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Ukraine is set to channel up to €1 billion from its European Union loan into a programme designed to bring its defence industry closer to its European partners, with air and missile defence first in line, alongside drones, counter-drone systems and ammunition.
The move would more than quadruple funding for the Ukraine Support Instrument, currently worth €300 million, which promotes joint Ukrainian-European production through joint ventures and licensing arrangements and facilitates joint procurement involving manufacturers from both sides, according to a confidential European Commission document obtained by Euronews.
The funding sits inside the €90 billion Ukraine Support Loan, the EU’s package covering Kyiv’s war effort in 2026 and 2027, of which €60 billion is earmarked for defence and €30 billion for budget support. Brussels recently agreed to bring some payments forward as Ukraine’s financing needs mount.
The boost forms part of the EU-Ukraine Strategic Defence Industrial Partnership, launched in July 2026 with the signing of a letter of intent, which seeks to combine Ukraine’s battle-tested technologies with Europe’s industrial capacity. On that basis the Commission is drafting a Defence Industrial Pact and seeking a mandate from member states. Its central objectives, the document says, are faster defence deliveries to Ukraine while ramping up and integrating European and Ukrainian defence industrial capacities.
Beyond the instrument, the Pact is meant to identify ways to remove regulatory barriers to EU-Ukraine industrial cooperation, including overarching deals on drone and missile technologies. A separate track seeks to encourage member states to use unspent loans under the Security Action for Europe (SAFE) programme to fund joint projects with Ukrainian industry, though EU capitals cannot be forced to do so.
The Commission hopes the initiatives will create a "defence window" lifting EU defence production in 2027, allowing Kyiv to use the loan to buy larger volumes from European manufacturers at lower prices. The document also says national governments should be encouraged to destock their arsenals to keep supplies flowing quickly and continuously to Ukraine.
EU ambassadors were due to discuss the initiative for the first time on Wednesday. The aim is to conclude the Pact by the end of the year, after which member states will have to approve the final text.