Going Danish: How a small Nordic country is aiding Ukraine's defense

Yahoo

30-01-2025

PARIS — Denmark is better known for LEGO bricks and leading in wind energy than for military power – a possible reason why U.S. President Donald Trump might have felt he could demand the country hand over its territory of Greenland, or else.
Whatever the Nordic nation's martial prowess, the Danes have made a difference in Ukraine by leading an initiative to spend Western military aid on locally produced weapons rather than foreign equipment. That's helping Ukraine rebuild and grow its battered defense industry by paying for 'Made in Ukraine' howitzers, missiles, and long-range strike drones.
For countries such as Denmark that want to help Ukraine fight off Russia's invasion but lack a major defense industry or weapon supplies, financing Ukrainian production makes sense, analysts say. Buying local gets weapons to the front faster and at lower cost, and facilitates training and maintenance. It also sets up Ukraine as a potential major European defense exporter.
'It's not a coincidence that it was the Danes who started it, because Denmark has very limited domestic military industry, but they have a lot of money,' said Jacob Funk Kirkegaard, a senior fellow at Brussels-based economic think tank Bruegel, who has testified to the European Parliament about Ukraine's economic recovery.
Ukraine has placed 'great hopes' on scaling up the Danish model, and expects to raise at least $1 billion via the initiative in 2025, Prime Minister Denys Shmyhal told parliament on Jan. 10. Getting more allies to join was high on President Volodymyr Zelenskyy's agenda in meetings with NATO Secretary General Mark Rutte and German Defense Minister Boris Pistorius in recent weeks.
'This Danish model is ideal, supportive to the Ukrainian defense industry and armed forces at the same time,' said Mykhailo Samus, director of Kyiv-based think tank New Geopolitics Research Network. 'We have huge room for growth and for development of this project.'
Ukraine's defense industrial capacity could reach €34 billion (US$35.4 billion) in 2025, but the country needs help to get there, being able to secure €16 billion in funding independently, Defense Minister Rustem Umerov said at a European Defence Agency conference this month. To compare, the entire European defense industry reported revenues of €158.8 billion for 2023.
More than two years into Russia's invasion, Denmark was the first NATO country to directly buy weapons in Ukraine, ordering 18 locally-made Bohdana howitzers in July last year. Three Nordic countries, the EU and Canada have since joined in, and Zelenskyy has repeatedly praised the initiative, singling out Denmark as one of his country's most reliable defense partners.
The Danish model delivered around €590 million of locally manufactured weapons to Ukraine in 2024, the Danish Ministry of Defence says. The Danes are among the top military aid donors to Ukraine in absolute terms, behind the U.S., Germany and the U.K., according to the Kiel Institute for the World Economy's Ukraine Support Tracker.
Buying in Ukraine gets around the full order books and tight supply for Western defense firms, which have seen a surge in demand as European countries rearm. The first Bohdana order was fully delivered by mid-September, when buying that many artillery systems in Europe would have taken years, according to Danish Minister of Defence Troels Lund Poulsen.
Speed of delivery is probably the biggest immediate advantage of the Danish model, said Pavel Verkhniatskyi, managing partner and director of Kyiv-based business-intelligence firm COSA. Direct investment in production by foreign firms is a 'much longer and sophisticated process,' he said. 'And in the end, someone still needs to fund the procurement of the produced goods.'
Allocating aid to buy from local arms makers allows them to focus on producing weapons for the frontline, rather than on exports or business survival, according to Verkhniatskyi, who said the funding mechanisms in place before the Danish model mostly helped foreign industries.
Ukraine had stepped up Bohdana production to between 15 and 20 guns a month by October, from starting with several units a month in 2023 and ten units in April. By comparison, KNDS France had increased monthly production of the comparable Caesar howitzer to six in April, from two per month before Russia's invasion of Ukraine, and a target for as many of 12 of the cannons per month.
The French and German defense industries still haven't achieved the pace of production required for high-intensity war, said Samus, the Kyiv-based think tank director.
'Ukraine, including its defense industry, is in war conditions, so we're thinking differently. We have a motivation that's not only financial, like profit for a normal business, we have the main task of giving everything we can to our armed forces, to stop Russians.'
Ukraine has built up what Zelenskyy calls a de-facto new defense industry, after Russian bombing left much of the pre-war industrial base in tatters. Ukraine churned out 25 times more artillery and mortar rounds in the first half of 2024 than in all of 2022, while drone production capacity rose to 4 million units in 2024 from around 300,000 a year earlier, according to government numbers.
