EU Commission to propose that Ukraine join EU defence industry support scheme

The European Commission will propose to make Ukraine a full member of the EU's defence industry support scheme, which will help Brussels use Kyiv's experience and bring Ukraine closer to EU membership.

As reported by Euractiv, one of the three objectives of the proposal for the European Defence Investment Programme (EDIP) is a step "contributing to the recovery, reconstruction and modernisation of the Ukrainian defence technological and industrial base and progressive integration into the European [one], thereby contributing to mutual stability, security, peace, prosperity and sustainability".

In order to achieve this, Ukraine should be allowed to become a full member of any consortium for joint procurement of military equipment with other EU member states and have access to EU funds and VAT exemption in case of joint ownership, the draft text says.

The EDIP Regulation will be presented by the European Commission on Tuesday, 5 March, along with the EU's common political defence strategy.

Therefore, Ukraine will receive a special place in the programme, which is intended to support joint European arms procurement and strengthen the EU's defence industrial base (DIB), which utilises EU funds.

Previous defence and industrial programmes adopted in the EU have never considered any third country as a full participant in these schemes, except for Norway.

Ukraine's accession to the EDIP would be crucial in shaping Europe's DIB, given Kyiv's two-year experience in using defence equipment and its EU accession aspirations.

With Ukraine in dire need of defence supplies, especially ammunition and drones, Kyiv is engaging with EU companies to establish joint ventures, make direct purchases from the EU industry, and develop large-scale UAV production facilities. Two years of war also gave the Ukrainian army expertise in testing and utilising modern weapons.

Under the draft regulation, "contributing to the recovery, reconstruction and modernisation of the Ukrainian defence technological and industrial base" is a way of "support[ing] defence readiness of the Union and its member states".

Outside the European Union, the EU industry is facing challenges in galvanising production while awaiting contracts after decades of underinvestment following the Cold War.

"Faced with a high-intensity conflict, the Ukrainian defence and technological, industrial base had to shift to a war economy model," the draft defence strategy reads, and therefore "will emerge as one of the best engines of the economic recovery of the country at the end of the war and testbed of the defence industrial readiness".

Cooperation between Ukrainian industry and European industry is a key aspect of the security commitments that the EU's diplomatic service has been discussing with Ukraine.

"Ukraine is and will increasingly be a crucial partner in the Union in the defence industrial sector, notably given its full accession process," the unpublished text of the defence strategy stated.

The draft document also envisages a separate budget for Ukraine's defence industry.

The document contains no indication of the total financial package, although the European Commission representative noted that it should be no less than €1.5 billion.

However, as the draft states, Ukraine must comply with several rules as outlined in the plan. It lists pre-conditions on the rule of law that resemble those it must meet on its path to EU membership.

Ukraine must "continue to uphold and respect effective democratic mechanisms, including a multiparty parliamentary system and the rule of law, and to guarantee respect for human rights, including the rights of persons belonging to minorities, thereby contributing to mutual stability, security, peace and prosperity".

The European Commission will also consider assessing the security context to evaluate its further support.

The integration of Ukrainian industry into the EU defence programme is likely to raise questions from enlargement sceptics who may oppose giving a candidate country another single market advantage and the benefit of subsidising sensitive national industries when the membership process and the war are protracted.

Earlier, the European Union reportedly engaged Ukraine to work on a future industrial strategy for the EU's defence industry.