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Military-Technical Cooperation Between Ukraine and NATO/EU Member – States: Steps Forward

Center for Army, Conversion and Disarmament StudiesNATO Liaison Office in Ukraine

National Institute for Strategic Studies

2015

(Summaries of the International Conference in Kyiv, April 2015)

Ukraine Has every CapaCity for Military and teCHniCal Cooperation witH tHe west

Cooperation between Ukraine and tHe eU and nato states in tHe defense spHere Has signifiCant prospeCts

new Conditions for MtC witH Ukraine are appealing to nato, eU CoMpanies

ways for fostering nato-Ukraine defenCe Cooperation to strengtHen Ukraine’s defenCe Capabilities

Ukraine strives to Cooperate witH tHe western CoUntries on Joint weapons design orders

CUrrent probleMs and MetHods for iMpleMenting offset sCHeMes in tHe spHere of Military-teCHniCal Cooperation

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inCreasing tHe operational Capabilities of tHe arMed forCes of Ukraine as a priority in Military Cooperation witH nato and eU CoUntries

tHe efforts of tHe private and state CoMpanies in tHe Ukrainian defense seCtor MUst be United

pUbliC-private partnersHip – tHe CUrrent CHallenge for tHe defense-indUstrial seCtor of Ukraine

opportUnities and CHallenges for allied defense indUstry CoMpanies in Ukraine: praCtiCal aspeCts

Ukraine - nato Cooperation: tHe iMportanCe of inCreased institUtionalization, forMat, and ManageMent

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he new National Security Strategy of Ukraine clear-ly identifies the directions for general reforms in the

defense and security sector. A consider-able section of it is devoted to the efforts necessary in the military-industrial complex (MIC).

Today, Ukraine’s independence is under great pressure in terms of both time and space. In this respect, it is very important that we use all available ca-pacities with maximum efficiency, to cre-ate weapons and military equipment that could counter the resources deployed by the Russian army in the eastern regions of our country. Thus, cooperation with NATO member-states and their defense enterprises can become a great incentive that will help us quickly solve a whole range of tasks faced by the Ukrainian military-industrial complex.

Concerning the MIC, it is worth reminding that in the Soviet times,

Ukraine was among the European and even world leaders in manufacturing of highly varied and effective weapons system. Three branches of the Ukrai-nian military industry were operating at the global standard: strategic missile systems (production based in Dniprop-etrovsk), armored vehicle production in Kharkiv, and shipbuilding in Mykolaiv. Those facilities operated a closed pro-duction cycle and supplied the Soviet Union with weapons to be globally reck-oned with. Simultaneously, top-class design bureaus and centers operated in Ukraine, specializing in design and pro-duction of radio equipment, radio loca-tion systems, and communications and control equipment.

After Ukraine gained indepen-dence, the above mentioned key indus-tries, especially as well as , and the space and missile field, found themselves in a grave situation, mainly because large-scale military orders that these indus-

Ukraine Has every CapaCity for Military and teCHniCal Cooperation witH tHe west

Volodymyr GORbUlIN,Director of the National Institute of Strategic Studies, First Vice-President of the National Academy of Sciences of Ukraine, Academic

t

5Military-technical cooperation Between Ukraine and nato/eU MeMBer – StateS: Forward wayS

tries used to receive during the USSR times were, for objective reasons, no longer available.

At the same time, it is worth noting that a large portion of design bureaus that specialized in radio equipment, radio location systems, and communi-cation technologies, transformed into private enterprises, which are helping Ukraine today in a wide range of tasks related to target acquisition and deter-mining the characteristics of weapon systems deployed by the enemy in east-ern Ukraine. Today, these tasks are re-solved in practice by private compa-nies. And today, it is imperative to organize relevant work (in coordi-nation with the General Staff and the Ministry of De-fense) in a way that would ensure that national private enterprises are properly represented in the government defense order. This task is, first of all, political.

Having been involved in develop-ment of the defense order in the past, the author can testify that only a small number of the private defense sector companies were granted a place in the government defense order, both in 2014 and 2015 (albeit the trend was less pro-nounced this year) even though the au-thor strongly believes that such private enterprises manufacture products with

high performance characteristics. We are not making this statement to criti-cize the actions of the government, but to point out the need for more efficient use of the existing technological potential of Ukraine, as well as its technological re-serve, which has great room for growth.

This growth will become all the more swift and efficient if we can come to an understanding with NATO coun-tries concerning our projects.

Overall, the relationship between Ukraine and the Alliance states is remi-

niscent of the ebb and flow of the tide. back in 1998, we reached a very im-portant step in de-veloping the AN-70 military transport plane. We enjoyed support from the EADS conglom-erate and, among

others, the Federal Ministry of Defense (Germany). The reason for that proj-ect not taking off was not the position of NATO countries, but that of Russia, who de facto sabotaged that contract by refusing to grant certain orders to NATO countries in the scope of the AN-70 project.

Failure to realize other prospective contracts that were planned with Swe-den and Poland can be attributed to the lack of political will of the leaders of Ukraine at the time. That factor pre-vented Ukraine from reaching a serious

it is imperative to organi-ze relevant work (in coordina-tion with the general staff and

the Ministry of defense) in a way that would ensure that national private enterprises are properly represented in

the government defense order

6 Ukraine Has every CapaCity for Military and teCHniCal Cooperation witH tHe west

level in military and technical coopera-tion, rather than be satisfied with small-scale ad-hoc contracts.

Naturally, Ukraine has some prob-lems. It has been considerably slow in the issues of standardization when switching over to the parameters and norms used in the weapons systems of NATO countries. The Ukrainian legisla-tion does not yet provide for a way to link private and state-owned enterprises in a single pool. It is well known that in the West, the role of principal designers and manufacturers of weapons systems belongs to large pri-vate corporations. but, importantly, a certain break-through is being observed right now – at the very least, in form of the strong will to improve the situation. We believe that Ukraine has every capacity required for that.

For example, today, the lockheed Martin Corporation, which has always been Ukraine’s competitor, is showing in-terest in Ukraine. The author, at one point, represented Pivdenne Design bureau, and was directly involved in the design of SS-18 and SS-24 systems, strategic missile complexes that are still justly considered

to be the best in the world. Why not estab-lish contacts with lockheed Martin, simi-lar to the contacts Pivdenne Design bu-reau has with the Antares space project?

Ukraine has great potential, and it is not limited to its highly qualified computer developers, who currently are employed all over the world. Today, life forces us to view many things dif-ferently. It is time we stopped consider-ing ourselves “great ones” – yet remem-bered that we are indeed worthy of serious military and technical coopera-

tion on any inter-national level. The author is convinced that the President and the National Security and De-fense Council have

a very constructive approach to these issues, and believes that the already-planned joint programs will start off after the adoption of the National De-fense Strategy, the Military Doctrine, and the appropriate program for the defense complex reforms.

We give particular thanks to the NATO liaison Office in Ukraine and the Center for Army, Conversion and Dis-armament Studies, for supporting and facilitating this process.

the Ukrainian legislation does not yet provide for a way to

join private and state-owned enterprises in a single pool

s the Director of the NATO liaison Office in Ukraine, I would like to emphasize that the new

round of discussions on the prospects for Ukraine’s military-technical coop-eration with the EU and NATO mem-ber states is the result of our continued efforts aimed at supporting the Ukrai-nian defense industry. last September, the NATO liaison Office in Ukraine initiated the Ukrainian Defense In-dustry conference during the MSPO 2014 International Defense Industry Exhibition. We strive to offer Ukrai-nian companies new opportunities for representing Ukraine’s defense poten-tial on the international level.

The reform of the Ukrainian de-fense industry is, naturally, one of the key development factors for Ukraine’s security and defense sector. We salute

the efforts of the Ukrainian govern-ment aimed to ensure development of defense enterprises under the ex-tremely difficult conditions of hybrid warfare.

In particular, I would like to point out the Roadmap for the Standardiza-tion Reforms in the Defense Industry for 2015-2018, jointly developed by NATO representatives, experts of the Ukroboronprom State Concern, and specialists of the Ministry of Defense of Ukraine, in early April. This docu-ment provides for a gradual transi-tion to Euro-Atlantic standards in the sphere of armament and military equipment production.

We want to fully utilize the po-tential of the NATO-Ukraine Joint Working Group on Defense Technical Cooperation, to support Ukraine in this trying time. Many aspects related

Cooperation between Ukraine and tHe eU and nato states

in tHe defense spHere Has signifiCant prospeCts

Marcin KOzIEl,Director of NATO liaison Office in Ukraine

a

8 Cooperation between Ukraine and the eU and nato StateS in the defenSe Sphere haS SignifiCant proSpeCtS

to the reform in the defense industry will be addressed in the scope of prac-tical implementa-tion of the NATO Trust Fund proj-ects. With regard to this, we welcome the decision of the Cabinet of Minis-ters of Ukraine that approves, and authorizes the Head of the Mission of Ukraine to NATO to sign, the Agreement between the Gov-ernment of Ukraine and the NATO Support and Procurement Agency.

I would also like to thank our Ukrainian partners – the National In-

stitute for Strategic Studies, and the Center for Army, Conversion, and Disarmament stud-ies. Thanks to the efforts of these or-ganizations, we

successfully brought together truly competent professionals, and leading specialists of official institutions and de-fense enterprises.

Many aspects related to the reform in the defense

industry will be addressed in the scope of practical imple-mentation of the nato trust

fund projects

kraine has more than 15 years of experience in mil-itary-technical coopera-tion (MTC) with NATO

and EU countries. Unfortunately, how-ever, Ukraine’s notorious reluctance to modernize its own military and, to some extent, its inability to play by Western rules jeopardize the development MTC with the West. Western defense compa-nies, for their part, have not demonstrated openness to a flexible defense-industrial cooperation policy towards Ukraine.

Lessons learnt from the initial period of cooperation

As the Ukrainian government has been traditionally keen to expand the export of arms and military equipment (AME), the country was able to retain some defense-related R&D and manufac-turing capacities and even create several new schools of thought on defense tech-nologies, and some of them from scratch, e.g. on armored personnel carrier vehi-

cles and modern protective equipment for armored military vehicles.

First MTC experiences with West-ern defense companies date back to the 1990s. Some joint projects were pretty successful technologically, as was the tri-lateral Ukrainian-Franco-Czech project to upgrade the T-72 main battle tank to the T-72AG configuration for the ben-efit of third-country customers. Other initiatives proved far less successful, such as the project to use the An-70 aircraft as a prototype for NATO’s future military transport platform.

