Prague cuts development support for Ukraine, raising questions about whether economic pragmatism can sustain a partnership once defined by political solidarity.

Long known as one of Ukraine’s biggest supporters in Europe, the Czech Republic, with its new populist government, seems to have decided on a different direction. This past week, the government decided to cut funding for its bilateral cooperation program with Ukraine by half, well-informed government sources say, with the official announcement due on 2 February. 

The government’s Program Ukraine and other initiatives have covered the MEDEVAC program, for example – which paid for the hospitalization in Czechia of Ukrainians injured during the war, including children – and the expenses of Czech doctors that were posted in Ukraine. The 500-million Czech crown annual allocation (20 million euros) funded many other activities linked to development aid.

The move to halve the financing is the latest for the cabinet of Andrej Babis, which has been following up on its pre-election pledge to radically reduce the outlay of state funds to help Ukraine. Also on the way out is the Transition Promotion program (TRANS), a long-running Foreign Ministry initiative that has funded Czech NGOs that promote democracy and human rights in places such as Ukraine. 

All this in spite of the public proclamations by key government officials that they do want to promote closer cooperation with Ukraine and work on common projects, such as learning from Ukraine how to build Czechia’s defense capabilities against drones.

All hope is not lost, however. What is staying in place – besides public support for Ukraine – is the interest and level of trade exchange and business ties, especially when supported by the European Commission and other EU funding schemes. But more needs to be done.

Economic ties between Czechia and Ukraine have successfully continued (albeit in a modified form) despite the Russian-Ukrainian war. Czech investment in Ukraine is long-established and concentrated in defense, transport engineering, agriculture, energy, and infrastructure, with major investors including Czechoslovak Group, Skoda, Agromino, and MND. These companies have helped preserve production capacity and employment in critical sectors in Ukraine. (While the presence of Ukrainian business in Czechia is much more limited, there is a growing footprint of dual-use and defense producers, including joint drone-production ventures.)  

That doesn’t mean the trade in goods hasn’t changed much since the launch of the full-scale Russian invasion in 2022. Before the conflict escalated, Ukraine was an important supplier of raw materials and industrial inputs for Czech industry, particularly iron ores and automotive components. The destruction and occupation of industrial regions, combined with disrupted logistics and growing domestic demand, sharply reduced these exports. 

At the same time, EU temporary trade measures facilitated a shift in Ukraine’s exports toward agricultural products. Meanwhile, Czech exports of coal, energy equipment, and defense-related goods expanded significantly: in 2024, 40 percent of the total revenue of the defense and security–based Czechoslovak Group came from supplying Ukraine, making it one of the company’s most significant markets. Czechia’s trade surplus with Ukraine climbed by more than 1 billion euros between 2021 and 2024. 

Despite the war-related disruptions, elements of industrial integration have persisted. The Eurocar plant in the western Ukrainian region of Zakarpattia, for example, continues to assemble Skoda vehicles, with key components supplied from Czechia. Similar two-way links remain in machinery and equipment. These patterns underline that current trade structures largely reflect wartime constraints and that there remains considerable potential to restore and deepen industrial trade once security conditions improve and production capacities in Ukraine are rebuilt.

An additional, often underappreciated asset in this relationship is the scale and structure of the Ukrainian workforce in Czechia. Even before the war, Czechia hosted the EU’s third-largest Ukrainian-born community (around 194,000 residents). After the full-scale invasion, a further 374,000 received temporary protection. By June 2025, over half a million were still living legally in Czechia, accounting for 54% of all foreigners. High levels of education and relatively secure living conditions for a sizable majority of refugees, most of whom are employed, creates favorable conditions for the transfer of skills, managerial links, and business deals between the two economies. Over time, these human-capital links can reinforce industrial cooperation and lower barriers to cross-border investment.

All in all, economic cooperation between Czechia and Ukraine has so far been mutually beneficial and remains underexploited. As wartime distortions gradually recede, Ukraine has the potential to re-emerge not only as a supplier of inputs, but as a reliable local partner for Czech industry, particularly in defense and dual-use production. Failing to build on these complementarities would mean giving up on economic and security benefits for both countries.

What To Do Next

If the Czech Republic wants to build on this momentum and continue benefitting from the positive picture that it created while supporting Ukrainians in past years, it is necessary to stop undermining the infrastructure of foreign policy and practical tools and programs, which serve as a pillar of meaningful exchange between both countries.

This is not only true for the Foreign Ministry’s TRANS program, but even more for Program Ukraine, the only bilateral tool of support for Ukraine. What has surprised experts is the hollowing out of the very foundations of the program, while the part related to cofunding for the Czech Development Bank and Czech companies involved in Ukraine’s reconstruction – particularly of six Ukrainian hospitals – has remained in place. 

Yet this approach looks more and more like the new normal – a political leadership that is primarily interested in promoting economic diplomacy, stressing pragmatic and mutually beneficial relations and business support rather than developmental and democracy-building initiatives.

This definitely sends a signal to the business community of both countries and should encourage more investment and also restoration of some of the opportunities for bilateral ties, which could prevent the Czech Republic’s reputation in Ukraine from crumbling, judging from the negative signals and messages coming from Czechia over the past several weeks.  

On the wishlist should be the reappointment of a special governmental envoy for Ukraine’s reconstruction and also dedicating resources to keep the original infrastructure for efficient exchange in place. This includes not only Program Ukraine but also other financial streams that could help to unlock the potential of accessing larger amounts of money from the EU and other international institutions. 

However, all of this will require political will and courage to continue investing in this area and also leadership, particularly from Prime Minister Babis and Foreign Minister Petr Macinka, who will need to minimize the destructive agenda of their coalition partner, the pro-Russia, far-right Freedom and Direct Democracy party. 

Without this, Czechia will turn out to be just yet another Slovakia or Hungary that nobody will consult when the important decisions about the future of Europe and its security architecture take place after the war finally ends.   

Pavel Havlicek is a research fellow with the Association for International Affairs (AMO), a Prague-based think tank. Iana Okhrimenko is a senior economist at the Center for Economic Strategy (CES), a Ukrainian non-governmental research body promoting sustainable economic growth.