Levelling the playing field: How democracies can keep pace with autocracies’ DefenceTech capabilities

As Ukraine enters its third year of war, the country faces a colossal challenge in its fight against Russia, now running critically low on ammunition, troops and air defences.

As an autocracy, Russian manufacturers don’t face the same barriers - such as regulations and limitations on investment opportunities - to developing sophisticated DefenceTech on an industrial scale that Ukraine does as a democratic nation. This makes it harder for countries such as Ukraine to scale and deploy new technology quickly.

The global defence budget - the combined total expenditure from governments worldwide - has reached a record high of $2440bn, the largest annual rise in over a decade. But Ukraine’s defence spending was still only equivalent to 59% of Russia’s military spending in 2023. And even as a multi-national force, most European NATO nations are still struggling to meet their 2% spending obligation.

Meanwhile, Russia spent 8% of its GDP on defence, trebling the figure since it invaded Ukraine and ensuring it will operate as a war economy for many years to come. It begs the question, if we can’t match the scale of this defence spending, what can democracies do to keep pace in the development of DefenceTech to effectively protect themselves against autocracies such as Russia, China and Iran?

Proportionate regulation

Regulations are vital to ensuring the safe and ethical development of DefenceTech. Even with such regulations in place, Ukraine has still become a world leader in DefenceTech innovation in a very short period of time.

That being said, the challenges talented Ukrainian founders and their companies have to overcome to do so has generated a disparity in the rate at which these technologies are being deployed. One such hurdle is access to private capital.

It is clear that private capital will be central to Europe’s advancement in its defence capabilities, given the aforementioned imbalance between governmental budgets. And despite taking 2nd and 3rd for the largest defence spending, funnelling private investment into DefenceTech startups is a technique that China and Russia have mastered. It is worth noting that the US is an anomaly when it comes to defence spending as it is miles ahead of all nations in this regard.

In contrast, European democracies often keep their defence industries too closely tied to the government, with an over-reliance on state-owned primes and lack of investment into startups.

The Ukrainian government requires companies that receive state funding to develop tech for the military, to transfer their intellectual property rights to the state while the war is ongoing. This shuts down further commercial opportunities which could be sought out in the private sector. In the UK, defence companies have previously been excluded from access to debt and equity capital. By maintaining this disconnect between private capital and DefenceTech, democracies risk falling further and further behind autocracies.

Regulation must remain in place, but if we’re to level the playing field between autocracies and democracies, these barriers should be lowered where appropriate. Now recognised by many as a legitimate sector for innovation and investment, we must approach regulating DefenceTech with the same considerations as regulating AI, for instance: ensuring safety without stifling its progress.

Helping defence companies reach their full potential

The key to keeping pace with autocracies will therefore be helping private DefenceTech companies reach their full potential, so that the most impactful contribution can be made to the protection of democratic societies. For Ukrainian companies, programmes and initiatives that focus on facilitating access to funding will be paramount. This funding, including investment from international funds, will allow founders to take their technology from prototypes, to resources that can be deployed across Ukraine and eventually further afield.

Elsewhere in the world, private capital may be more readily available, but the lack of access to in-field testing opportunities remains a big factor in defence companies’ inability to scale. We need more programmes that allow UK and other European DefenceTech companies to put their technology to use and demonstrate its viability.

International collaboration

Democratic nations may not be able to match Russia’s defence capabilities individually, but what about as a collective? Programmes designed to boost international collaboration, particularly between NATO and NATO-allied nations, could be the difference between closing the gap to Russia’s defence capabilities.

We must focus on building upon the cooperation between democratic nations that has become central to Ukraine’s survival, with a combined effort to shore up our international defence capabilities. We’ve seen UK aid act as a significant factor in Ukraine's war effort, along with the US’s recently announced $61bn aid package that is said to signal a turning point for Ukraine.

This international cooperation is not just for the benefit of countries currently at war. Ongoing geopolitical tensions across the world have put into perspective the pressing need for Europe’s democracies to stay at the cutting edge of DefenceTech if they’re to deter a future conflict.

This article is co-authored by Andriy Dovbenko, a UK-based private investor and Founder of UK-Ukraine TechExchange, and Daria Partas, Founder of Partas Global, a London-based boutique strategic communications advisory. Both authors originally come from Ukraine. They both have lived and worked in London for many years.