Despite all the problems Ukraine was able both to sell arms for export to European markets and to develop col-laborative projects. Examples are Greece (bison-class light landing craft air cush-ion (llCAC) vehicles, 2000), Macedonia (overhauled and upgraded Soviet-built aircraft and armored military vehicles, 2003), the USA (protective equipment for military armored vehicles, newly-built tanks, 2004), Poland (protective equip-

new Conditions for MtC witH Ukraine are appealing to nato, eU CoMpanies

Valentyn bADRAK,Director of The Center for Army, Conversion and

Disarmament Studies

U

10 New CoNditioNs for MtC with UkraiNe are appealiNg to Nato, eU CoMpaNies

ment for military armored vehicles and helicopters, years after 2005) and belgium (precision-guided weapons; follow-up projects after 2010). Some of the projects had a high level of technological sophis-tication that revealed Ukraine’s capac-ity to perform most ambitious projects qualitatively and efficiently. For example, State luch Design bureau of Kyiv and belgium’s CMI (Cockerill Maintenance & Ingenierie) Defence jointly implemented a successful project to integrate a 90mm Cockerill gun turret with the fundamen-tally new Falarick 90 ATG missile.

A range of collaborative projects with Western defense companies were carried out for the benefit of the Ukrain-ian Armed Forces. Especially positive experience that Ukraine has had thus far has been with Poland, and this experi-ence is encouraging. Among most vis-ible achievements are collaborative R&D with Polish partners relating to precision-guided weapons and protective equip-ment for helicopters and armored vehi-cles. Also noteworthy is the beginning of work to formulate new concepts regard-ing R&D on unmanned aircraft systems and upgrade of aircraft technology in Ukraine. Indeed, this has been made pos-sible not least due to the more extensive political dialogue and successful collabo-rative efforts in dual-use technology areas such as aerospace (Ukrainian companies partnered in the European Vega and U.S. Antares space launch vehicle projects and the international Sea launch project) and the employment of Ukraine’s mili-

tary transports for air transportation of NATO’s military personnel and supplies under the Strategic Airlift Interim Solu-tion (SAlIS) program.

Most importantly, Ukraine has begun to leverage the experience of the Western world and is gradually transitioning to NATO standards, which have become the dominant standards worldwide. It was back in the early 2000s when Ukrain-ian defense industries created successful designs such as the Yatagan MbT, the Kvitnyk family of precision-guided gun-launched projectiles, the Falarick family of tank gun launched missiles, as well as protective equipment for armored vehi-cles and helicopters – all built to conform to NATO’s compatibility requirements, particularly through the use of Western-supplied components such as a NATO-caliber gun bought from Switzerland and thermal imagers bought from France.

The leveraged experience of NATO/EU countries suggests that military-tech-nical policy should be regarded as a most important State military strategy tool, as a system of far-sighted, scientifically grounded views on the development of arms and the national defense industrial capacities. Unfortunately, real changes in the thinking of political leadership and defense industry managers in Ukraine have been too slow to occur. but what is critically important is that Ukraine has finally come to understand the need for technical modernization of its Armed Forces to current standards, and that this task is obviously beyond the capabilities


of the domestic defense industry alone. Western defense companies, for their part, have begun to use more flexible pol-icies with respect to technology transfers and the engineering of collaborative de-fense technology projects with Ukraine.

Initial significant changes in ap-proaches to how Ukraine’s defense indus-tries should grow occurred in 2008–2009, the period that saw the start of impor-tant programs such as the Mi-24 combat helicopter upgrade assisted by SAGEM of France, and the indigenous naval corvette warship that is foreseen to incorporate about 38% of components and subsys-tems of the Western manufacture, with potential suppliers in France, the Neth-erlands and Germany among other coun-tries of the Western world. However, it took good two years of intensive negotia-tions for Ukraine to get formal approval for such cooperation from governments of France, Italy and Switzerland. However in one occurrence Germany refused to transfer a missile technology to Ukraine. In the long run, subcontracts were award-ed to 35 companies, and overall level of mutual confidence has increased signifi-cantly. Another positive MTC experience was with Israel, in a project that resulted in the purchase of a tactical-level un-manned aircraft system.

However, almost all MTC projects with Western defense companies were put on hold with the coming to power of Viktor Yanukovych and his pro-Russian administration. Obviously enough, this was made possible by the involvement of

Russia, who set out to bring Ukraine back into its geopolitical and economic orbit.

New times. Capabilities and Opportunities

It is worth noting that signifi-cant changes also occurred within the Ukrainian defense industry. Unlike in the 1990s when ready-made equipment made up from 8% to 12% (by varying estimates up and down) of the coun-try’s total defense production, this level has now risen to 20-25% due to imple-mentation of a range of export market initiatives. beyond the aforementioned equipment types, new projects emerged such as the Oplot MbT (Kharkiv’s Malyshev Factory), light armored ve-hicles (Kharkiv’s Morozov Design bu-reau), ‘dual-use’ and military trucks (AvtoKrAz Holding Company), radar systems (Ukrspetstechnika), trainer simulators (MATS Holding Company), a variety of upgrade packages for com-bat aircraft MiG-29, Su-27, Su-25, l-39, and Mi-24 and Mi-8 helicopters, as well as modular assembly of armored mili-tary vehicles of all types.

Domestic defense industries now have the capability to produce up to 30% of the range of the AME types re-quired by the Ukrainian Armed Forces and other security sector institutions, according to CACDS’ statistics, thanks largely to the emergence and growth of brand new R&D schools of thought, most particularly on precision-guided weapons (an anti-ship cruise missile, a tactical-and theater range missile sys-


tem, a smart bomb etc). An experimen-tal piece of the first indigenous SAM missile system designated Alta was in-augurated at a defense technology exhi-bition in Kyiv on 24-25 September 2014. Antonov aircraft maker announced being ready to launch a fighter trainer development project, while a number of privately-owned companies said they would inten-sify developments of new UAV capa-bilities.

In this new en-vironment created by Russian aggres-sion in Ukraine, a leap in the development of AME types for the Ukrainian military, particularly through international defense-indus-trial cooperation has become possi-ble. Ukraine needs to diversify foreign sources of defense technology and manufactured products required by the country’s military establishment. Therefore, an emphasis placed on lead-ing-edge Western technology is becom-ing a must for the growth of Ukraine’s capacity to provide its own security.

It should be emphasized that, with the launch of the Kremlin’s aggression against the Ukrainian State, new, sufficiently ap-pealing opportunities have emerged for Western defense companies. While a persistent lack of funding for homeland defense programs was previously the key hurdle for Ukraine’s partnership with the

West, Ukraine is now evolving into a ca-pacious market for defense technology.

This is precisely about the tech-nology, rather than defense products proper, because, given the availability of extensive domestic defense industrial ca-pabilities, there should be no expectation of any significant procurements of arms

and military equip-ment directly from foreign suppliers.

Western part-ners are now guided by the statement made by Ukrain-ian President, Petro Poroshenko during festivities celebrat-

ing the 23rd Anniversary of Ukraine’s in-dependence on 24 August 2014, wherein he promised the disbursement of about UAH40b in funding for technical mili-tary modernization programs over the next three years. This is the key signal for European countries to launch coop-eration with Ukraine, as this implies op-portunities for collaborative R&D and co-production programs and for the de-velopment of multinational projects.

Ukraine’s Ministry of Defense budget was set at UAH44.6b (USD2b) for 2015. On 9th February 9, the Government ap-proved a record high level of the State Defense Procurement Order at UAH14b (USD600M), of which 15% is reserved for imported procurements. In addition, it makes provisions for a range of new R&D projects.

while a persistent lack of funding for homeland defense programs was previously the

key hurdle for Ukraine’s partnership with the west,

Ukraine is now evolving into a capacious market for defense

technology


Technical status of the defense in-dustries in Ukraine might be another contributing factor to defense-industrial cooperation between Ukraine and the West. For example, provisions regarding modernization and retooling of produc-tion lines and implementation of incen-tives for critical technology development in selected areas of specialization could be incorporated into offset agreements accompanying major armaments pro-jects. It is known that, due to ineffective, incompetent military-technical policy, Ukraine is lagging seriously in important technology areas such as microelectron-ics hardware, microprocessor technology and nanotechnology which are all indis-pensable components of modern arma-ments. In this context it should be added that the Ukrainian Government, by its decree issued on 24 September 2014, ex-empted foreign defense companies from customs duties. This is significant in the context of technical modernization of the Ukrainian Armed Forces as the domestic defense industry is obviously not able to proceed as fast as needed with moderni-zation of the homeland defense capacities. Important AME categories such as com-munications, ISTAR assets, C4I systems, some weapons types (especially ATGM and portable SAM systems) as well as some upgraded types of Soviet-built military equipment (particularly fighter airplanes and military helicopters) could be supplied to Ukraine under the already ongoing programs. Regarding strategic priorities of future cooperation, these in-

clude the building of a robust air defense infrastructure in Ukraine; production of helicopters, ammunition and unmanned aircraft systems; as well as the upgrade of gun fire capabilities among other areas.

It might be recalled that Sweden has already stepped up its cooperation in military technology with Ukraine. In October 2014, a team of the Swedish Defense Research Institute visited Kiev to meet and talk with executive officials of the Ukrainian defense industry. At the conclusion of the negotiations the par-ties agreed to develop bilateral projects in the defense technology industry. In April 2015, Ukrainian and Turkish defense in-dustry officials agreed to launch new col-laborative initiatives in space, aeronauti-cal and armored industries. According to statistics provided by Ukroboronprom as of early March 2015, the Company added twenty more countries to its portfolio of international partners in the period be-tween July and December 2014, and part-nership talks were launched with Airbus, boeing, Textron, lockheed Martin, bAE Systems and Thales.

True, during the earlier part of 2015 Ukraine was more busy with exploring own AME production capacities. As re-ported by Oleksandr Turchynov, Secre-tary of the National Security and Defense Council on 9th April 2015, 50 new AME types have already been delivered to forc-es in the field. At the same time, according a statement made by Volodymyr bashyn-sky, head of the Ukrainian Armed Forces’ R&D and Test Center on 31st May 2015,


defense industries have increased the pro-portion of AMEs manufactured to NATO standard requirements, while Western countries have intensified their military aid supplies to Ukraine. Particularly the USA, who decided to provide Ukraine with non-lethal de-fensive equipment on 11th March 2015, delivered initial ten HMMWV vehicles in late March, of the total of 230 vehicles slated for delivery to Ukraine. All those events are contributing to an intensifica-tion of MTC and solidify the ground for further collaboration.

At the same time, it is urgent that the Ukrainian military-political authorities make the necessary actions to facilitate the domestic defense industries’ transi-tion to Western technology standards.

First and foremost, legislative and administrative actions need to be made, which implies corporization and or-ganizational restructuring of most of the country’s military production companies. There is need for a transparent process to compile a list of companies eligible to be acquired (with a legislatively determined stake of equity to be privatized) by West-ern defense companies.

