Notes from Ukraine

I spent last week in Kyiv writing a piece (forthcoming) about what the rest of Europe could learn from Ukraine in defense tech. Inspired by this piece by Dwarkesh, I wanted to share some impressions from the trip and conversations with people there. It was my first time in the country; I won’t pretend to ‘understand’ it. I have included three sections — drones, war, and impressions.

Independence Square

Drones

These impressions are based on conversations with people in industry and government, though I couldn't independently verify them, so caveats apply.

The impression you can get from the international press' portrayal of Ukraine's drone industry is misleading. There is usually an emphasis on artisanal garage-style manufacturing (perhaps due to site access). The reality is that large manufacturers dominate the production of both Kamikaze/FPV drones and surveillance equipment. The top two FPV producers each produce around 40,000 drones monthly. One official mentioned that the same firm won 11 of 12 recent procurement competitions.

What distinguishes major producers from peers isn't innovation or manufacturing capability, but logistics. Success comes from securing large volumes of components from Chinese and Indian production lines and efficiently transporting them to Ukraine. The manufacturing process for FPV drones itself is relatively straightforward. High-end surveillance (ISR) drones occupy a different market with more exquisite systems and much lower volumes — 300 units is a very large order. (There are also tens of thousands of off-the-shelf low-end surveillance drones being used every month.)

The expectations for continuing large-scale hardware improvements in Ukrainian drones are more limited than for software. While components are constantly changing due to battlefield dynamics (e.g. the recent introduction of fiber-optics wires), limited funds mean creating entirely new hardware at scale is difficult. Large firms are bound by the general industry frontier (the basic components they buy abroad). There are much higher expectations for software development, ranging from guidance systems on weapons to cross-unit planning software. Drones using computer vision for autonomous last-mile guidance are proliferating very rapidly.

The optimism for technical progress in software comes with a catch. The security risks are much greater with software than in simple hardware, particularly as it scales, and a lack of coordination in the military above the brigade (or sometimes even battalion) level creates challenges with integrating new platforms. There were repeated rumors of significant problems deploying certain Palantir products, and Ukrainian-origin systems have been rolled out with an eye on replacing them.

There is an interesting defense-specific paradox: while hardware is more capital-intensive and progresses slower than software, its adoption in the field remains much easier.

The ‘secret sauce’ for Ukraine's drone industry is the licensing/procurement system. The pre-war multi-month approval process involved central Ministry of Defense (MOD) testing and extensive paperwork (what Europe still has). This was replaced by a "declarative system" where companies and brigades could get new weapons approved in days with a two-page statement describing their capabilities and features.

Procurement is often handled at the brigade level. This is a good thing; the incentives of users and purchasers are very aligned — given that they are the same person. Units use local funds (from the oblast where they are deployed — more incentive alignment!) to purchase their equipment. This approach enables rapid innovation but limits standardization and scaling, as the capital available to brigades remains a fraction of the MOD procurement budget.

Central MOD procurement is much less efficient. Multiple companies producing high-end drones have struggled to sell products to the Ministry of Defense. Bureaucracy is usually to blame. For example, selling a similar but better product for a higher price can lead to an investigation by the anti-corruption agency — which does not do quality adjustments.

Overall, the biggest limit on production right now is orders, not capacity. Ukrainian drone firms supposedly have the capacity for $10 billion in orders every year, and currently receive around half that (this same 50% utilization figure also applies to the wider Ukrainian defense industry). Given that compared with Ukraine the EU is fiscally unconstrained but has run out of armaments capacity, this gap is very frustrating to Ukrainians.

Ukrainian firms' biggest advantage over Western companies is their integration with end-users — the military units. Founders communicate directly with platoons. Firms test product updates on the same day. If you have the right connections, you can go from founding a firm to testing your product on the battlefield in days. In contrast, Western products — often on longer development cycles and taking months to arrive — are regularly outdated upon delivery, particularly regarding resistance to electronic warfare.

I generally heard much derision regarding drone products from Western companies. One particularly expensive American surveillance drone was useless on arrival due to its outdated radio link, until a Ukrainian firm used a cheap $10,000 part to change its frequency. Another large (multi-thousand) delivery of FPV drones from a hyped European start-up turned out to be dangerous for its operators because of missing ignition plates. As one official told me:

“I don’t care if you are based in Berlin, as long as you don’t have an office in Pokrovsk you won’t be useful”

There is more pessimism about the industry's long-term (post-war) prospects, as Ukraine lacks advantages in capital costs, the labor market is tight due to the war, and there are few revolutionary innovations. A potential lasting edge for Ukrainian companies selling to the rest of the West is regulatory. While getting export licenses and complying with procurement in Europe is challenging, the absence of the broader compliance burden that affects manufacturing in Europe has created a large cost advantage.

A lot of progress has been made in unmanned ground/sea vehicles, but I did not learn enough to include it.

