One night in March, a two-person Ukrainian crew established a record for the Ukrainian Armed Forces by shooting down, in one engagement, 23 Russian Shahed drones with Sting interceptor drones designed by the Ukrainian military technology company Wild Hornets. The story is noteworthy not only for the number of intercepted drones, but also for the operation’s cost efficiency and Ukraine’s interceptor-production capacity behind it.
A Sting interceptor costs about $2,500. In comparison, a single U.S.-made Patriot interceptor missile that does the same job costs more than $3 million and requires significantly more time and resources to build and operate than a drone. Lockheed Martin produced approximately 600 of the most advanced PAC-3 type of Patriot missiles last year; meanwhile, the Ukrainian Armed Forces used about 700 of these interceptors in the span of only four winter months in 2025-2026.
The conflict in the Middle East has further exposed the shortcomings of a high-end, slow-production approach to defense systems. In March 2026, when Iran launched hundreds of Shaheds at Persian Gulf states, countries with the most advanced U.S.-supplied air defense systems outside NATO watched their defense capabilities erode as their interceptor stockpiles drained quickly. The air defense systems worked as intended, yet they were not designed to protect against the intensity and scale of Iran’s attacks.
Kyiv is building drones in massive quantities out of wartime necessity against Russia’s ongoing full-scale assault, now in its fifth year. A key part of that necessity is Russia’s large-scale use of Iranian-made Shahed drones against Ukrainian cities and infrastructure. That Russian campaign has raised serious questions about Iran’s responsibility under international law. In response, Ukraine is rewriting the global rules of air power and air defense, replacing sheer mass and large stockpiles of weapons as key factors in warfare with the benefits of quantity, speed, and the ability to learn faster than the enemy. It is a novel and adaptive, low-cost military-industrial model that is already catching the interest of other countries.
Ukraine’s Military Spending Growth
Throughout 2025, Russia launched more than 54,000 Shahed-type drones against Ukraine. These drones, made from commercial parts, cost as much as $50,000 each. Each drone required a response. Copying an expensive foreign solution to this problem was not an option, so Ukraine built its own.
That was not easy. Ukraine’s military spending consumes an estimated 40 percent of its GDP compared with Russia’s 7.5 percent. Yet its overall military spending is less than half that of Russia, so it adapted by accelerating its production cycle. Ukraine now produces 6 to 9 times as many drones per person of working age than Russia.
This shift gave rise to what Ukrainians now call “Mala PPO” (small-scale air defense). This anti-drone ecosystem includes interceptor drones, mobile fire units, and automated anti-aircraft guns – all reducing the need for expensive missiles. By early 2026, Ukrainian firms were producing up to 1,000 interceptor drones each day. In February alone, these drones accounted for 70 percent of Shahed intercepts in the Kyiv region.
Offensive Use
Mass use of drones goes beyond interception. It also includes offensive operations, even on the ground. A spike in Ukrainian production of land-warfare first-person-view (FPV) drones), small and nimble aircraft controlled remotely through a headset that streams live video from the drone’s camera, lets a single operator guide it accurately to a target. Each drone costs between $300 and $400. This has offered a partial solution to Ukraine’s shortage of artillery ammunition. FPV drone-production grew from about 3,000-5,000 units per year in 2022 to about 3 million in 2025. As of early 2026, Ukraine’s defense industry could produce more than 8 million FPV drones annually.
In addition to the FPV drones used on the front lines, Ukraine has new long-range drones that are much more costly to produce but can target oil refineries, ammunition depots, and military airbases deep inside Russia. They work alongside Western-supplied missiles, such as the Anglo-French Storm Shadow and the U.S.-made ATACMS, while avoiding the higher per-unit costs and the restrictions imposed by international partners for the weapons they provide. Ukrainian drones have hit targets more than 1,500 kilometers (932 miles) from the frontline — distances at which few Western governments would allow attacks against Russia with their own weapons.
The June 2025 “Spiderweb” operation, a coordinated long-range drone strike launched simultaneously against multiple Russian airfields deep inside Russian territory, illustrates yet another new form of Ukrainian drone deployment. It took only 117 FPV drones costing about $117,000 altogether to damage or destroy more than 40 Russian aircraft across five airbases valued at more than $7 billion. Long-range Ukrainian drone strikes have also targeted oil extraction, refining, and fuel infrastructure hundreds of miles from the frontline, periodically forcing shutdowns and compelling Russia to redirect its resources from the front.
Home-produced long-range unmanned systems allow Ukraine to strike targets deep inside Russia while avoiding the need to get permission that likely wouldn’t be granted to use weapons provided by Western allies to hit targets inside Russian territory. The debate over these restrictions has been a constant part of the war. The United States and its partners have repeatedly limited or conditioned Ukraine’s ability to strike beyond its borders with arms supplied by the West. In contrast to Western-supplied missiles such as ATACMS or Storm Shadow, which cost more than $1 million per unit and may be subject to those kinds of restrictions, Ukrainian drones can be used freely, and cost between $400 (for tactical frontline operations) and $400,000.