Second success factor in defense in-dustrial and procurement relations be-tween Ukrainian and Western defense companies is the establishment of an ap-propriate, effective legal and regulatory

framework for offset contracting in de-fense and security procurements.

Third, Ukrainian Government needs to appoint a single government coordi-nator of the national defense industry,

who could be put in charge of awarding government defense procurement con-tracts and imported procurements of de-fense technologies. This would made it possible to re-direct

Ukraine’s MTC with Western defense companies towards the establishment of joint ventures and industrial partnerships operating based on common free market principles.

Areas of intensive search and overlapping interests

In 2014 NATO and Ukrainian ex-perts resumed consultations on potenti-alities for developing new MTC projects.

It should be noted that a number of MTC areas have been intensified as a re-sult of the Russian aggression. Privately-owned entities were first to come with their initiatives. HC AvtoKrAz, for exam-ple, launched deliveries of new Cougar and Spartan armored trucks to Ukrainian Na-tional Guard units and, joined with Streit Group, developed flat-bottom armored vehicles HMPV-A and Raptor based on its 6x6 KrAz-6322 truck chassis.

One of potential MTC areas could include a review of previously suspended potentialities. For example, Ukraine has

it is urgent that the Ukrainian military-political authorities make the neces-sary actions to facilitate the

domestic defense industries’ transition to western techno-

logy standards.


long had the potentialities of assembling helicopters under a license from the American company Sikorsky, as well as assembling (and marketing) Antonov air-planes (equipped with Pratt & Whitney powerplants) joined with U.S. partners. Another promising long-term coop-eration project calls for getting Ukraine engaged as partner in the development and production of target missiles for use under the US national missile defense (NMD) program (previously Ukraine re-fused to participate due to Russia’s con-cerns). Now that Ukraine terminated the servicing of SS-18 ICbMs of the Russian Strategic Missile Forces in 2014, and Rus-sia announced a refusal to continue buy-ing airplanes and Motor-Sich engines from Ukraine, not only the resumption of said projects looks realistic but sensible as well.

One more potential MTC area could encompass projects to adjust Ukrainian technologies to new conditions. First and foremost, we are talking about aircraft industry projects. It would be fully real-istic to give a new lease of life to military transport and specialty aircraft projects designed and built by Antonov, such as the AN-70 and AN-178. According to Antonov’s officials, other promising pro-jects for MTC between Ukraine and the West include the An-148-300MR mari-time patrol and border surveillance air-craft, the An-148T light military trans-port aircraft with a loading ramp, and the An-178 medium military transport aircraft with a loading ramp. The An-

178 has now become a priority project for Antonov as the new aircraft made its successful maiden flight in May 2015. If accepted for MTC projects, the aircraft could be offered equipped with a West-ern-supplied powerplant, avionics and some other key subsystems. Regarding the An-70, the talk could be about West-ern defense companies replacing Russia who previously was key partner in this project.

The potential areas of partnership could include a previously suspended ini-tiative on co-development and marketing of sonar equipment. In 2007-2008, the Kyiv Research Institute of Hydroacoustic Instruments and STN ATlAS Elektron-ick GMbH of Germany were co-working on a project to develop and market an active sonobuoy system. The same goes for projects on overhaul and upgrade of Soviet-built helicopters.

Still the key focus in MTC with Western defense companies should be on new high-tech developments, which could be used by partners for enhancing their respective homeland defense capac-ities. The following are some illustrative examples. Ukraine is extremely interested in developing robotic vehicles using do-mestic R&D and manufacturing capa-bilities, but Ukrainian engineers have traditionally had problems with payload equipment. Gyroscopes and other com-ponents are provided through imported supplies; the quality of live video data links is far below world standards; there have been none of high-tech secured


wideband data links under development; satellite communication capabilities have not been implemented etc.

Several years ago Ukraine announced intent to develop an indigenous helicop-ter, which could be an appealing oppor-tunity for Sikorsky, but with the proviso that the partners will need to make cer-tain compromises. JSC Motor Sich with its 30,000 employees must become a key partner in this program.

In a situation where there are vary-ing opinions as to the re-establishment of the national Naval Forces, the indig-enous corvette pro-gram has been put on hold for known reasons (limited re-sources and the ur-gent need to build a robust coastal defense and coastal fortification infra-structure). but resumption of the pro-gram in a longer term perspective looks pretty feasible, and the more so as Kyiv Research Institute Kvant proceeds with the development of a multipurpose ac-tive phased array radar system (PHOE-NICS-E), a shipboard radar-optical fire control system for medium-caliber guns (Stilet), an opto-electronic fire control system for small to medium caliber guns (Sarmat-2), as well as the shipboard optronic countermeasures equipment kit Facet, the optronic naval helicopter landing system Saga, the Infrared threat detection system Selena-X, the electro-

magnetic interference reducing system Sovmestimost; and the shipboard com-bat management system CMS that are all included into the Indigenous Corvette program. This ambitious program can-not be implemented other than with a high-level MTC.

A great many projects developed un-der export contracts could be used as ba-sis for development, in active partnership with Western defense companies, of new AME types for the Ukrainian military. Particularly in 2014, special instrument factory Arsenal in Kyiv launched produc-

tion line for the up-graded IS-90 infra-red-homing AAM seeker head. Now in production for an export customer, it could well be used as baseline for a project specifically focused

on the Ukrainian military’s requirements. There is another example that well

illustrates the high intellectual and R&D capacities of the Ukrainian industries. Ukrainian Defense Consulting (UDC) has since 2004 been actively engaged in projects in the field of automation and computerization of gun fire control functions. In 2014, UDC equipped artil-lery units of the Afghan Armed Forces with its proprietary computerized fire control system. According to Denis Danko, CEO of UDC, his Company has long partnered with U.S. firms lockheed Martin, General Dynamics, Northrop

so there are all the conditions - political, techno-logical, economic, intellectu-al – required for the growth

and expansion of MtC betwe-en Ukraine and western

defense companies


Grumman and Dynacord. The first ma-jor contract in which UDC was involved called for the delivery of 110 bMP-1 in-fantry fighting vehicles to the U.S. firm bUlOVA Technologies Group Inc, via the agency of the zhytomyr Armor Fac-tory and the Ukrinmash Corporation. This was followed by a major deal be-tween Ukraine and General Dynamics involving the delivery of 44 D-30 how-itzers. The Americans requested that the Ukrainian partner assist with “convert-ing” the weapons from Warsaw Pact’s 1/6000 mil scale to NATO’s 1/6400 sys-tem. So, UDC, in late 2008, completed the development of its Universal ballistic Computer” (UbC) that would compute the conversion values and generate data matched to a specific type of the weapon used – be it of the Warsaw Pact or NATO standard. And a short time afterwards, the Ukrainian company equipped the Afghan National Army with a gun bat-tery fire control system – the Univer-sal battery level Fire Direction System (UblFDS). This system enables real time dissemination of data across a network to speed up the fires process and im-prove efficiency. The system automates the preparation and fine targeting of the

various artillery pieces. This is just one example of international MTC for the benefit of third-country markets, but this experience could be highly valuable in terms of technical modernization of the Ukrainian Armed Forces.

So there are all the conditions - po-litical, technological, economic, intel-lectual – required for the growth and expansion of MTC between Ukraine and Western defense companies. Other suc-cess factors may be laying in the domain of political will, both of the Ukrainian government and the EU and NATO gov-ernments. In the judgment of Radoslaw Sikorski, the Speaker of the Polish Sejm, the West should share with Ukraine its know-how and provide expert advice rather than give money recklessly. A “Marshall Plan”, which was much talked about after the start of Russia’s military expansion in 2014, is the most appro-priate to include a military-technical cooperation component. MTC is in all respects a complex process of interaction between Ukraine and the Western world in critical, sensitive sectors. but what makes it extremely valuable is a mutually beneficial outcome achieved through the real, not declarative partnership.

would like to address three points: (1) the framework for defence-technical co-operation that exists to-

day between NATO and Ukraine; (2) an overview of latest activities; and (3) op-portunities for further development of cooperation in this field.

NATO-Ukraine framework for defence-technical cooperation

let me start by drawing a picture of the overarching framework for coopera-tion between NATO and Ukraine. This framework is underpinned by the 1997 Charter on a Dis-tinctive Partnership. The NATO-Ukraine Commission (NUC) provides direction and serves as a fo-rum for consulta-tion between Allies

and Ukraine on issues of concern.A number of joint working groups

have been set up under the umbrella of the NUC to take forward the work in spe-cific areas, including the Joint Working Group on Defence Reform that facilitates consultation and practical cooperation in defence and security sector reform. In 2004, a coordination mechanism was created in the area of defence-technical cooperation – the Joint Working Group on Defence-Technical Cooperation (JWG DTC).

This Group focuses on enhancing in-teroperability of Ukrainian contributions

to international op-erations with the forces of NATO Na-tions. We have had twenty meetings so far, with the last one held this past Janu-ary in Kyiv. With the

ways for fostering nato-Ukraine defenCe Cooperation to strengtHen Ukraine’s defenCe Capabilities

Ernest J. HEROlD, Deputy Assistant Secretary General for Defence Investment, NATO HQ

i

in 2004, a coordination mechanism was created in the

area of defence-technical cooperation – the Joint wor-

king group on defence-tech-nical Cooperation (Jwg dtC)


January meeting we raised the level of co-chairmanship to indicate the strengthen-ing of cooperation between NATO and Ukraine in these difficult times. This working group is a mechanism to pro-vide oversight of and direction to coop-eration. This cooperation takes places through multiple contacts in NATO including the Conference of National Armaments Directors – the CNAD, the Air Traffic Management Committee or the Consultation, Command and Con-trol board (C3b). Thanks to avid inter-est from Ukraine we have seen increased participation in all of these groups which we believe will ensure continued interop-erability with NATO.

let me now give you an overview of some of the latest activities.

Overview of latest activities

During the January meeting of the Joint Working Group on Defence-Tech-nical Cooperation, Ukrainian and NATO representatives assessed Ukraine’s in-volvement in the activities of the CNAD, reviewed cooperation in various capabil-ity development strands and identified several practical areas of cooperation in view of enhancing interoperability and strengthening the capabilities of the Ukrainian Armed Forces.

To begin with, the participation of Ukrainian experts in the CNAD – Con-ference of National

Armaments Directors, is intended to promote cooperation in the armaments field. It brings together the top national officials responsible for defence procure-ment in NATO member and partner countries to consider the political, eco-nomic and technical aspects of the devel-opment and procurement of equipment for NATO forces.

CNAD has a substantial substruc-ture. That is, various groups, sub-groups and specialist teams under the Army, Naval and Air Force Arma-ments Groups as well as groups active in the fields of ammunition safety, sys-tem life cycle management, logistics codification and the defence industry. These groups support cooperation on equipment and research projects and serve as means of information sharing on national programmes to the ben-efit of both individual countries and NATO as a whole.

