A recently announced aid package for Ukraine may be used to stimulate Europe’s arms industry, fund U.S.-Ukraine arms co-production, and even help lure away countries from the Russian arms market, according to State Department officials.
The effort falls under a package announced by Secretary of State Anthony Blinken last week. Under the plan, the U.S. will spend $2 billion to support Ukraine through the department’s Foreign Military Financing (FMF) program. Foreign military financing is a category of aid used to help U.S. partners and allies buy U.S. weapons.
Blinken said the goals of the package are to fund Ukrainian purchases of U.S. weapons, build up Ukraine’s defense industry, and bankroll Ukrainian purchases on non-U.S. weapons.
The majority of the $2 billion will most likely go to purchasing weapons for Ukraine, a State department official told Defense One, speaking on background to discuss the topic. But a “significant” portion will go to incentivizing arms production and other less typical uses for FMF funds, they added.
A portion of the money, for example, could be used to stimulate Eastern European production of arms and munitions that Ukraine needs. The official specifically named Bulgaria, Romania, and Montenegro as potential investment sites.
Bulgaria has emerged as a major producer of arms for Ukraine, especially Soviet-standard munitions. It also produces at least some NATO-standard munitions, and plans to produce more.
While the work is still in the planning stages, one option might be to subsidize Eastern European purchases of American weapons under the condition that they then invest equivalent amounts in ramping up domestic arms production. Countries receiving funds would then promise that a portion of the weapons or munitions produced would be donated to Ukraine.
The U.S. could also use the fund to subsidize loans to wealthier countries that have budgetary restrictions. The official mentioned Scandinavia as a potential investment area.
“We could look at it and say, OK, is money a problem for your production efforts?” the official said. “We could try to subsidize [a loan] in exchange for you ramping up production, and again, donating a portion to Ukraine.”
Munitions production for Ukraine has emerged as a key problem for European supporters of Ukraine, with an EU-backed plan to boost production failing to meet its deadline this year by a wide margin.
In tandem with this effort, the U.S. will also be working to boost Ukrainian industrial capacity through joint-U.S.-Ukrainian initiatives, the official said, such as using money to subsidize facility construction, with a focus on whatever weapons or munitions Ukraine identifies as critical.
The work is a “pretty preliminary” phase, the official said, noting the next step is to talk with Ukraine about what they’re most interested in.
A third way to use the fund, dubbed the Ukraine Defense Enterprise Program (UDEP), could be to “strategically weaken Russia by transitioning partners away from Russian-systems and supporting [foreign military financing] loans to partners and allies,” according to a second State Department official.
For example, a country weighing their options between a new jet from either Russia or the U.S. could receive a cheap loan to choose the American plane.
The money could also be used to pay for new American weapons that would replace old Soviet or Russian systems sent to Ukraine.
Regions that could potentially be involved include Latin America or Africa, said the first State Department official, although they emphasized that this strategy would be lower on the priority list.
“I don’t envision this being a huge part of this UDEP program,” they said.
Russia’s weapons sales help fund defense modernization while cementing political relationships abroad, according to a report by think tank CSIS.
Russia ranked third in the world for arms exports from 2019 to 2013, accounting for 11 percent of global arms sales, according to the Stockholm International Peace Research Institute (SIPRI). The country’s top arms export was aviation, at around 50 percent of exports between 1992 and 2022, followed by missiles, armored vehicles, and ships, CSIS reported, again citing SIPRI data.
The U.S. has reportedly already sought to encourage Egypt to sell weapons to Ukraine rather than Russia, with only intermittent success. In April of 2023, documents leaked by former Air National Guardsman Jack Teixeira said Egypt had ended a plan to sell rockets to Russia over U.S. objections. However, another U.S. plan to get Egypt to send those same rockets to Ukraine failed, the Wall Street Journal previously reported.
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