(Bloomberg) -- Denmark is planning a fund to pool investments with a purpose of expanding Ukraine’s weapons industry and speeding up manufacturing, Defense Minister Troels Lund Poulsen said.
Weapons production in Europe and the US is “too slow,” and Ukraine could arm up much faster if it produced more military equipment at home, Poulsen said in an interview with Bloomberg News by phone.
Manufacturing weapons in Ukraine could cut delivery times from years to months, Poulsen said. The Nordic nation is already working to allocate donations directly to Ukraine’s defense industry, and is now exploring options to raise more capital.
“We have taken many initiatives in recent years to scale up our production of various military hardware,” Poulsen said when asked about European and US capacity. “But in general, we are nowhere near having the same speed in the production of military equipment as in Ukraine.”
Specifically, the Danish government is looking into establishing a fund by the end of the year to combine investments from the state and others to expand and refine Ukrainian weapons production facilities, Poulsen said. Investors, which could also include pension funds and defense companies, will get an ownership stake, access to knowledge and the ability to enter joint ventures with Ukrainian manufacturers.
So far the Nordic country has supported Ukraine’s weapons industry by refunding costs of existing production, an approach that has drawn “great interest” from other allies, Poulsen said. In July it financed 18 Bohdana-artillery pieces produced by a Ukrainian manufacturer; those were delivered to the military two months later, he said. Denmark is also exploring acquisitions of attack drones, anti-tank systems and missiles.
Denmark is the world’s biggest donor to Ukraine relative to the size of its economy, having granted some 1.9% of gross domestic product in bilateral support since Russia began its 2022 onslaught, according to the Kiel Institute for the World Economy.
About €160 million of Danish donations have been allocated to Ukraine’s defense industry and the country was appointed in August by the European Union to spend €400 million in windfall profits from frozen Russian assets using the same approach.
Other allies are now considering picking Denmark to help them facilitate their donations too, Poulsen said.
Apart from being faster, production in Ukraine is cheaper, and equipment is easier to service and maintain, Poulsen said. Despite its potential, there is a “very large unused capacity” in the industry because of lack of funds, he added.
Ukraine’s defense industry has an annual capacity of $20 billion, three times more than the Ukrainian budget can afford, according to the country’s government.
The defense minister rejected the suggestion that this strategy would cost jobs elsewhere, saying it is an opportunity for European weapons companies to partner with Ukraine’s industry on production, and to learn from it to improve their own capabilities.
“We are facing a historic rearmament of both Danish and European defense,” Poulsen said. “We will see that many jobs will be created in the European defense industry.”
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