Before going into a detailed analysis of strategic investments into the European Defence Industry, let me bring some clarity into the kind of strategic goals we need to achieve in European Defence and European Defence industry.
Why, where and what we need to invest.
Lets start from a threat and challenges analysis.
One threat is the possibility of Russian aggression, which Russia can be ready for within the next 3-5 years.
That is the opinion of our intelligence services, not of politicians.
It means that we need to seriously evaluate this perspective.
That is why our strategy is called ‘Defence Readiness 2030”.
We also need to be ready, that Russia will escalate its provocations against EU and NATO members in the Eastern frontier region or somewhere else in Europe, like the recent “drone provocations” we have seen against Poland.
Such provocation have shown not only that we lack defence capabilities to detect and to destroy those drones in a cost-effective way, but also that we do not have effective political means to respond to these kind of provocations.
We cannot ask Article 4 consultations every time there is such a provocation.
And we need to ask ourselves the question: What will be our political reaction if next time in such a provocation Russia will use not 20, but 100 drones.
Another challenge related to our security is the longer term tendency, that the US will start to diminish their military presence on the European continent, and will shift more and more towards the Indo-Pacific.
Even if we dont know yet really the long term plans of the Washington administration, it would be wrong not to already now start serious preparations to replace American military resources on the European continent (except nuclear).
We need to learn the lessons from our past mistakes – we cannot allow ourselves to continue to be late with our decisions on defence and with their implementation.
For decades we postponed our investments into defence, despite the fact that Russia in the last 15 years was becoming more and more aggressive; for the last two years we did not invest into our anti-drone capabilities, despite the fact that since the beginning of 2023 the war in Ukraine gave plenty of evidence that drone warfare will be the biggest threat also to our security.
We need to change our mindset, the way our political decisions are discussed, are negotiated, are made and implemented in the end.
It cannot take long months or even years as has been the case until now.
As Mark Rutte says, “We are not at war yet, but we are not at peace anymore either”.
In order to build a Drone Wall, we need to break the old wall of our prevailing “peace mindset”.
Defence Readiness first of all demands Political Defence Readiness - to start to act strategically and decisively in all issues related with defence.
In order to act, we need to have very clear strategic goals – both for the short term and long term.
I see 3 groups of such strategic goals in defence:
1) ramping-up EU defence capabilities;
2) creation of conditions for peace in Ukraine; and
3) long term sustainable peace in Europe (without the permanent threat from aggressive Russia).
All 3 groups of our strategic defence goals demand both intellectual and financial investment into concrete strategies and long term projects.
To describe shortly where we are with our strategic investments, I can say: we are making good progress with intellectual and financial investments into European material defence readiness, and will very soon have an important strategic plan – the Roadmap on Defence Readiness 2030.
And this year we did a lot to create financial and legal opportunities to develop our material defence capabilities:
we created a big bang of finances to be used for ramp-up of defence production and procurement of new weapon systems;
We adopted the omnibus on defence simplification;
A new package on military mobility is coming.
But in contrast to our material defence readiness, we are lagging behind with our intellectual investments into our institutional defence readiness:
– how to better organize ourselves in European defence, if the US shifts more and more towards theIndo-Pacific, and how to integrate the battle tested defence capabilities of Ukraine within our security architecture, in order to strengthen our defencesagainst possible aggression by Russian battle tested military forces.
On the issue of “peace in Ukraine”: We are the strongest financial supporters of Ukraine defence capabilities, but our annual military support reaches only 0.1% of our common GDP.
We are ready to invest into our own defence 3.5% of GDP, but Ukraine, which defends us, receives only 0.1%.
There is no military logic in such a limited financial investment into the defence of Ukraine, and the reasons are related with the deficit of our ownEuropean strategy how to achieve peace in Ukraine.
Politically we are still not investing enough into development of such a strategy.
Still, we hope that President Trumps strategy for peace in Ukraine will be successful, but we need to be ready for different scenarios.
And this is the reason why the possible EU decision on the “Reparation Loan” is so important – sending a signal that Ukraines defence will be strengthened by the entire amount of Russian frozen assets can finally convince Putin, that he will not achieve anything substantial in his war against Ukraine and that it is better to stop that war now.
