EUR 597 million in investment: How the 'Danish model' is strengthening Ukraine's defense industry

russia's armed aggression against Ukraine has driven the international community to unite in providing our country with comprehensive support in resisting the invader. Throughout the full-scale invasion, partners have developed various mechanisms for providing military, financial, and diplomatic assistance.

The ‘Danish model’ emerged as one of these tools. This mechanism allows partner countries to allocate funds to produce Ukrainian weapons, ensuring the fulfillment of the priority needs of the Armed Forces of Ukraine.

The Ministry of Defence outlines the specifics of this cooperation format, its participants, and other similar mechanisms to support the Ukrainian military.

What is the ‘Danish model’?

In 2024, Ukraine and Denmark established a new mechanism to fund the procurement of weapons for the Armed Forces of Ukraine by reimbursing contracts with Ukrainian manufacturers. Under this mechanism, the Ukrainian side compiles a list of projects seeking funding, while Danish experts conduct a thorough assessment of the recommended companies' capabilities and review their track record in contract execution.

As early as 2023, the Ukrainian defense industry had already significantly expanded its production capacity. However, the country faced two significant challenges: limited government expenditures on weapons contracts and the decreasing scale of international military support.

By that time, partner nations had transferred a considerable amount of their available stockpiles, but their production capacities could not keep up with the new needs. Within this framework, the ‘Danish model’ offered a proven approach: directing the financial resources of allies straight into the Ukrainian defense sector, swiftly demonstrating success.

This approach is unique in that it not only guarantees the swift supply of necessary weapons to the Ukrainian military but also fosters a robust incentive for the growth of the national defense sector. As a result, this strengthens Ukraine's economic resilience in the context of martial law and creates a solid base for the continued development of the defense industry.

Why does the ‘Danish model’ have such a name?

The name of this mechanism is directly linked to Denmark's pivotal role in its development and implementation. This country pioneered the introduction of a direct financing system for Ukrainian defense enterprises, establishing a fundamentally new framework for cooperation between partners and Ukraine in the defense sector.

The decision to initiate such a mechanism was made after the Danish stockpile of weapons available for transfer to the Ukrainian military had been depleted.

What projects have been implemented under the ‘Danish model’?

In the first stage, Denmark allocated a tranche of EUR 50 million to produce eighteen Bohdana self-propelled artillery systems. The results followed promptly: only two months after the implementation agreement was signed, the equipment reached the combat units of the Defence Forces.

Subsequently, funding was extended to support the production of other strategically vital weapons, including long-range drones, as well as anti-tank and anti-ship missile systems.

In total, through the joint efforts of all initiative participants, the Armed Forces of Ukraine have already received weapons amounting to nearly €597 million. Of this amount, €175 million was contributed directly by Denmark.

Which countries have supported the Danish model?

The successful implementation of the ‘Danish model’ led to increased funding for the Ukrainian defense industry from other nations. In 2024, Sweden and Iceland joined the mechanism. They contributed financial support to the initiative, with EUR 20 million and EUR 2.7 million, respectively, channeled directly through Denmark.

Another result was the decision to fund the production of Ukrainian weapons, utilizing interest accrued from frozen russian assets. For these purposes, EUR 390 million was allocated in 2024. This was made possible through the Danish government's active diplomatic support and facilitation, further underscoring this partnership's strategic significance.

What is planned for implementation within the ‘Danish model’ framework?

For 2025, the EU has allocated €1 billion from revenues accrued from frozen russian assets, while Canada is committing around €67 million. Denmark has also allocated €130 million for further investments in the Ukrainian defense sector. In addition, Norway is anticipated to contribute approximately €43 million to implement projects under the initiative, while Sweden has pledged $178 million.

Under the ‘Danish model,’ the focus is planned to be on expanding the spectrum of weapons produced. Particular emphasis will be placed on producing high-tech long-range UAVs, modern missile systems, and artillery systems.

It is essential to note that the ‘Danish model’ will bring benefits not only to individual producers but to the market in its entirety. This approach enables the Ministry of Defence of Ukraine to allocate the funds freed by financing one enterprise to procure other weapons.

Simultaneously, the Ministry of Defence is working on scaling the ‘Danish model’ for producing non-lethal products. The realization of this initiative could substantially accelerate the necessary supplies to the Defence Forces.

What other financing models are available for Ukraine's defense industry?

In addition to the ‘Danish model’, other support mechanisms for the Armed Forces of Ukraine are also actively operational. Traditionally, partner nations provide weapons directly from their arsenals, engage in joint military equipment maintenance programs, and conduct extensive training for Ukrainian service members.

An equally significant form of cooperation is the establishment of joint defense enterprises in Ukraine, with nearly 40 currently active. The partners include global leaders such as Rheinmetall AG from Germany, KNDS from France and Germany, and Boeing from the United States. These enterprises not only facilitate the production and maintenance of advanced equipment and ammunition within Ukraine but also contribute to attracting substantial investments into the nation's economy.