Ukrainian Defense Technologies Struggle to Enter International Market Due to Legislative Requirements
Ukraine faces significant challenges in bringing its defense technologies to the international market, primarily due to national legislative requirements. Alexander Kardakov, founder of Octava Capital and IT millionaire, shared insights on these difficulties in an interview with NV.
Ukraine is grappling with a serious issue that hinders the entry of its defense technologies into the international market. This situation is closely tied to requirements dictated by national legislation. Alexander Kardakov, the founder of Octava Capital and a prominent IT millionaire, elaborated on these challenges in a recent interview with the publication NV.
Specifically, he noted that at the end of March, Ukraine signed strategic ten-year defense agreements with Saudi Arabia, Qatar, and the United Arab Emirates. These agreements entail joint development of air defense systems and the exchange of experience in combating unmanned aerial vehicles (UAVs). However, according to Kardakov, tangible results are currently lacking: "We are not there. For now, these contracts exist only on paper. There are preliminary contracts that remain on paper. We have signed a significant number of strategic contracts, but only one has started to work," he stated.
Kardakov also emphasized that the process of obtaining export permits for technology to produce certain components abroad is protracted. "We have been in the process of obtaining permission to export technology for the production of some components abroad for quite some time. Each time we are told: something will come out in two weeks," he added.
It is important to note that the issue is not that anyone is deliberately slowing down the process of bringing military technologies to market. "No, they are not slowing it down. It is just the current legislation. This pertains to our development of the kamikaze drone Flycat," he explained.
In Kardakov's view, one of the key problems in the field of military exports in Ukraine is the absence of adapted and operational legislation. He pointed out that the defense industry market is one of the most regulated in the world. To export military products, companies must obtain special permissions from the Cabinet of Ministers of Ukraine.
The procedure for obtaining these permissions is complex and multi-tiered. Submitted applications and documents undergo review by the State Export Control Service, after which the service independently coordinates them with the Ministry of Economy, the Ministry of Defense, the Ministry of Foreign Affairs, the Security Service of Ukraine, intelligence agencies, and others. Based on the collected approvals, the State Export Control prepares a draft of the relevant Cabinet resolution, Kardakov explained.
He also stressed that this draft undergoes additional coordination with various agencies, including the Ministry of Economy, the Ministry of Finance, the Ministry of Defense, the Ministry of Foreign Affairs, the Security Service of Ukraine, the Foreign Intelligence Service, and other bodies. After this, the draft is submitted for consideration by the Interagency Commission on Military-Technical Cooperation and Export Control.
"Since this commission only began full-fledged operations in mid-February and typically meets once every two weeks, the process of reviewing applications from businesses is slow, even though the legislation formally stipulates a decision-making period of up to 40 days," Kardakov noted. After obtaining permissions, companies must undergo an additional procedure—obtaining a separate export permit from the State Export Control. This is preceded by registering the company as a subject of international transfers and undergoing product identification planned for export.
Kardakov also highlighted that, in practice, each stage takes at least 30 days. Considering the need to respond to additional requests from the regulator, timelines are often doubled, leading to significant delays. He also mentioned that there is currently a draft regulatory act under consideration that proposes abolishing the need to obtain permissions from the Cabinet. "It is expected that this will help bring Ukrainian legislation closer to European standards. However, the timeline for the adoption of this document remains uncertain," emphasized the IT millionaire.
In conclusion, it is worth noting that earlier reports indicated that Ukraine had achieved a significant breakthrough and can now produce drones with minimal reliance on Chinese components. This highlights the potential of the Ukrainian defense industry, which could be realized if existing legislative barriers are removed.