EU aims to shift European arms industry to ‘war economy mode’

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The European Commission will propose on Tuesday ways for the European Union to boost its arms industry so it can shift to "war economy mode" in response to Russia’s invasion of Ukraine.

FILE PHOTO: Informal meeting of EU defence ministers in Toledo

Informal meeting of EU defence ministers in Toledo.

Thierry Breton, the European industry commissioner, will lay out proposals to encourage EU countries to buy more weapons together from European companies, and to help such firms increase production capacity, according to EU officials.

"We need to change the paradigm and move into war economy mode. This also means that the European defence industry must take more risks, with our support," said Breton, previewing the package.

Breton, a French former tech company CEO, has also said the possibility of another U.S. presidential term for Donald Trump - who has questioned Washington's commitments to NATO - means Europe has to do more to protect itself.

"In the current geopolitical context, Europe must take greater responsibility for its own security, regardless of the outcome of our allies’ elections every four years,” Breton said.

Russia’s war in Ukraine has prompted many European countries to increase defence spending.

But EU officials argue purely national efforts are less efficient and want EU bodies to play a greater role in defence industrial policy.

Analysts say the war has made clear that European industry was ill-prepared for some major challenges, such as a sudden surge in demand for large amounts of artillery ammunition.

Breton’s proposals include creating a European version of the U.S. Foreign Military Sales scheme, under which the United States helps other governments to buy from U.S. arms companies.

Another proposal would allow the EU to compel European weapons firms to prioritise European orders in times of crisis.

To become reality, the proposals will need approval from the EU’s 27 national governments – which have often been reluctant to cede power on defence and military matters – and the European Parliament.

The proposals will also be studied closely by NATO, which has said it welcomes EU efforts to help European defence but warned they must not duplicate or clash with the transatlantic alliance's work.

FUNDING QUESTIONS

Breton’s package is expected to include some 1.5 billion euros ($1.63 billion) in new money through the end of 2027 – a modest sum in the world of large-scale defence procurement.

But officials say the package will create a legal framework that would allow much greater coordinated spending in years to come, if the EU is willing to stump up the cash.

Breton has called for a special EU fund of 100 billion euros for defence projects.

Commission officials say they want Kyiv to take part in the proposed new schemes to boost joint procurement and production capacity, even though Ukraine is not part of the EU.

"Our mission here is to treat Ukraine as almost equivalent to a member state," said one official, speaking on condition of anonymity ahead of the launch of the package.

Agreeing on the proposals will take some time, particularly as a new European Parliament will be elected in June, followed by the appointment of a new European Commission.

Disagreements within the current Commission give a foretaste of some of the power struggles ahead.

While Commission President Ursula von der Leyen has said she will create a post of defence commissioner if she serves a second term, Breton has argued there is no need for such a role.

"If the question is that of a Defence Industry Commissioner, it seems to me that we already have one,” he said.

EU Commission to propose that Ukraine join EU defence industry support scheme

Stock photo: Getty Images

The European Commission will propose to make Ukraine a full member of the EU's defence industry support scheme, which will help Brussels use Kyiv's experience and bring Ukraine closer to EU membership.

Source: Euractiv, citing the offer from European Commission, as reported by European Pravda

Details: One of the three objectives of the proposal for the European Defence Investment Programme (EDIP) is a step "contributing to the recovery, reconstruction and modernisation of the Ukrainian defence technological and industrial base and progressive integration into the European [one], thereby contributing to mutual stability, security, peace, prosperity and sustainability".

In order to achieve this, Ukraine should be allowed to become a full member of any consortium for joint procurement of military equipment with other EU member states and have access to EU funds and VAT exemption in case of joint ownership, the draft text says.

The EDIP Regulation will be presented by the European Commission on Tuesday, 5 March, along with the EU's common political defence strategy.

Therefore, Ukraine will receive a special place in the programme, which is intended to support joint European arms procurement and strengthen the EU's defence industrial base (DIB), which utilises EU funds.

