During the Cold War many countries had to devote a high proportion of the gross national product to solution of their defence needs in order to counter new and increasing threats which they cannot afford to ignore. This was done either by trying to develop their own design weapons or by buying various new weapons abroad. However, both were very expensive solutions to the problem, and, with the Cold War being over, the ever-present problem of limited resources forced the governments to consider improvements to existing vehicles in lieu of a newly designed systems or new build vehicles as a more cost-effective way of satisfying the defence needs.

In this situation the Kharkiv Morozov Machine Building Design Bureau had to partially redirect its efforts in the 1990s from development of brand-new vehicles to development of modernisation projects for various existing armoured fighting vehicles in key areas to enable their offensive and defensive characteristics to be enhanced and to extend the life of the vehicles by a number years. In particular, for existing T-72 main battle tank users, the Kharkiv Morozov Machine Building Design Bureau developed a number of upgrade packages which envisaged significant improvements in the three key areas of MBT design: mobility, firepower, and protection. The first upgrade option was called T-72AG and featured introduction of many of the key components of the T-84 and T-80UD main battle tanks. The second upgrade option was designated T-72MP and featured installation of a French-designed fire-control system. The third upgrade option featured a 120mm gun and was designated the T-72-120. All three upgrade packages were equally focused on improving the automotive performance of the T-72 to the point of it being comparable to that of up-to-date battle tanks in order to give the T-72 a high degree of operational mobility, as well on enhancing protection against all likely forms of attack. The actual difference between the T-72AG, T-72MP and T-72-120 was in the firepower upgrade. Both the T-72AG and T-72MP retained the 125mm gun, but the T-72AG was fitted with a Ukrainian fire-control system, enabling it to fire a laser-guided missile, while the T-72MP featured installation of a SAVAN15 computerised fire-control system designed by the Sagem company of France. The T-72-120 was equipped with a 120mm gun to fire NATO-standard ammunition as well as a Ukrainian-designed fire control system with enhanced characteristics.

In 1998-1999 two upgrade package versions were developed for the T-64 battle tanks, and in 1999 the KMDB was awarded the contract to upgrade some of the Ukrainian Army T-64s to  the enhanced T-64BM1 configuration.

For a number of years the KMDB was concentrating on developing modernisation packages for T-54/T-55/T-59/T-62 battle tanks which originally had come into service as long ago as in the 1950s but were still in service in many parts of the world. One of the projects, known as the Al-Zarrar, was developed in co-operation with Pakistan and in 1999-2000 the upgraded prototype was subjected to extensive trials in that country.

Upgrade packages were also developed for a number of light armoured vehicles, including BTR-60/BTR-70/BTR-80 armoured personnel carriers, BRDM-2 armoured reconnaissance vehicle etc.

Armoured Vehicle Upgrade Projects

T-72AG MBT during the IDEX'97 exhibition in the United Arab Emirates (1997)