That we lack a political strategy for peace in Ukraine can be related to the fact that until now we have not invested our political capital into any kind of long term strategy towards Russia.
Deficit of such a strategy leaves us in the situationthat on the one hand we hesitate to show our stronger support to Ukraine because we are afraid that Putin will retaliate with escalation, and on the other hand we are afraid that decisive Ukrainian victory can destabilize the Kremlin regime, and that can bring general chaos to Russia.
That brings the fear that control of nuclear arms can be lost in the chaos and such a fear precludes us from giving stronger support to Ukraine.
But now lets return to the issues of our strategic financial investments into our material defence capabilities.
As I mentioned before – Next week, the forthcoming Roadmap on Defence Readiness will bring much more clarity on how we will achieve our strategic goals by 2030.
From the period when we were creating financial, legal and industrial policy opportunities for Member States to develop their defence capabilities we are moving into the delivery period, when created opportunities will need to be transformed into procurement contracts, new production capacities and developing modern weapon systems.
We need to have clarity on the 3 most important issues, related with delivery:
On the first issue of “what to deliver?” – the basic principle is clear:
NATO capability targets recently agreed between NATO and Member States are the basis for planning what needs to be delivered by 2030.
We need to remember, that for time being we have just 50% of what we need to have before 2030 according to new capability targets.
“What to deliver” can be divided into 3 distinct groups of weapon systems, which need to be produced and procured:
1) production of legacy systems (what we are producing now);
2) development of European “new systems” (which are produced globally, but not in Europe: deep strike capabilities); and
3) modernization of weapon systems along the modernization of war doctrines (Ukraines lessons).
Also we need to see the difference: how to manage mass production of legacy weapons, how to acquire capabilities related with Strategic Enablers, and how to implement big multinational flagship projects onregional or European scale.
On the second issue “how to deliver in the most effective way?” – the challenge is to find the appropriate balance:
what role in the management of a “big bang” delivery should be played by Member States, Commission, High Representative and European Defence Agency.
Member States have strong historic convictions that defence is a matter of national sovereignty, and they want to keep all the decisions on the development of European defence in their hands, but that makes it difficult to go for more centralized planning, for more of joint procurement, for the European defence level, which can be achieved only if Commission and other EU institutions will play a more active role in the delivery stage.
A more centralized and European approach is also needed, in order to overcome structural problems of the European defence industry, which is very much fragmented (because of fragmented defence policy), lacks single market principles and makes European defence industry less competitive in the global markets.
On the third issue - “how to finance a “big bang” of delivery in defence”? - lets look at what we have at the moment and what is coming:
The major challenge in the financing delivery stage - how to have financial resources not in 2035, but before 2030, and especially 2026-2030.
Now, several sentences about what the “delivery stage” and new financial opportunities mean for Eastern Flank countries and for smaller EU Member States, like Latvia or Lithuania.
In order to better understand new opportunities for our region, lets have in mind several factors:
They will be developed together with Ukraine and learning from Ukraine:
- on the importance of localized production of drones and EW instruments;
--importance to build local teams; importance to create local ecosystem;
The Baltic States (Frontier countries) have all the possibilities to be in the lead as promoters of defence modernization.
Tanks will continue to be produced in Germany; but production of drones, electronic warfare systems can concentrate itself in Latvia and other Baltic states, if we shall show smart leadership.
Politicians from the Baltic States should be active in pushing the broader agenda of our defence modernization – not only how to ramp-up material defence readiness of the whole EU, but also: how to strengthen our Institutional and Political defence readiness, how to include Ukraine into new European security architecture and how to defend against hybrid attacks our political will to defend ourselves.
Strengthening our defence means that we need to have a strategy how to ramp up our defence capabilities, but also a strategy how to diminish our adversarys, Russia, material and political offensive capabilities.
This is an agenda which demands not only financial investment, but also political and intellectual investment.
It is for the Baltic States to come with such an investment strategy, not just to wait when somebody will ask us to do it.
Especially because we can be effective in developing such a strategy together with Ukraine.
Until now we were assisting Ukraine – but the time is coming when Ukraine can assist us in a very valuable way.
