Reduction in deferments: government initiative could cost Ukraine dearly

Prime Minister Serhii Koretskyi explained the need to review the rules for reserving conscripts by citing the fight against abuse and the need to strengthen mobilization. He insists that this decision poses no threat to the defense industry or the energy sector. At the same time, the reduction in reservation limits proposed by the government could create additional problems for strategic industries that ensure the functioning of the economy during the war. Business representatives warn that ill-considered restrictions threaten an outflow of skilled personnel, a decline in production, and the disruption of state contracts, writes UNN.

Fighting abuse or a threat to enterprises: what the prime minister said

In an interview with BBC Ukraine, Prime Minister Serhii Koretskyi said that the government initiative to review the rules for reserving conscripted employees was prompted by the growing number of citizens who have been granted reservations and the Ukrainian Armed Forces' need for personnel.

Although Koretskyi speaks of systematic dialogue with entrepreneurs and almost weekly meetings, the head of government acknowledged that broad consultations with business were not held before the relevant amendments were prepared. He explained his position by citing 25 years of experience working in the business environment and his conviction that he understands companies' needs well.

Given that I definitely walk on the same ground as business, I understand it no less well than it understands itself, so there were no major discussions or consultations (regarding changes to the reservation rules – ed.). There were some, but we did not organize broad formats or roundtables

This suggests that either the discussions were held "with their own people," or there were no discussions at all.

At the same time, the very lack of full-fledged dialogue with the businesses that will be subject to the new restrictions casts doubt on the validity of the proposed approach. After all, a decision that directly affects enterprises' staffing capacity requires not only political will but also an objective assessment of its consequences for economic sectors.

The prime minister emphasized that the government primarily seeks to prevent abuse in cases where companies use their critical-enterprise status to reserve employees without making a corresponding contribution to the state's defense capability.

Those who created a company that produces, conditionally, two drones a year but reserved hundreds of people as its employees should be concerned

This approach raises a legitimate question: if the problem lies in abuse by individual enterprises, why is it being proposed that it be resolved through a general reduction in reservation limits, which could also affect bona fide manufacturers, instead of conducting targeted inspections in cases where there are reasonable suspicions?

Instead of monitoring specific enterprises that use reservations for purposes other than those intended, the government initiative envisaged restrictions for entire sectors of the economy. It was proposed to reduce the limits for defense-industrial-complex and energy-sector enterprises from 100% to 85%, and for the utilities sector – from 75% to 60%. Meanwhile, the review of the rules for granting critical-enterprise status threatens enterprises in sectors adjacent to the defense industry that are of strategic importance.

Loss of engineers and technological lag

Modern weapons production depends not only on the availability of funding and equipment but also on highly specialized professionals who cannot be quickly replaced. This is stated by business representatives, and the Ministry of Defense also understands this, as it is categorically opposed to reducing reservation limits.

Yaroslav Azhniuk, founder of Petcube and the defense technology company The Fourth Law, drew attention to the fact that Ukrainian manufacturers are already operating amid an acute personnel shortage, while the military's demand for their products often exceeds production capacity.

We desperately lack people. Demand for our products is significantly greater than what we can supply. And this is despite the fact that the company grows severalfold every six months

According to the entrepreneur, the very emergence of the initiative to reduce the scope of reservation has already had a negative impact on the staffing situation. Potential employees are refusing jobs, while those already employed are seeking guarantees that their deferments will be preserved.

85% reservation is not minus 15%. It is minus 100% of the planning horizon. Uncertainty affects not a minority, but everyone at the same time

He also warned that removing some employees from the reservation system would not necessarily provide the expected increase in troop numbers. Instead, highly qualified engineers may move to other companies where they can obtain reservations.

The state does not gain a soldier, while the front loses a weapon. This is not a forecast: it is already evident during job interviews, even before a decision is adopted

Another, perhaps the most important, risk is a slowdown in the development of new technologies. Ukrainian defense companies are forced to constantly improve their products in response to changes in the enemy's tactics and the development of its weapons.

The loss of even a few key specialists can bring an entire area of development to a halt, since training machine-learning, computer-vision, embedded-systems and other specialists takes months and sometimes years.

The rotation of servicemembers, which the Prime Minister has spoken about, is important, and the state should regulate reservations; however, decisions must take into account the actual needs of the front.

But weapons do not appear by themselves. Someone has to develop them and then manufacture them. And if these people are taken away, the front will receive fewer weapons, and of poorer quality

The proposed changes could create a paradoxical situation: while trying to strengthen defense capabilities by expanding the mobilization pool, the state risks weakening its own capacity to produce weapons.

Beyond the defense industry: which strategic sectors remain outside the government's focus

In his statement, the Prime Minister identified two main criteria for an enterprise to be considered critical: defense capability and the life-support of the state.

Now, regarding criticality. Criticality consists of two main points: defense capability and the life-support of the state

However, such wording leaves open the question of the future of enterprises that do not directly produce weapons and do not belong to the energy or utilities sectors, but perform other government contracts related to supporting the army, ensure the operation of strategic sectors, tax revenues and the state's economic resilience.

Defense capability is not limited to the production of drones, missiles or armored vehicles. The defense industry requires metallurgy, machine building, the chemical industry, transport, logistics, communications, repair enterprises and component suppliers.

For example, a weapons manufacturer may have the status of a critically important enterprise while also depending on dozens of contractors that manufacture electronics, metal structures and specialized equipment or provide transportation. Or, for example, an enterprise may specialize in repairing military equipment.

For example, even after the closure of Ukrainian airspace, civil aviation continues to operate, including abroad, thereby preserving employment for Ukrainian specialists and the inflow of foreign currency into the budget. Repair enterprises in the sector have reoriented themselves toward repairing military aviation aircraft. 

According to data previously cited by representatives of the aviation industry, in 2022–2025 aviation enterprises paid almost UAH 27 billion in taxes and fees to the Ukrainian budget. This is happening despite relocation, flight restrictions, high costs of maintaining aircraft and additional regulatory problems.

The aviation industry depends on scarce specialists—pilots, aviation engineers, technicians, and specialists in maintenance and flight-safety support. Their training requires substantial funds and time, while the loss of human resources may complicate the restoration of civil air connectivity after Ukrainian airspace is reopened. 

After the rules change, companies may cease their operations.

Transport and logistics companies, agricultural enterprises, extractive industry businesses, and manufacturers of industrial products are no less important, as they also provide exports and foreign-currency revenues.

Therefore, the issue is not only which enterprises the government recognizes as critically important, but also whether it will take their role in the overall economic system into account. In practice, even an enterprise that does not directly carry out defense contracts may be an indispensable link in the production of weapons or generate significant tax revenues used to finance the army.

The discussion surrounding reservations from mobilization should not be reduced to pitting the needs of the army against the interests of business. It is impossible to ensure the defense of the state without adequate mobilization resources; however, without a functioning economy, defense industry, energy sector, transport, and other strategic industries, it is impossible to finance and supply the military for a prolonged period.

In its current form, the government initiative appears overly risky. The prime minister promises to finalize it within a week, and to this end the government plans to hold additional consultations with businesses. But whether officials will hear the voice of entrepreneurs remains unclear.