Previous defence and industrial programmes adopted in the EU have never considered any third country as a full participant in these schemes, except for Norway.

Ukraine's accession to the EDIP would be crucial in shaping Europe's DIB, given Kyiv's two-year experience in using defence equipment and its EU accession aspirations.

With Ukraine in dire need of defence supplies, especially ammunition and drones, Kyiv is engaging with EU companies to establish joint ventures, make direct purchases from the EU industry, and develop large-scale UAV production facilities. Two years of war also gave the Ukrainian army expertise in testing and utilising modern weapons.

Under the draft regulation, "contributing to the recovery, reconstruction and modernisation of the Ukrainian defence technological and industrial base" is a way of "support[ing] defence readiness of the Union and its member states".

Outside the European Union, the EU industry is facing challenges in galvanising production while awaiting contracts after decades of underinvestment following the Cold War.

"Faced with a high-intensity conflict, the Ukrainian defence and technological, industrial base had to shift to a war economy model," the draft defence strategy reads, and therefore "will emerge as one of the best engines of the economic recovery of the country at the end of the war and testbed of the defence industrial readiness".

Cooperation between Ukrainian industry and European industry is a key aspect of the security commitments that the EU's diplomatic service has been discussing with Ukraine.

"Ukraine is and will increasingly be a crucial partner in the Union in the defence industrial sector, notably given its full accession process," the unpublished text of the defence strategy stated.

The draft document also envisages a separate budget for Ukraine's defence industry.

The document contains no indication of the total financial package, although the European Commission representative noted that it should be no less than €1.5 billion.

However, as the draft states, Ukraine must comply with several rules as outlined in the plan. It lists pre-conditions on the rule of law that resemble those it must meet on its path to EU membership.

Ukraine must "continue to uphold and respect effective democratic mechanisms, including a multiparty parliamentary system and the rule of law, and to guarantee respect for human rights, including the rights of persons belonging to minorities, thereby contributing to mutual stability, security, peace and prosperity".

The European Commission will also consider assessing the security context to evaluate its further support.

The integration of Ukrainian industry into the EU defence programme is likely to raise questions from enlargement sceptics who may oppose giving a candidate country another single market advantage and the benefit of subsidising sensitive national industries when the membership process and the war are protracted.

Background: Earlier, the European Union reportedly engaged Ukraine to work on a future industrial strategy for the EU's defence industry.

Ukraine anticipates EU negotiation framework by 12 March, says Deputy PM

Olha Stefanishyna. Photo: Stefanishyna on Facebook

Ukraine expects the European Commission to present it with its negotiation framework for future accession to the European Union no later than 12 March.

Source: Olha Stefanishyna, Ukraine’s Deputy Minister for European and Euro-Atlantic Integration, on the sidelines of the international platform "Restoration of the rights of victims of conflict-related sexual violence: an element of peace and global defeat," as quoted by Liga.net.

Quote: "Not later than 12 March, we expect the European Commission to present its negotiation framework and assess our progress in reforms so that by 19 March, EU countries can make a decision," she said.

Stefanishyna expressed hope that there would be no delays. She noted that there have been "unfortunate cases" when internal problems in the parliament led to appeals to the European Commission, presumably referring to a letter from former Ukrainian president Petro Poroshenko.

"This practice is not ideal, and I still do not know what impact it will have. I hope that when we say we are all on the same page regarding strategic matters, this will be believed even if there are some exceptions," emphasised the Deputy Prime Minister.

She added that as of 24 February, Ukraine had a clear plan of action, but "it is currently difficult to predict whether it will be implemented due to recent events."

Background:

  • In January, the European Commission began working on the draft negotiation framework for Ukraine – a document that defines the conditions and procedures of EU accession negotiations.

  • The negotiating framework is expected to be approved at the intergovernmental conference convened after the EU leaders' summit on 19 March. The convening of the intergovernmental conference marks the actual start of accession negotiations.

  • The March EU summit is expected to assess Ukraine's recent steps taken to initiate accession negotiations. Among these steps is the approval of the lobbying law.

 

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