War

Air raids, soldiers, recruitment ads, and memorials show that this isn’t a normal city. But many of the inhabitants seem — now almost three years in — accustomed to the circumstances. Air raids are met with indifference. Even playgrounds remain packed. My (Western) hotel would not sound alarms during the night.

A classroom in the air raid shelter at the Kyiv School of Economics

The mood seems to fall into three buckets: disillusioned, fatalistic, and committed. Disillusionment was prevalent amongst some of Kyiv's younger ‘elites’ I met, who had hoped that the war would lead to greater acceptance from Europe, and less governmental dysfunction, only for both to disappoint.

Difficulties with institutions pervade the conversations of people of all stripes. One journalist suggested that the median Ukrainian allocates twice as much attention to corruption scandals as to news from the war. Inequality in mobilization (with mobilization hitting working classes harder than the well-off) chafes. Recruitment, especially for infantry, is generally the most important war-related topic in daily life (and thanks to roaming draft officers and ever-present recruitment ads, the most visible one). While I was there, the mismanagement of the newly recruited 155th Brigade came up a lot.

The (ex-)soldiers I spoke to were generally weary but remained motivated. Two had recently demobilized using the exceptions for having a third child. They had been fighting since the war began, and once even before that. While both were committed to the war, they felt they had done their time.

No one I spoke to thought that Trump would manage to end the conflict soon. Those in government all believed that the war would still be going on at least 12 months from now. No one I met supported an imminent ceasefire on terms unfavorable to Ukraine (one with no guarantees, and permanently renouncing claims).

Nonetheless, the Biden administration has become unpopular with a wide swath of Ukrainians, from taxi drivers to internationally educated journalists and civil servants. Many people, while acknowledging faults with the new administration (‘Trump is crazy’ was a common refrain), thought that at this stage in the war, Ukraine needed to gamble. The Greenland remarks, which happened when I was there, made an impact, particularly the offhand remark that NATO had provoked the war in Ukraine.

Of the foreign-educated Ukrainians who did choose to return, many have opted to support the war effort through humanitarian or military roles, rather than the central government. Working as an official can leave you earning just $400 per month, which is not enough to live on. A refrain I heard was that many senior bureaucrats/officers are those who entered government in the 1990s/2000s, not the dynamic/young Ukrainians foreigners interact with (you fight a war with the state that you have).

Impressions

All countries are polarized. Still, it is striking how much different Ukraine’s continue to co-exist. Kyiv is a buzzing and genuinely fun city. It reminded me most closely of Riga, with an imperial core interspersed by dense construction (both Brezhnevka and post-1991 monoliths). The downtown is packed with the oat milk coffee shops and craft beer pubs that signify hip everywhere. In some areas of the city, you can hear more English than Ukrainian. The countryside (which I admittedly only saw from the train) corresponds much more to what you would expect from a GDP per capita of $3000. Most small towns seemed to feature a large (often abandoned) factory, some Khrushchevka, and large rows of small homes on unpaved roads.

The divide of the two Ukraines is not strictly rural/urban either. A Ukrainian friend thought it was as much cultural and generational. It is particularly noticeable amongst those who came of age post-Maidan, who expect different things from their government and the world.

A village in Western Ukraine

Despite the invasion, Kyiv is an easy place to visit. Everyone I met was very welcoming. Much of life is digitized. Some bars only take contactless, and all use a very effective QR code system that works. Life takes place earlier during the day due to the curfew at midnight (parties have been known to start at 1 pm). A set of internationally educated Ukrainians, journalists, and Westerners congregate around the center. Although wages have risen, labor-intensive work remains very cheap by EU standards — Bolt, the local Uber, usually costs between one and two dollars, with my most expensive ride, roughly 35 minutes, costing five dollars.

Conclusion

A lot of the things you learn can feel trivial. As Dwarkesh said:

“Travel often teaches you things about a country which you honestly should have intuited even without visiting”

But there are things you cannot get from afar.

One is a better sample of industry and governmental work, both of which are necessarily not representatively covered (‘secret factory produces a lot of kit’ is not a story for many reasons). The progress being made is not homogenous. But Ukraine’s defense firms are producing more at larger scales than is adequately conveyed from afar. The primary advantages seem to be mass, integration, and speed, not scientific or engineering.

The Ukrainians I spoke to saw Europe as both the solution to Ukraine's problems and an object of profound disillusionment. The deepest long-term challenges to continued economic growth, including in defense tech, will be a lack of integration with European markets, and a lack of trust in institutions. These are both things Europe could make a lot of progress by simply opting for more integration. Despite American delays, Europe could not ramp up production which provoked the most derision. One MOD person mentioned that at least America understands how the world works.

It is hard not to be moved by a trip to Kyiv, and the perseverance and sacrifice of a people engaged in a basic fight for liberty. It starts in the train station — an Art Deco hall with Christmas decorations that could be anywhere in Europe, packed with soldiers heading to the front — and that feeling does not ever disappear. I suspect that even now, many skeptics of further aid would be convinced by a trip there. Given Ukrainian expectations for 2025, it will be as necessary as ever.