Ukraine’s economic model of high production and rapid technological improvement could be called “drone Keynesianism,” borrowing from John Maynard Keynes’s argument that governments can solve structural problems through massive, sustained spending on production. Rather than producing drones itself, the Ukrainian state procures the weapons, creating a constant market demand to which hundreds of competing private firms respond. The state sets the floor through defense orders, subsidies, and fast-track contracting, but does not control the ceiling.
As a result, more than 500 companies now manufacture drones in Ukraine, with roughly 40 to 50 of them considered market leaders. The private sector makes up about 90 percent of FPV output. There are no national champions, no guaranteed contracts, and no five-year plans. Success is measured not so much through fulfilling procurement specifications, but by whether the technology performs under fire.
Constant Tech Iteration in Wartime
Can the Ukrainian model be copied? Russia has been trying to do so over the last several years. Iran built its Shahed drones under conditions of sanctions and used components anyone can order online. The United States has recovered these drones from the Ukrainian battlefields, reverse-engineered them, and created its own low-cost clone — the LUCAS attack system — within months. However, copying a design is not the same as developing the economic and social ecosystem that enables constant technological iteration under conditions of war. That is what Ukraine has, and, so far, no other country has replicated it.
The ecosystem’s first key element is its feedback loop. Ukrainian engineers work alongside combat units, receiving live performance data and returning modified systems back to the frontline within weeks. Some brigades rework up to half of the delivered drones before deploying them. Such improvisation would grind most standard Western procurement programs to a shutdown — modification of delivered equipment without manufacturer sign-off is rarely if ever permitted under European or U.S. defense contracting rules.
The Ukrainian feedback loop functions as a form of quality control conducted under real-world, rather than lab or test-field conditions. The European Union’s standard defense certification cycle can run years. Ukraine’s runs weeks.
The second core element of the Ukrainian drone-production ecosystem is its institutional culture. Russia’s military-industrial complex is built around state giants, like Rostec or the Kalashnikov Combine, and works on long-term guaranteed contracts. That may be good for scaling up a proven design. But a jamming technique that works today, for example, may be useless by next month if the adversaries adapt. Typically, centralized systems cannot swiftly react to quick changes on the battlefield. Europe’s procurement, organized around prime contractors like the French Airbus and Thales, the German Rheinmetall, is also built on multi-year development procedures. They try to reduce risks before deployment rather than learn from failures on the battlefield — the ideal scenario, of course, but not always feasible.
Lastly, the Ukrainian unmanned aerial vehicles production ecosystem depends on talent. The same software engineers and electronics designers who built Ukraine’s pre-war technology-export sector now run the drone economy. What happened after the 2022 full-scale invasion could be called a “dronization without militarization” of the economy. It has its advantages and disadvantages.
Industry Risk
The prospect of declining state demand has inspired small enterprises to seek dual-use innovation rather than locking themselves into permanent military production dependent on continuously high defense spending. However, since 2022, Ukraine’s military-industrial complex has suffered from brain drain. More than 120,000 IT and engineering professionals have left Ukraine. One large Kyiv defense company alone, for instance, has more than 700 unfilled technical vacancies.
The talent problem is one part of Ukraine’s broader industrial fragility. Almost 89 percent of Ukrainian drone producers depend on Chinese components. The supply chain from Beijing has been tightening since 2023. And procurement is reactive. Despite the industry’s efforts to diversify with dual-use manufacturing, without predictable demand from the biggest customer, manufacturers cannot plan. Units sometimes wait months for equipment that arrives already outdated.
In the meantime, Western aid, though crucial, is poorly structured. It is irregular, aimed at battlefield gaps rather than industrial stability. If the war ends quickly, a production base designed to produce 7 million drones annually will face a sudden drop in demand.
Yet, new opportunities for Ukraine’s drone production ecosystems have emerged recently. After years of needing and receiving Western weapons, Ukraine began massively exporting its own technologies and expertise in 2026. Kyiv has opened 10 weapons export offices across Europe and agreed to supply Gulf states with its complete air defense package, including maritime drones, electronic warfare systems, and interception technology.
These are not standard arms deals. Ukraine is not selling a finished product to a passive buyer. It is offering partner countries something closer to a living ecosystem: the production templates, engineering expertise, and feedback-loop methodology that allow a buyer to manufacture, modify, and improve drone systems on their own soil. When a country buys a billion-dollar Patriot battery, it acquires defense capability, but not the seller’s knowledge and ability to adapt. When the threat changes, as it did with Iran’s massive Shahed attacks, the buyer needs to return to the market to buy a new capability.
Over the past four years, Western governments have debated and rationed weapons deliveries to Ukraine, including Patriot missiles. To sustain its war effort and secure a reliable weapons supply, Ukraine therefore had no other choice but to lessen its dependence on the West. Ukraine created an industrial system in which knowledge is local, adaptation is ongoing, and responding to new threats does not require a call to Washington.
By contrast, much of Europe and the United States is still reading from an older map. The opportunity to change that, with Ukraine as a full partner, is there to be taken.
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(Author’s note: A more extensive outline of the rise of Ukraine’s “dronized” economy can be found in a recent EPIK Policy Brief.)
