How Supporting Ukraine Is Revitalizing the U.S. Defense Industrial Base

Commentary by Elizabeth Hoffman, Audrey Aldisert, Cynthia Cook, Gregory Sanders, andShivani Vakharia

Published April 18, 2024

Congress is facing the most significant and transformational opportunity to strengthen the U.S. defense industrial base (DIB) since the end of World War II. The heritage equipment that the United States has provided to Ukraine for its self-defense in the face of the brazen and illegal invasion by Russian forces in 2022 needs to be replenished to ensure the United States is postured to continue to deter its adversaries. The new hardware will be produced at factories across the nation. Of the $113 billion appropriated by Congress to date related to the conflict in Ukraine, as much as $68 billion is destined to be invested here at home. U.S. support for Ukraine thus offers a once-in-a-generation opportunity to sustain a demand signal to address long-standing weaknesses in U.S. DIB systems generally and ordnance and missile production specifically. Examining how U.S. military assistance to Ukraine is being spent and where funds for the U.S. industrial base relevant to Ukraine and future U.S. needs are being invested can help demonstrate how Russia's war can establish a long-term incentive structure to revitalize the DIB.

Prior to the war in Ukraine, policymakers recognized the need to shift away from a defense posture focused on counterterrorism and counterinsurgency to one prepared to confront rising great power competition. This was articulated in the National Security Strategy adopted by the Trump administration in December 2017. The strategy specifically highlighted the need for a robust and innovative DIB and noted supply chain vulnerabilities. Recognition of the challenges did not result in rectification, as the attention of policymakers pivoted to crises including the Covid-19 pandemic, domestic political unrest, and the end of the U.S. presence in Afghanistan. In the face of the continuing supply chain vulnerabilities, these policies were sustained in the Biden administration's 2022 National Security Strategy, which notes the "criticality of a vibrant Defense Industrial Base."

The catalyst for change began in February 2022, when Russian president Vladimir Putin's invasion of Ukraine ignited the largest ground war in Europe since World War II, internally displacing 3.7 million Ukrainians as of February 2024 and creating a refugee crisis of over 6.5 million people. Almost immediately following the full-scale invasion, Congress appropriated nearly $14 billion in emergency funding to assist with the response. Since then, three additional aid packages have been approved.

Public skepticism of continued assistance has increased with each vote. Almost half of Americans are concerned that U.S. taxpayer dollars are going to fund Ukraine's war while domestic issues continue to fester; other analysts have highlighted the impact of weapons transfers on the ability of the United States to deter and defend adversaries should other conflicts occur in the near term-such as a Chinese invasion of Taiwan. These concerns miss the point.

The $113 billion spans agencies and bureaus and provides for much-needed support in areas including military equipment, migration and refugee assistance, energy, and countering disinformation. The majority of the assistance has gone to support the military response to the invasion, with nearly $62 billion allocated to the Department of Defense. Additionally, nearly half of the $9.9 billion allocated to the Department of State has gone to the Foreign Military Financing program, which enables partner countries to purchase military equipment or services from the United States.

The two primary mechanisms through which the United States is sending military support to Ukraine include presidential drawdown authority (PDA) and the Ukraine Security Assistance Initiative (USAI). PDA allows for the rapid transfer of weapons and defense services directly from U.S. stocks in the face of unprecedented crises. The value of equipment transferred to Ukraine under PDA is not a part of the $113 billion appropriated by Congress. Since PDA uses existing weapons stockpiles, this equipment has long been paid for, and in some cases has been sitting in U.S. warehouses for decades. As such, the value of the defense articles is assessed using what is called the "net book value," or the historical cost of the equipment minus depreciation based on use life. As of December 2023, nearly $24 billion worth of equipment had been transferred to Ukraine from stockpiles under PDA. The benefit of PDA transfers to the United States has been the ability to clear out old stock and replace it with newer, more modern equipment.

As old equipment leaves the warehouses, substantial sums have been appropriated to replenish U.S. stockpiles that have been drawn down. As of November 2023, $25.9 billion had been appropriated, of which $16.8 billion had been obligated to replace equipment taken directly from U.S. inventories. Typically, and according to statutory authority, these items are not replaced with exactly the same systems; they frequently include older models that may no longer be in production and may no longer represent leading-edge capabilities. However, replacement and replenishment strategies are critical to ensuring that U.S. stockpiles are prepared for future conflict.

The second mechanism through which the United States has provided military assistance to Ukraine is through USAI, which allows the Ukrainian government to contract directly with U.S. industry, such as Lockheed Martin or RTX, for weapons procurement. The challenge for Ukraine with this approach is the timeline, as weapons manufacturing takes months or years. Ukraine is expending systems such as 155 mm ammunition at a very high rate, and current production rates and the long time required to ramp up production will mean that they do not have the requisite capabilities for self-defense. USAI will likely be most useful in refreshing Ukraine's stocks postwar. Congress has obligated $10.5 billion for USAI, bringing total obligations, including PDA, to over $27 billion.

Regardless of the funding mechanism-whether replenishment for PDA or for USAI-this money flows into the United States' DIB. This has direct, and substantial, impacts on what the DOD has identified as "prime vendors and critical suppliers in 37 states." The map below demonstrates the massive influx of funds into the DIB since January 2022, shortly before the inception of the war, by identifying parts of the DIB relevant to restocking or future manufacturing for transfers to Ukraine. This map includes all contract funding for relevant systems and munitions, not just those destined for Ukraine, and thus shows the extent of the full demand signal bolstering the U.S. DIB. This map shows funding by congressional district, not to draw attention to specific members of Congress, but because this distinction is made in DOD contracting documents and allows for greater specificity than showing investment by state.

Ukraine-Relevant Defense Spending by Congressional District | Created with Datawrapper

As shown in the map, there are several districts that received substantial contract spending between 2022 and 2023, notably, in descending order, Texas-33, Arizona-3, Arizona-7, Michigan-10, Pennsylvania-10, Massacheusetts-6, Florida-10, Alabama-5, and Missouri-1. These specific states have received a significant influx of cash into their factories that not only provides jobs for Americans but also creates "opportunities for local suppliers, shops, restaurants and other businesses that support the factories rolling out weapons." These benefits overflow to surrounding areas as workers will sometimes cross state borders, let alone congressional district lines, to meet the specialized workforce needs of these facilities.

Analysis shows that the DIBs of China and Russia have significantly scaled up production and are on wartime footing. If the United States fails to respond to this strategic reality and fails to scale up and sustain production across a range of capabilities, it may find itself unable to deter and defend against the current threat environment for the first time in decades. A supplemental spending bill focused on providing Ukraine with the arms it needs to fend off Russia's illegal aggression could start to move the needle in the right direction. As Congress considers another supplemental spending bill for Ukraine, this analysis reveals that this infusion of cash is just as valuable, if not more so, to U.S. readiness and deterrence as it is to sustaining Ukraine on the battlefield. Walking away from Ukraine will not only put NATO and the United States at risk but also undermine bipartisan efforts to make the necessary investments in the DIBcreating further challenges for any future fight.

Elizabeth Hoffman is the director of congressional and government affairs and fellow at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Audrey Aldisert is a research assistant in the International Security Program at CSIS. Cynthia R. Cook is the director of the Defense-Industrial Initiatives Group and senior fellow in the International Security Program at CSIS. Gregory Sanders is deputy director and fellow with the Defense-Industrial Initiatives Group at CSIS. Shivani Vakharia is the associate director of congressional and government affairs at CSIS.

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