Several American defense companies are considering joint manufacturing in Ukraine, but questions remain about the security of doing business in a war zone, ongoing corruption, and long-term economic viability, reports Defense One.
The Pentagon is pushing American defense contractors to expand cooperation with their Ukrainian counterparts, but U.S. firms are making deals more slowly than European companies.
“Industry is really eager, but at the same time, [it] has to make sense from a business case, right? And financing is an issue too, how you can actually pay for this stuff,” said a State Department representative in an interview with Defense One on the sidelines of the Farnborough Airshow.
Some Western companies are also concerned about corruption in Ukraine's defense-industrial complex.
“Clearly, corruption is a concern,” said the official, noting that Ukraine is making progress and that Ukrainian officials recognize that the situation needs to improve for American industry to confidently collaborate with Ukraine.
Companies are also trying to assess which local or regional markets can survive the war, as starting a new production line will take years, the official said.
“It has to be a business case for what they're trying to do, and so looking at maybe starting off with a maintenance, repair, and overhaul type stuff, spare parts production, so kind of starting a crawl-walk-run-type philosophy, before you actually get to the more advanced stuff,” the official said.
Another problem for American companies is whether they have political risk insurance—essentially financial protection for their investments in Ukraine.
“U.S. companies or European companies, if they're going to make these investments in those countries, they’ve got to have confidence that political risk insurance is in place, and they get the financing, stuff like that,” said the official.
