PERMANENT ARMS ECONOMY

A peek at the future of US-Taiwan defense industrial cooperation

BY MARK STOKES, COLBY FERLAND AND ERIC LEE, OPINION CONTRIBUTORS - 10/13/22 

Taiwan Presidential Office via AP
In this photo released by the Taiwan Presidential Office, President Tsai Ing-wen visits Taiwanese soldiers near the sign for Hualien Defense in eastern Taiwan on Sept. 6, 2022. She said China is conducting “cognitive warfare” by spreading misinformation in addition to its regular incursions into nearby waters and airspace intended at intimidating the self-governing island.

The Chinese Communist Party (CCP) poses significant challenges to the United States, Taiwan and other like-minded countries in the Indo-Pacific. The People’s Liberation Army (PLA) has embarked on an ambitious reform and reorganization program — with one result being a defense research, development and acquisition (RD&A) system that encourages synergy between and within military, defense industrial and academic communities. With heavy emphasis on informatization and a microelectronics-heavy supply chain, China is able to move from concept to fielded capability at an unprecedented rate. The main strategic direction of PLA force development is Taiwan — and, by extension, the United States.

Facing a shared threat, the United States and Taiwan should strengthen joint efforts in defense industrial cooperation.

As part of a broader competitive strategy, the United States and Taiwan should develop innovative and asymmetric options meant to align resources in a complex political, economic and military environment. Support for asymmetric approaches to Taiwan’s defense acquisition and posture appear to be gaining favor in U.S. policy. Against the backdrop of an increasingly aggressive Beijing, the subsequent increased focus on Taiwan’s defense has created a golden opportunity to advance U.S. interests, deepen and broaden the bilateral relationship with Taiwan, and address structural problems in confronting shared challenges.

The United States and Taiwan share common interests in a more proactive approach to competition with China. Recognizing in part that a viable domestic defense industry can help create conditions for greater popular support for sustained high levels of defense spending, armaments cooperation is central to bilateral relationships between the United States and Japan, India, and NATO. Provision of defense articles and services through the Foreign Military Sales (FMS) program — arms sales — are central in U.S.-Taiwan relations.

China’s failure to meet its own obligations under the 1982 Joint Communiqué countermands any U.S. responsibility to reduce arms sales to Taiwan. Since 1982, there has been significant defense industrial cooperation between the United States and Taiwan, but without any senior policy body. This has resulted in inconsistent and significant fluctuations in success of industrial cooperation programs, such as GE Aviation’s thriving joint venture with Evergreen Aviation Technologies compared to Lockheed Martin’s cooperation with AIDC on the stalled F-16 Maintenance Center.

The structure for U.S.-Taiwan defense relations should be adjusted. Like Japan, Taiwan has low political support for increased defense spending; thus, there exists a natural linkage between defense investments and economic growth. With caps on deficit spending, increases in defense budgets compete with economic infrastructure, social programs, research and development, and more.

In Taiwan, political pressure to target economic sectors more relatable to the public’s day-to-day life has limited defense-related resources and caused competition in funding allocation between production and acquisition, and life-cycle sustainment. The latter, having a clear impact on equipment availability rates, directly translates shortfalls in defense spending to issues of defense readiness.

The United States and Taiwan should establish a senior-level defense industrial supply chain (DISC) policy coordination body. DISC would translate popular support, and the will to fight, in Taiwan into requisite defense spending, and increase Taiwan’s operational readiness.

Defense industrial cooperation is a complex issue. Establishment of DISC specifically targets this challenge by mobilizing and giving direction to hundreds of millions of dollars on offer from Taiwan during each FMS transaction, as high as 10-12 percent of the contract value. These funds are referred to as industrial cooperation requirements, or “offsets,” and exist as a Taiwan policy requirement for U.S. defense contractors. Over the next decade, about $1 billion in resources are in jeopardy of being waived or delayed due to an inability to transparently build them into the initial contract agreements because there is no senior-level communication on how best to use them.

