Several defense companies are considering co-production deals with Ukraine's territory, and the Pentagon is supportive of this idea, but American businesses are much more wary of taking this risk than their European colleagues.
Key factors are the dangers of setting up production in a war zone, the "persistence of corruption," and the uncertainty about long-term business prospects, a U.S. Department of State official told Defense One journalists at the sidelines of the Farnborough International Airshow held this July.
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"I think our industry is really eager, but at the same time, [it] has to make sense from a business case, right? And financing is an issue too, how you can actually pay for this stuff," the official said and recalled Northrop Grumman's initiative to open an ammunition factory in Ukraine as an example of an incentive that pushed other players of the market to take note of this opportunity as well.
However, this venture is associated with obvious risks: "No one wants their facilities blown up or employees getting hurt," the official said, as delivered. Corruption in Ukraine is another point of concern, they admit, though stress on Kyiv's progress in rooting it out.
Provided that deploying and cranking up an assembly line over the ocean might take a few years, American defense companies have to take a "crawl, walk, run" approach, starting with opening maintenance centers and steadily growing them into spare parts manufacture and finally a full-time factory. The entrepreneurs want to be confident stepping into the market, a "political risk insurance," and financing.
The U.S. government is encouraging industry to cooperate with Ukraine, the speaker mentioned a "Ukraine deal team" for consulting and guidance on potential agreements.
From Ukraine's point of view, Defense Express would like to add, this sounds like the U.S. Department of State hints through the media about the conditions Ukraine needs to create for U.S. defense contractors in order to get a green light for these agreements.
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