A significant portion of the CNAD substructure is open to partners, espe-cially the Partnership for Peace (PfP) countries, including Ukraine. I am pleased to say that Ukraine is one of the most active partners. Cooperation is taking place for example in CbRN defence, Ground based Air Defence

and logistics Cod-ification domains. I am pleased that my division has been able to sup-port increased participation by

Cooperation is taking place for example in Cbrn defence, ground based air

defence and logistics Codifi-cation domains

20 Ways for fostering nato-Ukraine Defence cooperation to strengthen Ukraine’s Defence capabilities

Ukraine through financial assistance to enable participation of Ukrainian experts in the various fora.

Such participation enhances Ukraine’s access to information on ar-maments cooperation with Allies thus improving interoperability between NATO and Ukrainian forces through networking, material standardization and participation in multinational projects.

let me make a special point on defence industry, as this is one of the main topics of today’s conference. The NATO Industrial Advisory Group (NIAG) under the CNAD is a forum where high level representatives from the defence and security industry of the 28 NATO Nations and partner nations come together to discuss re-search, development and production of armaments and provide advice on armaments cooperation and the streamlining of capability develop-ment. Recently we had representa-tives from Ukroboronprom attend the meetings, to deliver a report on Ukrainian defence industry capabili-ties; this was well received and much appreciated.

I would also like to mention that the NATO-Industry Forum to be held in lisbon, Portugal the 19th and 20th October is the venue for NATO leaders and Strategic Commanders to interact with senior representa-tives from industry and discuss fu-ture plans and strategies. Industry

is invited to share their thoughts for the future, and explain how they see the geopolitical environment shaping and influencing their investment de-cisions. Ukrainian representatives are welcome to participate, as the Forum is open to PfP countries.

beyond the CNAD, NATO is as-sisting Ukraine in capability develop-ment also through multinational proj-ects and the newly established Trust Funds. As for multinational projects, you have probably all heard of NA-TO’s Smart Defence initiative, which is about harmonizing requirements, similarly to the way the EU pursues pooling and sharing of capabilities, to prioritize and coordinate more cost-efficient, effective and coherent capa-bility delivery. There are currently 91 active Smart Defence projects, with 30 mature ones called Tier 1 and 61 less advanced projects referred to as Tier 2. Of them, 23 Tier 1 (or 77%) and 34 Tier 2 (56%) projects are open to partners with the agreement of par-ticipating Nations. Ukraine currently participates in projects on Harbour Protection and Female leaders in Se-curity and Defence. And we are ready to work with Allies to facilitate partic-ipation in more projects should there be interest.

The Trust Funds are an important element of capability development and capacity building in the areas of command, control, communications and computers (C4); logistics and


standardization; cyber defence; mili-tary career transition management; and medical rehabilitation.

The objective of the C4 Trust Fund, managed by my division, is to identify, fund and implement projects to assist Ukraine in modernizing C4 structures and systems, to enhance interoperability with NATO in NA-TO-led exercises and operations, and to enhance the ability of Ukraine to provide for its own security and de-fence. lead Nations are United King-dom, Germany, and Canada with con-firmed contributions from five other Allies and three countries that have indicated an interest to contribute.

The logistics and Standardization Trust Fund also falls under the scope of defence-technical cooperation. led by the Czech Republic, the Neth-erlands and Poland, the goal of this trust fund is to help build a logistics and standardisation system for the Ukrainian defence sector. This will be achieved by the implementation of specific logistics projects, including Information Technologies, structures and processes.

Finally, there is cooperation in the field of air security. The key com-ponent of this cooperation is the Air Situation Data Exchange (ASDE) programme. The programme, which Ukraine joined in 2006, serves to im-prove situational awareness of activity in the national and nearby airspace to reduce the risk of misunderstanding

through the exchange of air situation between NATO and Partner Nations. As a result of the ongoing crisis, air data information provided by NATO to Ukraine has been extended to cover a larger area.

Opportunities for further development of cooperation

As you can see from this short summary, a lot has been happening in the field of defence-technical co-operation. Current priorities include standardization and codification as means for increasing interoperability; implementation of the C4, logistics and Standardization Trust Funds; cooperation in the framework of the CNAD, including industry; Ukraine’s participation in Smart Defence; and air security.

Practical steps being taken in-clude, for example, planned partici-pation by Ukrainian representatives in the upcoming NATO Standard-ization courses, supported by NATO funding. Under Codification coop-eration, NATO will fund the acqui-sition of an automated codification system for Ukraine and provide as-sociated training under the logistics and Standardization Trust Fund. We expect several more projects to be ini-tiated in 2015 under both the logis-tics and Standardization Trust Fund and the C4 Trust Fund. For both Trust Funds, several fact finding missions by NATO staff have already taken

22 Ways for fostering nato-Ukraine Defence cooperation to strengthen Ukraine’s Defence capabilities

place, with significant support from the Ukrainian side. These Fact Find-ing missions help formulate specific projects that will be implemented, in coordination with Ukraine.

We hope Ukraine will continue to send experts to the various CNAD ac-tivities, with NATO providing finan-cial support. We are also very pleased that Ukraine will host a meeting of the land Capability Group on land Engagement under the NATO Army Armaments Group in Kyiv this Sep-tember. Conducting NATO meetings in Ukraine sends a strong signal of NATO’s support for your country.

NATO staff is also prepared to help Ukraine approach relevant Allies in the context of Smart Defence proj-ects of interest to Ukraine.

Cooperation in air security under the ASDE programme will also continue.

Conclusion

So to sum it all up, there are many positive activities going on. NATO is pleased to continue our collaboration to strengthen Ukrainian capabilities and capacities.

I look forward to listening to the other panellists and fielding your ques-tions in the discussion. Thank you.

kraine has set its course to-wards creation of a modern, developed, and democratic state, towards European in-

tegration and increased cooperation with the European Union and NATO states. Those are the values that Ukraine is defend-ing in its eastern regions today. Russia’s ag-gression against our state, its occupation of some of our territories, combat activities in the lugansk and Donetsk regions, con-tinued supply of weapons to Russian-con-trolled and terrorist groups, and continued deployment of standby units of the Russian Armed Forces in the vicinity of the Ukrain-ian state border – all those facts require a more active military-political and military-technical cooperation of Ukraine with the European Union and NATO countries. We believe that such cooperation must become an important component in ensuring the defense capacity of our state.

Ukraine values the efforts of the Eu-ropean Union and NATO member states

made at the highest level to stabilize our country, as well as the efforts aimed at sup-porting the reforms and transformation of the Ukrainian defense sector. Unfortunately, we are still unable to receive sorely needed material and technical assistance in the sphere of armaments and military equip-ment. Nevertheless, the existing supplies of certain armaments and military equipment, communication devices, protective gear, night vision devices, Hummer type vehi-cles, AN/TPQ-49 counterfire radar stations, aerial drones, etc., are already increasing the effectiveness of our units.

Our cooperation in this direction is yet to become systematic. Nevertheless, the existing legal framework with the EU and NATO countries creates favorable conditions for developing a constructive bilateral partnership with NATO mem-ber states. We have agreements on mili-tary and technical cooperation, as well as on mutual data protection, with a large number of NATO countries. The num-

Ukraine strives to Cooperate witH tHe western CoUntries

on Joint weapons design orders

Volodymyr GREK,Head of the Service on the Issues of the Defense-Industrial

Complex and Military Technical Cooperation,

National Security and Defense Council of Ukraine

U

24 Ukraine StriveS to Cooperate with the weStern CoUntrieS on Joint weaponS DeSign orDerS

ber of such agreements keeps growing: for example, execution of one with the Nether-lands in currently underway. based on the results of the sessions of the NATO-Ukraine Joint Working Group on Defense Technical Cooperation and the NATO-Ukraine Joint Working Group on Defense Reform, more areas for cooperation were determined: cooperation in the scope of NATO’s logis-tics database and the Random brokerage Services, which will improve exchange of information between Ukraine and the member states; partnership in order to supply the Armed Forces with material and technical resources; and online procure-ment.

Implementation of the Trust funds is also very impor-tant for Ukraine. We would like to draw attention to several areas of concern related to the supply of imported mili-tary equipment to the Armed Forces of Ukraine, including equipment received as assistance and purchased equipment. It should be pointed out that in the condi-tions of the anti-terrorist operation, prop-er maintenance and repairs for the sup-plied equipment were not always provided for, which meant lack of service kits, spare parts, and specialized repair facilities. As a result, some of the previously supplied armament and military equipment types have virtually no long-term use pros-pects – unless this issue is addressed.

Import of armaments and military equipment was not always done com-petitively, and the offers chosen did not always best satisfy the price/quality cri-terion. This must be decisively changed, especially given the need to supply the gradual transition of the Armed Forces of Ukraine to new armament and mili-tary equipment models, as well as to pro-vide certain equipment for specific tasks and missions (including aerial drones, digital communication equipment, and others).

In addition to the task of supply-ing armaments and military equipment, Ukraine faces the need to create new technologies and production ca-pacities in various spheres. We must create a good invest-ment climate in the

defense industry. To this end, we should determine the medium-term needs for specific military product purchases and hold supply competitions (with the terms providing that the products must be manufactured at facilities located in Ukraine).

Resolution of the above issues will be facilitated by the new state program for development of armaments and mili-tary equipment until 2020, which is cur-rently being developed by the Ministry of Defense of Ukraine, by instruction of the National Security and Defense

proper maintenance and repairs for the supplied

equipment were not always provided for, which meant lack

of service kits, spare parts, and specialized repa-

ir facilities


Council. Ukraine has significant scien-tific, research, technical, and defense-industrial potential for increasing and expanding cooperation in the sphere of defense, allowing for a whole new level of military-technical cooperation with the European Union and NATO states.

We perceive the following opportu-nities for expanding such military-tech-nical cooperation.

First: expanding cooperation with the leading defense companies of the rel-evant states, in or-der to purchase and use specific high-tech subsystems that will increase the performance of Ukrainian defense products; as well as purchasing specific defense products not manufactured in Ukraine. For ex-ample, joint projects currently carried out by Ukraine with the leading Euro-pean companies, such as modernization of the MI-24 helicopter, and building of a Corvette class ship.

Second: participation of Ukrainian defense companies in implementation of foreign defense projects, aimed at sup-plying armaments and military equip-ment to the European Union and NATO countries, where Ukraine would design and supply individual components of the final products. For example, supply of

guided anti-tank missiles in the interests of the Ministry of Defence of belgium and third countries; design and supply of armored vehicle active defense sys-tems and precision-guided munitions in the interests of the Ministry of National Defence of Poland.

