TRANSFORMATION OF THE DEFENSE-INDUSTRIAL COMPLEX OF UKRAINE IN 2025: INSTITUTIONAL MECHANISMS AND SECTORAL STRATEGIES

Abstract

This article presents a comprehensive academic analysis of the transformation of Ukraine’s defence-industrial complex in 2025 against the backdrop of a war economy and persistent, high-intensity security challenges. It examines the evolution of state policy in the field of defence-industrial complex development, from situational and reactive management to the formation of a systematic institutional environment. Particular attention is paid to the analysis of institutional and legal changes, in particular the introduction of the special legal regime ‘Defence City’, as well as tax and customs incentives. The study examines the transformation of the financial architecture of the defence-industrial complex, which by 2025 had taken on the characteristics of a hybrid model combining direct state funding, preferential lending instruments and mechanisms for international cooperation. It has been established that the introduction of innovative financing models, in particular the ‘Danish model’, not only ensured the attraction of significant volumes of external resources but also contributed to improving the efficiency of financial resource utilisation, reducing logistical costs and stimulating the development of domestic arms production. A sectoral analysis has been carried out of the development of key segments of Ukraine’s defence industry, in particular unmanned systems, missile weapons and ammunition production. It has been established that the technological transformation of the sector is uneven in nature and is accompanied by a concentration of resources on the development of asymmetric weapons. It has been demonstrated that the active implementation of innovations, in particular artificial intelligence technologies in unmanned systems, as well as the development of missile programmes and the localisation of munitions production, ensure the growth of the state’s defence capabilities and the development of its technological autonomy. It has been demonstrated that the institutional, financial and organisational transformations of Ukraine’s defence-industrial complex in 2025 contributed to increased production efficiency, the strengthening of innovative potential and the formation of a new model for the sector’s operation. It has been established that the further development of the defence-industrial complex requires deeper international cooperation, the expansion of production of critical components, and the strengthening of enterprises’ infrastructural and energy resilience.