France and Norway Fund Ukraine’s Defence Industry Push

By Grace Kim

France and Norway announced defence-industry funding at NATO’s eastern doorstep on Tuesday, according to Resilience Media: the BPI agreement includes €50 million for venture-capital funds and direct investment, €200 million in guarantees and €229 million in loans, while Norway set aside NOK 1 billion (€96 million).

France’s BPI public investment bank signed an agreement with the European Commission to promote French investment in Ukraine. The three-year programme targets “30 partnerships between French companies and startups in Ukraine’s defence and dual-use technology ecosystem.”

Resilience Media described Ukraine’s defence industry, four years after Russia’s full-scale invasion, as formidable, with unparalleled battlefield experience and a technological edge. The report said European countries are stepping up to support Ukrainian industrial capacity, with technology transfer, testing and business opportunities in view.

What is France backing?

The BPI agreement uses three financing channels: the €50 million for VC funds and French companies making direct investments; €200 million of guarantees for French companies investing in Ukraine; and €229 million in loans to Ukrainian companies.

Resilience Media described France as the world’s second-largest defence exporter and said the country wants the benefits of Ukrainian joint ventures. France’s Minister Delegate to the Armed Forces Alice Rufo called strengthening industrial partnerships with Ukraine a “strategic priority” for France.

Despite the presence of global prime contractors Safran, Airbus and Thales, France has lagged some European peers in its presence in Ukraine, Resilience Media reported. The report said Ukraine had already exposed the limits of what France’s incumbent defence industry exports.

Christian Dubarry, BPI’s European affairs director, told Resilience Media that BPI has no preference between supporting French primes and startups. “There is a need for established companies to introduce innovation through partnering with Ukrainians,” he said. He added that startups’ agility could make them more open to joining forces with Ukrainian counterparts.

Under BPI’s plan, French primes and startups can pursue Ukrainian partnerships through the same three-year financing window.

What does Germany’s lead show?

Resilience Media said Germany hosts prime contractors and some of Europe’s largest new defence technology companies. Over the past year, Germany has announced multiple high-profile joint ventures with Ukrainian partners. The report cited:

• Quantum Systems teamed up with Frontline and, just last month, Firepoint.
• Auterion joined forces with Airlogix.

Germany’s joint-venture slate gives BPI a concrete benchmark for its 30-partnership target.

Can the money finance interceptors?

Because the programme forms part of the European Commission’s Ukraine Facility, it permits only dual-use investment, Resilience Media reported. That limit leaves a major question over financing interceptor production, which the report described as desperately needed by Ukraine.

Dubarry said the European Commission signs off on every investment. “I hope we have an answer soon,” he said about the interceptors’ alignment with the programme.

The only announced timetable is a rollout over the next three years. Dubarry indicated that the first deal will likely be announced by the end of the year, in the manufacturing domain.

Interceptor eligibility is the main unresolved issue for France’s most urgent industrial target.

How will Norway deploy NOK 1 billion?

The Norwegian government set aside NOK 1 billion (€96 million) for Ukrainian defence investments, working with the business sector. It said the intent was “to help mobilise further Norwegian private capital for investments in the Ukrainian defence industry.”

Under the government plan, distribution will go to funds operating in Norway that invest in the Ukrainian defence industry. Investinor, the state-owned investment company wholly owned by the Norwegian government, will manage the scheme. Investinor is not connected to Norway’s giant sovereign wealth fund.

Norway’s three-year scheme will draw financing from the Nansen Support Programme for Ukraine, a long-term programme for military and citizen support focused on the war-torn country.

Norway’s Minister of Defence Tore O. Sandvik said: “It is crucial that we help to develop the Ukrainian defence industry. Even after a ceasefire has been reached, these efforts will enhance deterrence. This initiative will also help to further develop cooperation between the Norwegian and Ukrainian defence industries.”

Sandvik continued: “This is not only important for Ukraine,” he said, “it is also in the interests of Norwegian security. If Russia succeeds in Ukraine by means of military force, it is more likely to use military force against other countries as well.”

He added: “This is why an investment in the Ukrainian defence industry is also an investment in European and Norwegian security.”

Norway’s public money is designed as a catalyst for private capital, with defence-industry cooperation framed as a security policy.

What should investors watch?

France’s first manufacturing deal, likely by year-end, will test whether BPI can turn its three-year programme into production partnerships. Norway’s scheme will be judged on whether the NOK 1 billion pulls in additional private capital for Ukrainian defence investments.

The unresolved issue is whether European Commission approval can extend beyond dual-use projects to interceptors. If it cannot, BPI’s support for Ukrainian joint ventures will stay short of one of Ukraine’s most urgent production needs.

Over the next three years, the first manufacturing deal and the first private funds flowing through Norway will show whether Europe’s announced capital can build durable defence-industry partnerships.