Third: creating joint cooperatives between the defense ministries and companies of the EU and NATO, and Ukrainian companies, for design and production of new armament and mili-

tary equipment models to supply to the Ukrainian Armed Forces. We are striving towards the fourth level of cooperation – bilat-eral coordination of state development programs related to armaments and military equipment, and a gradual tran-sition to fulfilling

joint orders for design of specific arma-ments and military equipment by defense ministries of several states, including Ukraine. We believe that moving to this level of cooperation will significantly re-duce the costs of new armament design for Ukraine, help direct the integration of Ukrainian defense companies into the European economic space, and involve the latest technologies in the production processes of Ukrainian defense compa-nies.

we are striving towards the fourth level of cooperati-on – bilateral coordination of state development programs

related to armaments and military equipment, and a

gradual transition to fulfilling joint orders for design of specific armaments and

military equipment by defense ministries of several states,

including Ukraine

n the light of the long-term armed aggression against Ukraine, when the key task of the state is to significant-

ly increase the combat ability of the Armed Forces and other power structures, the is-sues of creating and implementing the mil-itary-technical cooperation (MTC) policy become especially important.

The main priorities of Ukraine in the medium term should be realignment of markets and domestic rearmament. Achiev-ing these goals requires increasing the ef-ficiency of state regulation in the sphere, ensuring an adequate level of financing for the appropriate measures, and coordinat-ing actions in international armaments markets. Changing the direction of MTC with foreign states must take into account Ukraine’s international obligations, while giving priority to its national interests.

The priorities of structural reforms in the defense sector should be as follows: ef-

ficient use of Ukraine’s defense potential; a balanced MTC policy; and effective instru-ments for financing the defense and secu-rity sector.

The above is predicated by the fact that the unrest in the eastern regions of Ukraine was combated under extreme conditions during the last year.

In 2014, the needs of the Armed Forces of Ukraine and other military for-mations were financed by funds provided for in the state budget, as well as through donations of individuals and legal entities, from the reserve fund, and through issue of state bonds.

This practice is unprecedented for Ukraine. The main reasons for this state of things were the low quality of defense plan-ning and the implementation of programs for development and restructuring of the Ukrainian defense industry that could not be sufficiently funded throughout the years of Ukraine’s independence.

CUrrent probleMs and MetHods for iMpleMenting offset sCHeMes in tHe spHere of Military-teCHniCal Cooperation

Yuliya MAlYSHENKO,Key Officer Ministry of Economic Development and Trade of Ukraine

i


This is why, after finding itself in a cri-sis situation, the Ukrainian defense indus-try turned out to be unable to fully satisfy the AFU with the required armaments and military equipment.

The above translates to the need for importing modern weapons and military equipment systems. Their high cost is a burden for Ukraine’s budget even given the increase of defense spending in 2015.

Thus, the need arises for Ukraine to implement a practice that would signifi-cantly decrease the burden on the budget and the economy as a whole, in the course of MTC with foreign countries, and spe-cifically, when im-porting weapons and military equipment.

A favorable al-ternative would be enabling Ukraine to use the offset scheme for purchasing weapons and military equipment – a compensation for the pur-chased defense products in the form of in-vestment in the importer’s economy.

In developing the regulatory base on the issues of offset transactions, the Ministry of Economic Development and Trade of Ukraine studied the inter-national practices of offset agreements used by European countries and NATO members.

When assessing the prospects for im-plementing the researched practices, we worked primarily based on the necessity of

evaluating state regulation of offset trans-actions and the interdepartmental cooper-ation between authorities and institutions managing the issues of offset transactions. Particular attention was paid to the status of the defense industry in the countries re-searched, their international cooperation links, and their key partner states for pur-chases of weapons and military equipment.

As a result, we created a scheme simi-lar to that used by the Republic of Poland. The law of Ukraine «On the State Defense

Order» determines the prerequisites for offset transactions; a resolution of the Cabinet of Ministers of Ukraine approves the Procedure for Concluding Offset Agreements and types of compensa-tion; a commission

for offset transactions was created in the Ministry of Economic Development and Trade of Ukraine.

Implementing offset procedures in Ukraine aims to satisfy Ukraine’s needs in the military and civilian spheres on terms that would be the most beneficial for Ukraine.

The desired result of implementing and carrying out offset transactions in Ukraine is attraction of new technologies and investments to the national economy.

Domestic coordination in the issues of offset procedures has been appropriately organized – specifically, representatives of

a favorable alternative would be enabling Ukraine to

use the offset scheme for purchasing weapons and

military equipment – a com-pensation for the purchased defense products in the form

of investment in the importer’s economy.

28 Current Problems and methods for ImPlementIng offset sChemes In the sPhere of mIlItary-teChnICal CooPeratIon

all state authorities that may be involved in offset transactions are members of the offset commission created in the Ministry of Economic Development and Trade of Ukraine, and will be taking part in imple-menting measures aimed at improving op-erations in this field.

The key aspects of offset transaction development are aligned with strategic program documents that determine the methods for further development of the defense industry, research industry, and Ukraine’s military-technical cooperation with foreign states.

Specifically, measures to develop, mas-ter, and implement new technologies, pre-pare production facilities and create new capacities with the use of offset transactions, should be included in the National Target Defense Program for Development of the Defense Industry un-til 2020, and the Na-tional Target Defense Program for Devel-opment of Weapons and Military Equipment until 2020.

To this end, the Ministry of Economic Development and Trade of Ukraine is cur-rently working on suggestions for possible methods to implement offset projects in the medium term.

Together with the Ministry of Defense of Ukraine and State Concern Ukroboron-prom, we are studying prospective direc-tions for attracting foreign investments, including investments of strategic value for

the development of the defense and secu-rity sector.

In terms of practical preparation, we are preparing a list of companies that can be involved as beneficiaries of offset liabilities, and lists of defense products, goods, and ser-vices to be purchased in the medium term for amounts in excess of EUR 5 million.

At the same time, preparing offset pro-jects is a lengthy process, and concluding offset agreements during the anti-terrorist operation is not economically feasible, be-cause there is no real possibility to deter-mine the expected economic effect from the potential compensation.

Considering the above, the Min-istry of Economic Development and Trade of Ukraine, by suggestion of

State Conglomer-ate Ukroboron-prom, prepared and submitted to the Government’s con-sideration a draft of amendments to the law of Ukraine «On the Govern-

ment Defense Order,» which provide, in particular, that compensation (off-set) agreements shall not be concluded during the special period, in a state of emergency, and during the anti-terror-ist operation.

Therefore, Ukraine today has the ca-pacity to implement and carry out offset operations, which should result in attrac-tion of new technologies and investments to the national economy.

we are preparing a list of companies that can be invol-ved as beneficiaries of offset

liabilities, and lists of defense products, goods, and services to be purchased in the medi-

um term for amounts in excess of eUr 5 million

n the context of the co-vert military aggression of the Russian Federation, the ongoing «hybrid war,»

the annexation of Crimea, and Russia’s strong support of illegal armed groups in the Southeast of Ukraine, we are viewing our military cooperation with NATO and EU countries through the prism of Com-prehensive Security and Defense Sector Review. The priority of this cooperation should be increasing the operational ca-pabilities of the Armed Forces of Ukraine, in order to repel aggression in the course of possible escalation of the conflict.

International military cooperation also plays an important part in the cre-ation of a modern and combat effective Ukrainian army. The promising directions of this cooperation shall be as follows:• expanding the format of military-

political dialogue between the lead-

ers of Ukrainian defense authorities and those of EU and NATO coun-tries;

• participating in common military trainings aimed at operational capa-bilities increase;

• taking part in multinational peace-keeping and security operations;

• receiving material and technical as-sistance to support the AFU units deployed in the ATO zone;

• military training instructors inviting;• cooperating in the scope of the

U.S. – Ukrainian Joint Coordination Committee for Military Coopera-tion and Defense Reform;

• providing for civil-military coopera-tion and information operations;

• professional and language training of AFU representatives in education and training institutions of EU and NATO countries;

inCreasing tHe operational Capabilities of tHe arMed forCes of Ukraine as a

priority in Military Cooperation witH nato and eU CoUntries

borys KREMENETSKY,First Deputy Chief,

Main Department of Military Cooperation and Peacekeeping Operations,

General Staff of the Armed Forces of Ukraine

i

30 IncreasIng the operatIonal capabIlItIes of the armed forces of UkraIne as a prIorIty In mIlItary cooperatIon

• providing for participation of the AFU in the NATO Response Forc-es and EU multinational joint task forces;

• participating in regional initiatives, jointly with EU and NATO coun-tries;

• providing for treatment and reha-bilitation of injured military service-men of the AFU in EU and NATO medical facili-ties.In terms of op-

erational capabilities increase, we must concentrate our ef-forts, first of all, on establishment of high-quality com-mand, control and communications sys-tem (C3), logistics network, as well as Special Operations Forces, and effective military medicine.

One of the main mechanisms for pro-found reform of the above areas is the U.S. – Ukrainian Joint Coordination Commit-tee for Military Cooperation and Defense Reform (JCC).

It is crucial that other countries in the region are also mindful enough of the present threats. Today, this includes not only Ukraine, but also Romania, bulgaria, lithuania, and other countries that share a border with Russia and observe intense military training exercises being conduct-ed in their proximity.

Despite all efforts on the part of ter-rorists, who enjoy unlimited support from

our eastern neighbor, we successfully con-ducted three multinational training exer-cises in Ukraine, in the last year alone. On the part of the Armed Forces of Ukraine, the forces involved in these training ex-ercises included over 1,500 military per-sonnel, 159 pieces of equipment, 7 ships, 2 planes, and 3 helicopters. In addition to that, Ukraine took part in five internation-al training exercises outside its borders

(including three un-der NATO auspices).

The plans for 2015 include carry-ing out of four train-ing exercises on the territory of Ukraine, and involving per-sonnel and equip-

ment of the Armed Forces of Ukraine in seven multinational exercises outside of Ukraine. Additionally, Ukraine plans to participate in five more multinational command-staff exercises for staff officers.

The direction of the Russian ag-gression is not exclusively Ukraine. In a broader context, this aggression presents a threat to the safety and stability of all Eu-ropean and world countries – as it leads towards complete destruction of the exist-ing system of international relations and international law. This new threat requires all countries in the region to create new international mechanisms for overcom-ing such challenges, as well as entirely new instruments. An example of one such instrument is the creation of the lITPO-lUKRbRIG – an international military

we must concentrate our efforts, first of all, on estab-

lishment of high-quality command, control and com-

munications system (C3), logistics network, as well as

special operations forces, and effective military medicine


brigade formed of lithuanian, Polish, and Ukrainian armed forces’ units.

