In 1977, the U.S. gave Israel permission to employ foreign military financing funds to acquire the Merkava tank. Seven years later, Washington formalized a program for Israel to designate $250 million in foreign funds for what was termed “offshore procurement.” The program has been in force ever since, reaching a total of $819 million in 2019. It is scheduled to be terminated in 2028, but in 2025 Israel will still receive $450 million to spend on its own domestic military programs.
The U.S.-Israel offshore procurement arrangement is unique to Israel and has been critical to that country’s increasingly sophisticated and expansive arms industry. It is time, however, that even as the Israeli program is wound down, the concept should not be terminated. Instead, it should be extended to Ukraine and even to Poland.
The Ukrainian arms industry has been developing at a remarkable pace, even as the war with Russia drags on. Initially focusing on producing artillery and tank ammunition, it now produces such a wide a variety of unmanned aerial vehicles — both short- and long-range systems — that it is now among the world’s leaders in unmanned system technology. Indeed, some 40 percent of all weapons that Ukrainian forces are employing are now domestically produced, and Ukrainian President Volodymyr Zelensky has projected that figure to rise to 50 percent by years’ end.
The Ukrainian arms industry’s growth has in part been spurred by the emergence of numerous private arms manufacturers, as well as by government initiatives to support technology developers. In addition, domestic Ukrainian producers have been collaborating with foreign partners such as Germany’s Rheinmetall that have opened production facilities in the country and have entered into joint ventures with Ukrainian firms,.
Finally, eight countries have adopted a model initiated by Denmark, and are providing funds to support Ukraine’s arms industry under a program that Ukraine calls “Zbroyari (armor) Manufacturing Freedom.”
Denmark in particular provides funds to allow Ukraine to purchase weapons directly from its own domestic defense industry. In July Copenhagen also reached an agreement with Kyiv to enable Ukrainian arms manufacturers to produce armaments in Denmark. And in September the first such production arrangement came into being when Fire Point, a Ukrainian firm, announced it would begin producing solid rocket fuel at a new factory in southern Denmark.
The Danish support model for Ukraine is almost identical to America’s forty-year-old offshore procurement program for Israel. It goes beyond Washington’s current support for Ukraine. The Trump administration is now supplying Ukraine with arms indirectly through a mechanism by means of which Europeans acquire American materiel to replace equipment that they send to Kyiv.
Washington could go much further. Even if the administration does not want to reduce its own weapons stocks by shipping them to Ukraine — given the shortages it currently faces with respect to artillery and other systems, it could adopt the “Danish model,” which is a European version of its own offshore procurement program. Indeed, as it reduces annual funding for Israel, it could simply apply all or part of those funds to supporting the Ukrainian arms industry.
Washington should also consider directing at least some of the Ukrainian offshore procurement funds towards joint Polish-Ukrainian arms development. Doing so would be in line with President Trump’s personal commitment to Poland and with the Sept. 18 agreement between Warsaw and Kyiv that, among other things, expands their joint weapons production.
When Trump met with Polish President Karol Nawrocki on Sept. 5, he indicated that he was ready to add to the 8,000 American troops already stationed in Poland. In response to the Russian drone incursions into Polish airspace several days later, Trump reiterated his strong support for Warsaw when he repeated America’s longstanding commitment to defending Poland and the Baltic States against Russian aggression. Supporting joint Ukrainian-Polish weapons development through an offshore procurement program would therefore underscore Trump’s commitment to Warsaw.
America’s original offshore commitment program enabled Israel to become an international arms manufacturing powerhouse as well as a leading arms exporter. Creating an offshore procurement program for Ukraine, and indeed, for Ukrainian-Polish joint production efforts, would enable both countries further to develop cutting edge military capabilities, and, in doing so, bolster their joint deterrent against an aggressive Russia.
With Russian President Vladimir Putin showing no sign of reaching a peace agreement with Ukraine, and with Moscow’s increasingly brazen attempts to test NATO’s ability to respond to Russian incursions and hybrid warfare, creating an American offshore procurement program to further energize Polish-Ukrainian arms production capabilities could not be more timely.
Dov S. Zakheim is a senior adviser at the Center for Strategic and International Studies and vice chairman of the board for the Foreign Policy Research Institute. He was undersecretary of Defense (comptroller) and chief financial officer for the Department of Defense from 2001 to 2004 and a deputy undersecretary of Defense from 1985 to 1987.
