‘Progressive membership’: Ukraine’s economic resilience shows future for EU business tie-ups

Joint ventures on defence, green energy and telecoms suggest how country could join bloc in stages rather than wait for full status

When the first Ukrainian-designed drone to be made in a German factory rolled off the production line last month, Volodymyr Zelenskyy knew it marked a turning point for the economy.

With drone-making joint ventures also well advanced in Finland and Denmark, war-torn Ukraine has shown how its businesses can adapt and break out of their bomb-threatened domestic confines, becoming more integrated into the EU’s industrial network with each passing day.

As the grim four-year anniversary of Russia’s full-scale invasion of Ukraine is marked on Tuesday,the Ukrainian economy continues to shows resilience under great strain.

Last year, the economy was expected to grow by 2% to 3%, but Russia’s rockets and drones reduced the rate of expansion to 1%.

This year, economic growth is expected to improve, though the persistent Russian attacks will cut expansion from a previously expected 2.2% to 1.8%, forecasters at Ukraine’s central bank said last month.

Last month, Brussels took another collaborative step, making it easier for Ukrainian-registered trucks to drive across borders with minimal paperwork.

Deepening EU trade ties with Ukraine has taken years to negotiate – much too long, according to critics – but there are concrete moves to integrate Kyiv into the bloc that could lead to accession talks later this year.

Kurt Volker, a distinguished fellow at the Centre for European Policy Analysis, a thinktank, says there is a political imperative to bring Ukraine into the EU as quickly as possible.

“But the practical side of this is Ukraine is not ready in terms of reform and implementation to be a fully fledged EU member in that space of time.

“So what I think [Brussels] will do is develop a concept, what you might call progressive membership,” says Volker, a former US state department official and US ambassador to Nato.

Rather than wait for Ukraine to tick every box before accession, Brussels could set a minimum level of compliance and then monitor progress, handing Kyiv greater access to the single market and customs union as each benchmark is achieved.

“More of the benefits of participation in the EU would be opened as Ukraine goes through that process, but it would have the political effect of bringing Ukraine into the EU sooner,” he says.

There are about 1,000 Ukrainian companies working on defence research, building on the huge knowledge gained during war with Russia. Many of them collaborate with defence contractors from the EU and US.

Andy Hunder, the president of the American Chamber of Commerce in Ukraine, says Boeing is among many US defence contractors that employ thousands of workers inside Ukraine. Tie-ups with Ukrainian companies are becoming commonplace, he says.

The level of commitment, based on a 10-year investment horizon, is clear, he adds.

About 85% of US companies operating in Ukraine have staff serving in the military, while two-thirds employ veterans.

“Ninety per cent of our members are fully operational, but it’s not easy because Russia is targeting US companies,” he says.

Last year, a factory making coffee machines owned by the US electronics group Flex was hit by two missiles. Hunder, who has worked in Ukraine for almost 30 years, says there was only seven minutes’ notice of the strike but all employees were successfully evacuated.

A McDonald’s in Kyiv has been hit seven times. Two weeks ago, a Russian Iskander-M missile slammed into a former Marlboro cigarette factory in Kharkiv adapted to produce munitions.

Speaking from his office on the western side of Kyiv, Hunder says: “Security is a big challenge for everyone. The first thing I check in the morning is whether my team are still alive. Then whether the heating and electricity is working.”

He adds: “About half of the companies we represent have had some damage since the war started. It’s very clear that Russia wants US companies out of Ukraine.”

Natalie Shapoval, the chair of the Kyiv School of Economics (KSE), says all Ukrainian businesses have battled to recover from the constant shelling, but haven’t been able to close a yawning trade gap.

Agricultural production declined last year by almost 7% from 2024 and last month fell by 20% compared with the previous January.

Last year’s fall can be blamed partly on wrangling over a revised “deep and comprehensive” trade agreement with the EU that has restricted trade in foodstuffs since it was signed in June and came into force in October.

Ukrainian farmers have suffered after Poland, Hungary and Slovakia went further and openly defied Brussels by blocking grain supplies.

In the past two months, the bombing of ports on the Black Sea coast has prevented grain exports getting through to markets in the west.

At the end of 2025, exports of all kinds were worth $45bn (£33bn) less than imports, “which is huge”, says Shapoval. The difference is made up by aid, mostly from the EU.

The significant level of aid underwrites government investment and welfare spending, while taxes fund the war.

Agriculture aside, the EU trade deal offers greater access to other industries and a pathway to membership for Ukraine. For instance, Brussel’s digital market trade liberalisation has benefited Ukrainian IT and communications businesses, many keeping all their data on cloud services to avoid losses should physical servers be wiped out.

“Green energy and the telecoms sector are also growing, despite being destroyed by bombs all the time,” says Shapoval.

Maria Repko, the deputy director at the Centre for Economic Strategy, a thinktank based in Kyiv, says the construction sector was struggling after supplying the armed forces with a disproportionate number of soldiers.

Recruitment more generally has proved to be a widespread problem for businesses after a decline from five to 10 people for every vacancy before the conflict to no more than two this year, despite the unemployment rate hovering at about 16%.

Salaries increased as the supply of workers dried up, but this trend has failed to prevent inequality rising, she says, which could undermine the president’s appeal should he be forced to hold elections at short notice in the event of a peace accord.

Donald Trump has made presidential elections a price of peace talks and Zelenskyy has agreed, saying last December: “I am ready.”

Hunder says US companies have made clear to Washington that Ukraine’s future lies within the EU and not with Russia.

US thinktanks, many of them on the right of the political spectrum, have urged domestic firms to consider how they could benefit from the end of the war and deeper economic integration with Europe.

The World Bank estimated on Monday that it would cost $588bn – nearly three times the country’s annual economic output – to reconstruct Ukraine’s damaged infrastructure. This investment, and the likelihood of huge private funds pouring into the country, could propel the nation of 40 million to be one of the strongest economies in Europe.

Leaders across Europe know that the kind of settlement proposed at the moment by Trump will mean the peace is temporary and Russia will still be a threat. With this in mind, Ukraine’s military experience and technological knowhow will continue to have huge value.

When Zelenskyy held the first joint German/Ukraine drone while attending the Munich security conference, he wrote on X: “This is modern Ukrainian technology. Battle-tested. Powered by AI. It will strike, it will scout, it will protect our soldiers.”