Separate note should be given to the issue of procuring assistance from NATO and EU countries. At this time, material and technical aid is the most effective form of assistance for us. The national economy is devoting significant effort to supply and equip the AFU, but we are still lacking cer-tain military supplies and equipment. In-ternational technical assistance programs provided by the U.S. Government are be-ing implemented in the AFU. Starting from 1997, over 150 contracts have been concluded, for a total of almost USD 200 million.

Starting from 2014, we received over USD 25 million in military supplies from the USA according to valid international technical assistance contracts, to provide for the top-priority needs of the AFU. The total amount of humanitarian aid received by the AFU from all countries was over USD 69 million.

Despite the complex situation and certain economic restrictions, Ukraine shall keep observing its international obli-gations. This means that we will continue taking part in the NATO Response Force, the Operational Capabilities Concept, and the Partnership for Peace Planning and Review Process, even though the latter would require significant adjustment. We

also view our continuing participation in NATO operations as an effective way to increase specific operational capabilities of the Armed Forces of Ukraine.

NATO Trust Funds disposal is an-other primary mechanism to achieve our objective.

The decision to create new NATO Trust Funds for the Ukrainian defense sector support was made at the meeting of

the NATO-Ukraine Commission at the Foreign Ministers level, June 25, 2014 (brussels, Kingdom of belgium).

During the NATO Summit in Wales (September 4 to 5, 2014), NATO

officially announced the creation of the following Trust Funds:• Command, Control, Communica-

tions and Computers (C4) Trust Fund, (lead nations: United King-dom, Canada, Germany).

• logistics and Standardization Sys-tems Reform (lead nations: the Netherlands, the Czech Republic, and Poland).

• Military Career Management Trust Fund, (lead nation: Norway)

• Medical Rehabilitation Trust Fund, (lead nation: to be determined).

• Cyber Defense Trust Fund. (lead nation: Turkey).At the meeting of the NATO-Ukraine

Commission at the Foreign Ministers lev-

international technical assistance programs provided

by the U.s. government are being implemented in the

afU. starting from 1997, over 150 contracts have been concluded, for a total of almost Usd 200 million

32 IncreasIng the operatIonal capabIlItIes of the armed forces of UkraIne as a prIorIty In mIlItary cooperatIon

el, on December 2, 2014 (brussels, King-dom of belgium), the above NATO Trust Funds practical implementation com-mencement was officially announced.

One of the directions for the new NATO partnership policy implementa-tion (adopted by NATO Foreign Ministers at their meeting in berlin in April 2011) is involving partner nations in multinational projects as part of the Smart Defense con-cept.

At this time, a decision has been made for Ukraine to participate in Project 1.28 “Har-bor Protection” (lead nation: Por-tugal) and Project 1.12 “Female leaders in Security and Defense” (lead nation: bulgaria). In this context, the Mission of Ukraine to NATO is working with the lead nations to formalize the issue. Additionally, the possibility of Ukraine’s involvement in the “Alliance Defense Analysis and Planning for Transforma-tion” project (lead nation: Norway) is under discussion.

Equally, our cooperation agenda still includes the AFU’ and NATO countries’ units operational interoperability increase.

The main top-priority directions of military cooperation with the EU also re-main unchanged.

Armed Forces of Ukraine’ assets in-volvement in the EU battlegroups forma-tion is one of those paramount directions of cooperation with EU.

Ukraine has been taking part in the alert periods of EU battlegroups since 2010, when it first participated in the alert period of the baltic EUbG, by acquiring associate member status.

After consultations with the V4 States (Poland, Czech Republic, Slovakia, Hun-gary), a decision was made to deploy a group of staff officers and an Il-76 air-craft of the AFU Air Force (with crew),

as Ukraine’s contri-bution to the battle-group of these states. Its alert period is scheduled for the first half of 2016.

Another one of our joint projects

is educating AFU representatives on the subject of the EU’s Common Security and Defense Policy. The project is being car-ried out in Ukraine as well as abroad.

In the scope of this initiative, creation of the Eastern Partnership Technical As-sistance Trust Fund was an important step. The Fund was established by lithu-ania, latvia, Hungary, and the United Kingdom; according to the Memorandum of Understanding between the signatories, lithuania has been appointed as the Co-ordinator of the Fund. In addition to the above countries, luxembourg joined the Trust Fund financing.

The purpose of the Fund is facilitat-ing cooperation between the European Union and the Eastern Partnership states under the EU CSDP, by providing finan-cial support.

armed forces of Ukraine’ assets involvement in the eU

battlegroups formation is one of those paramount directions

of cooperation with eU

n view of the events in the east of Ukraine, the state, in the person of the Ministry of Defense,

must change its attitude towards private manufacturers of military products.

We cannot say that private com-panies have been entirely neglected. However, govern-ment orders were granted primarily to state-owned en-terprises, including members of Ukro-boronprom State Conglomerate. This remains the case even in situations where private com-panies are the only Ukrainian manu-facturers of fairly specialized products. For example, in Ukraine, only private companies manufacture radio locating equipment operating in the meter and

millimeter wavebands, and there are no alternatives to them in the state-owned sector. While this fact may have been neglected in the past, today our heads of state cannot afford to ignore such issues.

In general, current relations with the Ministry of Defense are show-

ing some positive trends. However, some promising directions for de-velopment of co-operation remain unrealized.

For example, both the Ministry

of Defense and the Ministry of Econo-my have gaps in the production process planning. However strongly we might wish to do more, it is not possible to shorten the production cycle, for ex-ample, from six months to two months, even if we work five shifts per day.

tHe efforts of tHe private and state CoMpanies in tHe Ukrainian defense

seCtor MUst be United

Vera KOSHEVAYA, Chairman of the board

Ukrspetstekhnika Holding Company JSC

i

in Ukraine, only private companies manufacture radio locating equipment operating

in the meter and millimeter wavebands, and there are no

alternatives to them in the state-owned sector

34 The efforTs of The PrivaTe and sTaTe ComPanies in The Ukrainian defense seCTor mUsT Be UniTed

Amendments to the state defense order for this year have not been adopt-ed yet. There is no state defense order for 2015, either. This once again creates a situation that prevents companies from ordering parts and components. All components we use are imported, with a minimum delivery term of 90 days. Therefore, it takes approximately three months just to prepare the pro-duction process. Only after that the production cycle can actually start. At the same time, in a scenario where I am the director of a company that has a state defense order, with specific product amounts and clear financing terms, I can afford to risk and order components ahead of time, and increase production rates. Therefore, theoretically, my company can manufacture the necessary prod-ucts more quickly, and deliver them at the required rate of regularity. but in a situation that exists today, I cannot af-ford such risks. Therefore, the approach must be changed here, because other-wise, progress becomes impossible.

The Ministry of Defense also clear-ly lacks information about private com-panies, their capacities, designs, and finished products. This results from the fact that Ukroboronprom State Con-glomerate, being responsible for its member companies, understandably chooses to inform the Ministry of De-

fense of such member companies first, and continues lobbying their products.

Furthermore, contracts concluded by companies with the Ministry of De-fense do not create partner relations, but rather, give the dominant role to the defense authority and somewhat infringe on the rights of the perform-ers. Changing this dynamic would open up numerous opportunities. For example, companies should be allowed to obtain loans, whzich they would use to manufacture and market their prod-

ucts. In such a situ-ation, the Ministry of Defense, being interested in pur-chasing new de-signs, could com-pensate borrowing

expenses – in particular, loan interest. Companies would use their own funds, or, when necessary, borrowed funds, to manufacture new products that would be promptly tested and marketed. This would allow stepping away from cost-ly R&D projects that are financed for years, only to produce zero results.

We have observed the above sce-nario in many cases. In fact, we have followed it ourselves, when developing the Malachite radio location system. We have conducted state tests, and are now successfully supplying this prod-uct to various markets. The same goes for other products. We should also note that the company does not always have sufficient working capital – which is

the Ministry of defense also clearly lacks information

about private companies, their capacities, designs, and

finished products


where loans are necessary. Personally, I believe that the state should be inter-ested in this scenario, since it results in ready-made state products without constant inflows of budget funds. but implementing this scenario requires a dialogue, so that companies can un-derstand that they would not become hostages to the situation, and that their expenses would be subsequently compensated. This method is standard practice abroad.

To make the above scenarios vi-able, it is imperative to create at least a two-year, or, bet-ter yet, a three-year state defense order, as is done in many countries. because if we are signing the state defense order for 2014 as late as in October 2014, and still don’t have one for 2015 – then how, pray tell, can we deliver on it?

Overall, the existing problems in our relations with the Ministry of De-fense are not always related to the fact that our company is private. Often these problems are present in the relations of the Ministry of Defense with all com-panies of the defense sector, and they should be resolved comprehensively, and not only pertaining to the private or state-owned segment.

When it comes to private compa-nies, I believe that they deserve more attention in the current situation. To-day, private manufacturers of military products are not standing still, but

constantly moving forward. Why? be-cause they lack the bureaucracy that plagues the state-owned sector. They are faster at making decisions. They are faster at reaching mutual agree-ment. They are faster at setting up production cooperation. They have a wider communication circle in the international market. And if Ukraine is to enter the European market, we must remember that the products of private companies are largely manu-factured to NATO standards.

In state-owned companies, all of these processes are much more com-plicated. They have

a huge management vertical, which requires getting approval even for the smallest purchases, and these approv-als take months to procure. We can feel that especially strongly when we work with exporters and need to approve the documents for supplies of some prod-ucts we are unable to procure. The pro-cedure takes months. Sometimes, our partners lose interest in cooperation because of that. And in the case of state orders, we are losing more than the in-terest of partners – we are losing speed of supplying the products required for the ongoing war.

because of this, I believe that all contacts with the Ministry of Defense must be direct. Direct communication makes production faster and products cheaper. For example, participation of

all contacts with the Ministry of defense must be

direct

36 The efforTs of The PrivaTe and sTaTe ComPanies in The Ukrainian defense seCTor mUsT Be UniTed

Ukroboronprom in the cooperation process between the Ministry of De-fense and private companies with ap-propriate licenses only makes this pro-cess more complicated and more costly. We always operate directly. We have no internal contacts with the Ukroboron-prom conglomerate, even though we closely cooperate with various compa-nies included in it. At the same time, Ukroboronprom is important for us, in the role of a unifying party that is aware

of the key trends, informed about the development direction of the defense sector, etc. We are always happy to take part in their conferences, trade shows, and other events that are important for us. Thus, I believe that all companies of the Ukrainian defense sector – both private and state-owned – should com-municate freely and should not be arti-ficially divided. That would only harm our common cause – the work we do to strengthen and protect our state.

n presenting the UA.RPA company, a Ukrainian agency for advanced re-search and technology, I

would like to focus on the modern hy-brid warfare technologies in Ukraine, as well as on the role of the private sector and the importance of coordinating its activities with the state in the course of military-technical cooperation.