The country now produces about a third of the weapons it uses, from less than 10% at the start of the war, the president says. Domestically produced unmanned aerial vehicles accounted for 96% of those used by Ukrainian forces last year, according to Umerov.
'In the longer run, it's clear that Ukraine wants to become more self-sufficient in arms so that in the future, they will not be as dependent on Western military support and goodwill,' Kirkegaard said. 'And of course, if they have a huge, very competitive, battle-tested war-weapons industry, they will have the ability to export.'
Zelenskyy says his country is set to become a 'very strong player' in global arms and defense technology. The country's defense firms employ around 300,000 people, nearly half as many as the workforce of the entire European defense industry.
The potential hasn't gone unnoticed in France, the world's second-biggest arms exporter. Ukraine is 'building up an extremely important defense industry, which it openly states is destined to become a major defense exporter,' Bruno Berthet, head of the international committee at French aerospace-industry lobby Gifas, told lawmakers in a Jan. 15 hearing on weapon exports.
France and Ukraine in October discussed a French model for cooperation, which Zelenskyy said was different from the Danish one, with the inclusion of technology and construction of production facilities. The French model would be an opportunity to attract investment specifically in new manufacturing capacity, the president said.
'I would not expect France to be a major player in the Danish model,' Kirkegaard said. 'But if you ask the major French military producers, they will have an interest in having a presence in Ukraine – which we are seeing.'
Norway discussed yet another cooperation mechanism dubbed the Norwegian model in January, after already pledging funds for the Danish initiative in November. The Norwegian Ministry of Defence said it didn't have any comment on the talks.
Lower production costs give Ukrainian equipment an edge over comparable kit from France or Germany. A Bohdana self-propelled howitzer costs around $2.5 million, according to Ukrainian media reports, whereas France last year financed 12 new Caesar howitzers destined for Ukraine at a cost of about €4.2 million each. Meanwhile, drones are more profitable to make in Ukraine than anywhere else in Europe, according to Zelenskyy.
'You get much more bang, literally, for your buck', Kirkegaard said. 'If budgets overall are limited, it should be in everybody's interest, both the donor and of course Ukraine as the recipient, to have it produced in a more cost-efficient manner.'
Industry wages in Ukraine averaged 22,186 hryvnia ($529) a month in the first nine months of 2024, around one-third of average wages in neighboring Poland and Romania and one-eighth of average pay in Germany, according to data from the Ukrainian and EU statistics offices.
Low costs, industrial capacity and experience from the conflict with Russia will make Ukraine's defense industry extremely competitive and very efficient in the longer term, provided the country survives as an independent state, Kirkegaard said. Should Ukraine join the EU, the country would be the premier military production location in the bloc, he said.
'I like to think of Ukraine as kind of the arsenal of the EU,' the Bruegel researcher said.
The Danish model doesn't exclude joint ventures, and that might actually be the best way to invest, as some allies might prefer to fund equipment manufactured by companies linked to one of their national firms, according to Verkhniatskyi at COSA.
'Allied states and their businesses can benefit from cooperating with Ukrainian enterprises in R&D and co-production,' Verkhniatskyi said. 'After the war, these jointly made products would find their way into global markets much easier. 'Designed in Ukraine' should be a competitive advantage.'
Beyond the political driver of countries wanting to help Ukraine, there will be a corporate logic for European defense producers to expand in Ukraine, said Kirkegaard, citing Rheinmetall, KNDS and others investing in the country with the intent of actually manufacturing there.
Rheinmetall has been one of the more proactive European defense companies in Ukraine, setting up a joint venture company with state-owned Ukrainian Defense Industry in October 2023, with the Germany company holding a 51% stake. KNDS created a unit in Kyiv a year later which it said would support cooperation with the Ukrainian government and the local arms industry.
'In the short run, it's an advantage for Ukraine to have money invested in their existing capacity, because then you can scale it up faster,' Kirkegaard said. 'In the longer run, I would expect there to be very close collaboration between Ukrainian defense producers and other European ones. There will be mergers, there will be acquisitions, there will be joint ventures.'