February 7, 2012: Ukraine is increasing its annual defense spending 30 percent this year. The $2 billion budget is 1.1 percent of GDP. It has been .8 percent of GDP for the past few years. The average for East European nations is about 1.3 percent. The Ukrainian armed forces are in need of updating but a shortage of cash has delayed this process for two decades. Ukraine will be upgrading existing weapons and buying new warships and combat aircraft. Ukraine has sold over $2 billion worth of weapons to Iraq. Most of these were of Russian design, which many Iraqi military personnel are familiar with. Ukraine has, and still manufactures, lots of Russian designed weapons.
The basic Ukrainian problem is that their military is still closely linked with the "Red Army" (the armed forces of the Russia). Nearly all Ukrainian military equipment and weapons are Russian. Before, and after, 1991, a large portion of the Ukrainian export market was driven by factories that manufactured Russian designed weapons. Ironically, for the last 20 years the Ukrainian weapons industry has prospered, even though the Ukrainian military could not afford to buy most of these newly built weapons. But export customers could.
Unlike Russia, Ukraine doesn't have oil and gas exports to finance rebuilding of their armed forces. Ukraine spends barely enough to keep its force of 156,000 active duty troops going. Because it uses conscription it could quickly mobilize over half a million more troops, who are equipped with even more ancient and decrepit gear.
Ukraine split from the Soviet Union (and Russia) in 1991 when the Soviet Union was dissolved. Many Soviet weapons plants were in Ukraine, as well as huge quantities of military equipment. That's because Ukraine was the forward staging area for Soviet forces that were to invade Western Europe, or defend against NATO. Ukraine inherited whatever was on its territory when the dissolution took place. Ukraine has kept some of those weapons plants going by becoming the low-cost provider of new Russian designed weapons (and now much of those have been updated by Ukrainian engineers).
While friendly with the United States, Ukraine has also cultivated good relations with China by quietly sending the Chinese examples of advanced Soviet weapons (including some that never went into mass production). Ukraine wants to be on good terms with the U.S. and China because of the fear that Russia will try to make Ukraine, once more, part of Russia. This first happened in the 17th century and the Ukrainians never got used to it. Actually, Ukraine had been dismembered before that by Poles, Lithuanians, and Mongols. Thus Ukraine is enjoying its first period of real independence in over 500 years. They want to keep it that way.