In the context of the ongoing hybrid war, our military leaders often overlook modern warfare methods. The existing obsolete system requires practical com-mand skills, but does not leave room for leadership. To-day, we see combat carried out by mili-tary groups. That also represents a past mentality present in the military command. Combat must be carried out by military SYSTEMS.

by analyzing the recent lessons learned from the conflict, we often see that we still attribute the highest importance to achieving superior numbers of per-sonnel and equipment. Even personnel training is often overlooked – let alone a focus on modern weapons systems or technological superiority.

Unfortunately, our military com-mand system is highly centralized, with all decisions being made in Kyiv, while in practice, decentralized military com-mand is required. That is the reason for our being reactive and static in situa-

tions that require proactivity and dy-namics, and in cir-cumstances that re-quire maneuvering and outpacing the

enemy in both actions and time. We are also observing exclusively linear com-munication, while vertical, horizontal,

pUbliC-private partnersHip – tHe CUrrent CHallenge for tHe defense-indUstrial

seCtor of Ukraine

Igor KAbANENKO,President of UA.RPA,

Deputy Minister of Defense of Ukraine (2014),Admiral

i

we must have an upper hand in the understanding the advantages of modern techno-logies for staying ahead of the

enemy

38 Public-Private PartnershiP – the current challenge for the Defense-inDustrial sector of ukraine

and interactive types of communication are needed.

These things can be attained by be-ing technologically superior over the enemy. Effective military systems must consist of military equipment, person-nel, computers, software, sensors, com-munication systems, and more. We must have an upper hand in the understand-ing the advantages of modern technolo-gies for staying ahead of the enemy. We must also be superior in mentality, or, in other words, military culture. We must form a positive leadership motivation and shorten the power vertical in the military, as well as overall in the govern-ment authority systems.

The activities of the Ukrainian civil society and private businesses in the sphere of defense merit more attention. The civil society and private companies are demonstrating flexibility, quick re-sponsiveness, and an adaptive approach to real conditions, where circumstances change fast. Plus, they have an effective network approach to a number of high-tech projects, from regular logistical is-sues, to tablet solutions, drones, simula-tors, and various sensor systems. Even now, we see the private sector offering a number of comprehensive automa-tion solutions that can greatly increase the quality of operational military com-mand.

Another strategic issue is the need to improve public-private cooperation in the sphere of defense, especially relating to the implementation of modern tech-

nological solutions. In Ukraine, different teams can often be focused on the imple-mentation of the same projects – which is unacceptable in the current condi-tions. For example, over 30 groups are designing aerial drones. Such diffusion of effort is the result of poor coordina-tion. To improve coordination, a group of companies, enthusiasts, and collec-tives in Ukraine have created a so-called high-tech network cluster, bringing to-gether Ukrainian high-tech companies in order to implement modern dual-use defense technologies in Ukraine. Plus, they created UA.RPA, a service compa-ny providing coordination, support, and expert analysis services for the cluster.

As of today, we received 76 propos-als and high-tech initiatives in the de-fense sphere, which will allow to finally gain technological advantage over the enemy. The proposals are submitted by collectives with modern-day expertise, high intellectual potential, the possibil-ity to manufacture high-tech products, and, most importantly, the enthusiasm and energy to provide real assistance to the state defense sphere.

The network working principle of UA.RPA must provide for the full prod-uct cycle, from the drawing board to the finished product. It is already working for specific projects that have the top-most priority for Ukraine right now.

Today, IT and electronics are taking the front and center spot. The foremost spheres for their application must be surveillance, target assignment, outpacing the enemy in


decision-making, troop survival, and per-sonnel training. We have designated pro-jects that can provide for the above. They are labeled as «mega-projects»; in terms of time, they are classified as short-term, medium-term, and long-term. At this time, I would like to point out the following pro-jects: tactical scout-attack complex; tactical unmanned aviation complex; automated system for operational military command and resource management; Ukrainian comprehensive robot-assisted defense base; defense systems utilizing innovative materi-als; and tactical trainers (simulators).

It should be noted that three of the above projects are already undergoing operational test-ing in the military, while others are at the design stage. For example, im-plementing the tac-tical scout-attack complex will help decrease the con-sumption of ammunition, shorten the response time to change of conditions, increase the probability of target dam-age, and decrease own losses.

Now we reach the list of problems. Today, we definitely have a potential that the public sector does not – a huge potential, in fact, as our structure alone received as many as 76 applications. 11 projects are under development, and three are with the troops. At this stage, we already require a productive public-private partnership, and military-tech-

nical cooperation with the Alliance’s member- states, in order to achieve tech-nological superiority in the hybrid war. That needs to be done with a special focus on energy of the Ukrainian civil society and private companies.

We require effective communication with the Ministry of Defense. Today, pri-vate companies need proper conditions in order to receive proper orders. The high-tech cluster, UA.RPA, and other private initiatives and companies need the state to effectively coordinate the society’s efforts, in order to gain techno-logical advantage in the defense sphere. Such coordination is currently absent,

which is regretta-ble. It is vital to pass the law «On Public-Private Partnership in the Sphere of Na-tional Security and Defense,» the draft of which is already in the Verkhovna

Rada of Ukraine.When it comes to partnership and

support on behalf of Euro-Atlantic struc-tures and the European Union, we must be result-oriented. This means, among other things, effective scientific and technical partnership with the Ukrain-ian private defense sector, which will provide for the implementation of joint projects; as well as the EU’s and NATO’s support for high-tech research that will benefit the interests of Ukraine as well as the entire Europe.

we already require a productive public-private partnership, and military-

technical cooperation with the alliance states, in order to

achieve technological superio-rity in the hybrid war

have had the opportunity to visit Kyiv on several oc-casions since early 2014, and have met several de-

fense industries to better understand the industrial landscape of this country. I hope that I can provide some construc-tive inputs addressing the practical as-pects of cooperation among our defense industries.

let me start by disclosing that the views and recommendations contained in this presentation are my own.

This monologue is to discuss the op-portunities and challenges for allied de-fense industry companies in Ukraine. In my opinion, opportunities and challeng-es can be determined within a frame-work within which European and Amer-ican defense contractors can collaborate with Ukrainian companies. Therefore, I propose ten tenets for reform that the Government of Ukraine should consider if our industries are going to cooperate.

1. Demographics. The defense in-frastructure in the Donesk and luhansk regions has been compromised if not destroyed. An immediate effort must be undertaken to secure and protect critical military infrastructure in the Dnipro-petrovsk region, and to build new, secure and defensible infrastructure in the west-ern region. This is an expensive but urgent undertaking in order to secure Ukraine’s military supply chain and manufacturing centers. There are three benefits to this approach: first is the opportunity to at-tract foreign direct investment; second, it involves colocating critical supply chain industries adjacent to Poland and Roma-nia, both of whom have modern defense industries, opening up the opportunity for increased trade and defense coopera-tion; and third, it provides Ukraine the opportunity to build modern state of the art facilities.

2. Industry benchmark. Rees-tablishing military production facilities

opportUnities and CHallenges for allied defense indUstry CoMpanies in Ukraine: praCtiCal aspeCts

Alan MERbAUM,lockheed Martin Corporation

i


cannot occur without a thorough bench-marking Ukraine’s defense industry. An independent audit must be performed of manufacturing capacity for key military hardware as well as the secondary and tertiary supply chain in order to identify manufacturing gaps and redundancies. A rigorous Tech-nology Readiness level (TRl) evalu-ation of existing capabilities would assess gaps and in-vestment require-ments. In addition, the organization of Ukraine’s defense industrial base should be reviewed in terms of its competitive-ness, quality control, production rates and acquisition processes.

3. Research and Development (R&D) Centers of Excellence. Assess how Defense Research and Develop-ment funds are allocated and prioritized. R&D activities that do not support warfighter capability should be suspend-ed. The Government of Ukraine might consider establishing strategic research initiatives with foreign companies to leverage investments in technologies of mutual interest. In addition, the Finance and Defense Ministries might consider investment programs that attract and re-ward Foreign Direct Investment (FDI).

4. Supply Chain mapping. Sec-ond and third tier suppliers are cru-cial to sustaining a defense industrial

base. First, they create jobs within the Small and Medium Enterprise (SME) sectors of the economy. Secondly, they tend to be more innovative and effi-cient than larger organizations. Third, a distributed supplier base offers both

higher security and increased competi-tiveness. Suppliers represent the ‘up-stream’ component of equipment man-ufacturing. The ‘downstream’ com-ponent, consisting of Maintenance Repair and Opera-

tion (MRO), and sustainability, can be privately or government operated – or a combination of both.

5. Standards. Adoption of stand-ards and specifications are necessary if Ukrainian and western defense in-dustries are to collaborate effectively – and if desired – interoperate. A robust standardization program should be established to align with NATO stand-ards and quality control practices.

6. Simulation and Training should be given special attention for two reasons. The establishment of simulation facilities will – over time – save vast amounts of money while si-multaneously building next generation training capabilities. While live train-ing is still important, the establishment of simulation facilities aid in the devel-opment and modernization of capabil-

adoption of standards and specifications are neces-sary if Ukrainian and western

defense industries are to collaborate effectively – and if

desired – interoperate. a robust standardization prog-ram should be established to

align with nato standards and quality control practices

42 OppOrtunities and Challenges fOr allied defense industry COmpanies in ukraine: praCtiCal aspeCts

ity and support a sustainable training environment.

7. Governance. Enforceable policies on fair negotiations, ethi-cal behavior, and anti-corruption are crucial if Ukraine is to become a sta-ble country with the ability to grow a strong workforce and attract foreign investment and cooperation. For ex-ample, the Foreign Corrupt Practices Act (FCPA) adopted in the US ensures ethical behavior among defense con-tractors and international customers. Policies that punish corruption while embracing fair business practices are tantamount to successful cooperation.

8. Defense Procurement and Acquisition Policy. Using the United States Department of Defense as an ex-ample, Defense Procurement and Ac-quisition policy is “Responsible for all Contracting and Procurement policy matters including e-business in the Department of Defense (DoD).” In ad-dition, this policy maintains a Vision of Acquisition excellence through leader-ship with integrity, with a Mission to Enable Components to effectively de-liver equipment and services that meet the needs of the warfighter through innovative policy, guidance, and over-sight while being good stewards of the taxpayers’ money. American Defense Procurement and Acquisition Policy is an acquisition model to consider. The United States continually assesses its defense acquisition process, and will change its approach to assure adapta-

tion to military requirements, threats, technologies, and budgets.

9. Foreign Sourced Acquisition. Ukraine has the ability to build and deliver indigenous weapon systems. However the ability to meet urgent needs in the face of increased aggres-sion from the east, a foreign supplier acquisition policy should be consid-ered. In the case of the United States, Ukraine will benefit from working within the US Foreign Military Sale (FMS) and Foreign Military Financing (FMF) programs to fulfill acquisition needs that are currently approved.

