Serbia is preparing a defence manufacturing partnership with Israel-based Elbit Systems through a planned combat-drone production venture involving state-owned arms company Yugoimport-SDPR.
Public statements have characterised the project as a partnership between the two companies with approximately equal participation, while earlier reports indicated that Elbit Systems could hold a 51% stake in the future venture. Details on the ownership structure have not been formally disclosed.
Defence Production Partnership Under Preparation
The planned joint venture is expected to focus on the domestic manufacture of combat drones, although the companies have not released information on the planned investment amount, factory location, production capacity or expected start of operations. The project follows a broader expansion of Serbia’s commercial cooperation with Elbit Systems, which has included major defence procurement agreements.
In early 2025, Serbia completed the acquisition of PULS artillery systems and Hermes drones from Elbit in a deal valued at US$335 million. A later Serbian procurement package covering missiles, drones and electronic-warfare equipment was estimated at approximately US$1.6 billion.
Local Manufacturing and Defence Industry Development
The transition from purchasing defence equipment to establishing domestic production could support higher-value engineering employment and contribute to the development of Serbia’s defence industrial base. The economic impact of the venture will depend on several factors, including the extent of technology transfer, ownership arrangements for intellectual property, involvement of Serbian suppliers and the conditions governing potential exports of systems produced in Serbia.
Export Controls and International Market Considerations
Defence manufacturing typically provides higher margins compared with conventional subcontracting activities but also involves additional regulatory and political requirements. Serbia will need to manage export-control obligations and end-user verification procedures while maintaining its commercial relationships with multiple international partners, including the European Union, Israel, Russia and non-aligned markets.