10. Export Policy and Market Strategies. Ukraine can supplant Rus-sian companies during the period of sanctions against the Russian Fed-eration. Ukrainian suppliers who sold through Russian middlemen and Original Equipment Manufacturers (OEMs) should approach end-users directly. Ukrainian companies can up-grade obsolete components currently in many national inventories served by Russia. US defense companies are expanding internationally. The oppor-tunities and risks of strategic partner-ships should be approached.

Way Forwardbased on the aforementioned ten

items for consideration, it is suggested that Ukraine consider the following in terms of addressing defense industry reform:

1. Establishment of an inde-pendent tiger team to immediately put


in place benchmarking activities. This will require the highest level of govern-ment support and backing. Confront-ing the ‘old way of doing business’ will be difficult but is necessary in order to effect change. In the absence of the political will there will be no effective change to Ukraine’s defense infra-structure, and this will maintain the country’s vulnerability as well as deter cooperation by western industry.

2. Establishment of budgets for the reform process, in terms of the pre-

requisite studies, and eventual execu-tion of reform solutions.

3. Defining the Ministry of De-fense acquisition policy that will define defense industry reforms to meet capa-bility requirements.

4. Continued engagement with western industries, who if convinced that Ukraine is serious about reforming its defense industry, will consider vari-ous levels of investment.

Thank You.

ussia’s war against Ukraine, and occupation of Crimea and certain areas of Donetsk and lu-

hansk regions by Russian troops, mer-cenaries and insurgents, forces us to review and update our approaches to organizing and implementing Ukraine’s cooperation with NATO and its mem-ber countries.

The effective-ness of this coopera-tion is largely held back by insufficient support and control on the part of the society, as well as sub-standard state management.

To overcome these and other flaws, the following steps are recommended.

The President of Ukraine has initi-ated a constitutional reform. With con-sideration to that, it would be feasible to

record the European and Euroatlantic vector of our country in the Constitu-tion. Furthermore, it would make sense to abolish the Constitution provision that forbids establishing foreign military bases in the territory of Ukraine.

These steps would be a re-sponse to Moscow’s attempts to force

Ukraine to as-sign itself a fed-eral structure and non-aligned status in the Constitu-tion. Addition-ally, constitutional entrenchment of

Ukraine’s European and Euroatlantic integration vector will prevent the latter from being abolished through reconfiguration of the Parliamentary coalition and specific amendments to appropriate laws of Ukraine. It is worth reminding that this was the

Ukraine - nato Cooperation: tHe iMportanCe of inCreased institUtionalization, forMat, and ManageMent

Vadym TYUTYUNNYK,Specialist of the National Institute of Strategic Research,Advisor of the Expert Council in the Issues of National Security

r

furthermore, it would make sense to abolish the

Constitution provision that forbids establishing foreign

military bases in the territory of Ukraine


exact method used to assign our state non-aligned status in 2010.

This will also create legal grounds for Ukraine to receive international military aid in case of Russia’s large-scale aggression, and for foreign troops to be stationed in Ukraine before it acquires NATO member status.

Recently, the Head of State declared that a national referendum may be held. In view of that, it would be feasible to in-clude the matter of Alliance membership as one of the referendum’s questions. We are certain that today, the Ukrainian people will support this course of action. This would put an end to Moscow’s spec-ulations about the alleged illegitimacy of our state’s legislated Euroatlantic in-tegration vector. It would also become an important argument for convincing the heads of individual Alliance member states who still have a negative view on the idea of Ukraine’s NATO member-ship.

Implementing the Euroatlantic course must be-come a top-priority domestic task for all state authorities of Ukraine. Instead of slogans, words, and calls to action concerning NATO mem-bership, which are often heard from our government officials, we need thorough work towards this goal, on the part of ex-ecutive authorities, leadership and per-sonnel of the Armed Forces, other power ministries, etc.

The above work by the government authorities must, first of all, be aimed at achieving the criteria that Ukraine must meet in order to become an Alliance member. Those efforts and their results must be included among the main goals of reforming Ukraine’s defense and secu-rity sector.

In today’s Ukraine, it is difficult to talk about government management in the issue of Euroatlantic integration. After all, the chair of the First Deputy Prime Minister has remained empty for almost a year now, while a war is on. It is worth pointing out that the above of-ficial’s authority includes the issues of improving the state’s defense and secu-rity capabilities, equipping the Armed Forces, operation of the defense sector, and cooperation in the military sector, the defense industry, and the military-technical sector.

Therefore, the Government Com-mittee on the Issues of Defense, Defense Industry, and law Enforcement, which

must be headed by the First Deputy Prime Minister, is operating ineffi-ciently. According to the provisions of

the Coalition Agreement, an Interde-partmental Commission on the Issues of the Defense Industry Development must be created in the Cabinet of Ministers of Ukraine, operating as an advisory and consultative body. These provisions are yet to be implemented.

the chair of the first deputy prime Minister has

remained empty for almost a year now, while a war is on

46 Ukraine-naTO COOperaTiOn: The impOrTanCe Of inCreased insTiTUTiOnalizaTiOn, fOrmaT, and managemenT

Furthermore, the First Deputy Prime Minister must ensure appropri-ate organization and effective coordina-tion of the use of increasing amounts of expert, consultative, financial, mate-rial, technical, and other aid required to improve Ukraine’s defense capacity and provided to Ukrainian ministries and other central executive authorities by NATO, the European Union, and their member states. Due to lack of such organization and coordination, the re-sources of the five trust funds created by the Alliance for Ukraine are not being utilized adequately. The trust funds were created with the objectives of modern-izing the command, control and com-munication systems of the Ukrainian Armed Forces, reforming their logistics and standardization systems, ensuring cyber defense to Alliance standards, and retraining, social adaptation, and psychological rehabilitation of military servicemen taking part in combat in Donbas.

We believe that Ukraine should put forward to NATO a suggestion for re-viewing the format of cooperation. In the current military and political cli-mate, neither party requires coopera-tion for cooperation’s sake. Instead, the objectives and measures in the scope of cooperation should be made more con-crete and pragmatic.

For example, it would be feasible to abolish the Annual National Program of NATO-Ukraine cooperation and replace it with a document that would:

• be the closest approximation of the NATO Membership Action Plan in terms of structure and content;

• include measures in the spheres of defense, foreign policy, military policy, military-technical sector, logistics, resources, and others, to be implemented by Ukraine in order to satisfy specific criteria for Alliance membership and to fa-cilitate improvement of our state’s defense capacity in the presence of a real threat of large-scale Russian aggression.

This document could be titled the Plan for Ukraine’s NATO Membership Criteria Satisfaction.

Among other things, it would allow any Ukrainian to finally comprehend the substance of the above criteria and the benefits from their achievement. The Plan would also enable the Parlia-ment, political parties, and non-govern-mental structures to control the actions of the government aimed at bringing Ukraine closer to the Alliance member-ship criteria.

Unlike the existing Annual National Program, the Plan should not duplicate the list of measures included in the Plan for Implementing the European Un-ion – Ukraine Association Agreement, approved by the Cabinet of Ministers of Ukraine.

It is known that creating and im-plementing Ukraine’s military, mili-tary-technical, and military-industrial


policies, as well as the policy for mili-tary-technical cooperation, constitute an important component of Ukraine’s preparation for defense (see Article 3 of the law of Ukraine «On Defense of Ukraine»).

The authority to ensure creation and implementation of the military and military-technical policy is vested in the Ministry of Defense of Ukraine. Unfortunately, after six months of work, the leadership of this institution has so far failed to provide suggestions on the principles, priorities and directions for state policy in these spheres. Given that fact, it would be un-wise to assume that the defense authori-ties have chosen adequate and pragmatic directions for Ukraine’s military, mili-tary-political, and military-technical co-operation with NATO and the EU.

The situation is even graver in respect of creating and implementing Ukraine’s military-industrial policy and the policy for military-technical cooperation. Over its year in office, our Government has not determined the top-priority develop-ment directions for the national defense industry (see requirements of Article 20 of the law of Ukraine «On the Cabinet of Ministers of Ukraine»). Furthermore, it has not granted any central executive authority the competence to ensure cre-ation and implementation of Ukraine’s military-industrial policy and the policy

for military-technical cooperation. The latter must be done not only under the mentioned norms of the law of Ukraine «On Defense of Ukraine,» but also under the law of Ukraine «On Central Execu-tive Authorities.»

Therefore, at this time, Ukraine has no established principles, priorities, or directions for military-industrial policy or policy for military-industrial coop-

eration, including that with NATO, the EU, and their member states. State Concern Ukroboronprom is attempting

this task. However, that is not accept-able, because Ukroboronprom is only a state-owned business entity, and one of the entities that should be following the state military-technical policy, military-industrial policy, and policy for military-technical cooperation.

At this time, Ukraine also lacks a system for state management of the de-fense industry.

To correct the above flaws, it would be feasible to put the following recom-mendations forward to the President of Ukraine, the Prime Minister of Ukraine, and the Parliamentary Coalition of Ukraine:• expedite appointment of the

First Deputy Prime Minister of Ukraine;

• create the Council on the Issues of Operation and Development of

the situation is even graver in respect of creating and implementing Ukraine’s

military-industrial policy and the policy for military-techni-

cal cooperation

48 Ukraine-naTO COOperaTiOn: The impOrTanCe Of inCreased insTiTUTiOnalizaTiOn, fOrmaT, and managemenT

the Defense Industry of Ukraine, as an advisory and consultative body in the Cabinet of Ministers of Ukraine (to meet the require-ment of the mentioned Coalition Agreement provision); the Coun-cil is to include leading general de-signers of armaments and military equipment, heads of appropriate departments of central executive authorities, directors of leading defense facilities of all property forms, governmental and inde-pendent experts, etc;

• reorganize the State Space Agency of Ukraine into a central executive authority, for example, the State Agency for Defense and Space Industry and Military-Technical Cooperation of Ukraine («Agen-cy»), to be coordinated by the Cabinet of Ministers of Ukraine through the First Deputy Prime Minister of Ukraine;

• grant the Agency the competence to ensure creation and implemen-tation of the defense industry pol-icy, policy in the sphere of space activities, and military-technical cooperation policy, as well as to participate in the implementation of Ukraine’s military-technical policy;

• appoint the Agency responsible for ensuring creation and imple-mentation of the government de-fense order, and to cooperate with NATO and the EU’s European De-fense Agency, within its scope of competence;

• include the State Concern Ukrob-oronprom, other defense facilities, institutions and organizations that are not part of the State Concern, and facilities in the space industry, into the Agency’s sphere of man-agement.

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