This is especially critical at a time when Taiwan’s policies for offsets are undergoing significant reform. During this period of flux, DISC would serve as a critical channel of communication and problem solving between relevant parties in the defense industrial cooperation ecosystem. Offsets are but one form of industrial cooperation, and DISC is structured as a helpful third-party to both Taiwan and the United States, as the same stakeholders and processes apply to all forms of cooperation. At its core, establishment of DISC would better serve Taiwan’s military readiness, potentially saving American blood and treasure in the event of a crisis.

Moreover, the U.S. military increasingly relies on sophisticated weapon systems that are underwritten by advanced microelectronics. Taiwan provides the steel in the spine for the U.S. defense industrial complex. As the U.S. military depends on U.S. commercial technology firms, who in turn depend on Taiwanese chip manufacturing, there is a growing need to more closely coordinate and integrate U.S. and Taiwan defense and technology sectors.

Many in Taiwan may remain on the fence in seeing where their future lies, including within Taiwan’s military. Near and long-term solutions to the PLA threat must be simultaneously expanded. Solely focusing on the near-term challenge of a possible PLA invasion of Taiwan puts aside any long-term thinking. Much of Taiwan’s defense community does not see hope in defending against an invasion without clearly defined U.S. military support. In Taiwan, buy-in from the local defense industry and key stakeholders is critical for a motivated defense effort. In the United States, a conscious effort should be made to find an area for partnership.

A senior-level U.S.-Taiwan DISC forum would seek to advance these goals:Identify Chinese defense trends to identify single points of failure, keep pace with common challenges, and maintain a qualitative military edge in key areas;
Enhance Taiwan’s operational readiness by identifying cooperative opportunities targeted to increasing equipment availability, sustainability, and the relevant human capital skills;
Provide policy guidance for a War Reserve Stocks for Allies (WRSA) program in Taiwan;
Promote cooperative research, development, testing and evaluation of defense technologies, systems or equipment;
Examine opportunities for joint production, sustainment and follow-on development of defense articles; and
Provide a forum for procurement of Taiwan’s technology, equipment, systems, or logistics support solutions that uniquely meet U.S. needs.I advocated full legalization; I was wrongOpportunities for Biden and Congress to combat the overdose crisis right now

Taiwan would benefit from establishing a mechanism for identifying and coordinating capabilities for defense industrial cooperation. In addition, both the United States and Taiwan should invest resources into assessing China’a RD&A in order to pace the threat into the future. This is an opportunity for the United States and Taiwan to cooperate in developing options and capabilities to counter the PLA threat, and to lay the groundwork for achieving unity of effort.

Mark Stokes is executive director at the Project 2049 Institute in Arlington, Va., where Colby Ferland is director of programs and Eric Lee is associate director of programs.

WHO IS WINNING THE WAR
Defense Stocks Soar $69 Billion On Russia's War

MATT KRANTZ
03/03/2022

Russia's attack on the Ukraine sparked a global humanitarian and political crisis. But S&P 500 investors are still finding ways to engage in defense companies helping nations defend themselves in a world torn by war.

Investors have already posted $69 billion in stock gains on the 33 major defense and aerospace stocks in the largest ETF of its kind, the iShares U.S. Aerospace & Defense ETF (ITA), says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.

The ETF itself is up nearly 10% from Russia's initial Feb. 24 attack on Ukraine. That's more than twice the 4% rise in the S&P 500 in that time. Analysts, too, see more upside in a year's time in more than three-quarters of the stocks in the top defense ETF. And not just a little rise — they're calling for an average double-digit gain.

And yet, the top defense ETF doesn't show the magnitude of gains seen in the defense and aerospace industry in the wake of Russia's attack. The 33 stocks in the ETF, on average, are up nearly 13% from the attack and more than 5.3% this year so far. The S&P 500 itself, measured by the SPDR S&P 500 ETF Trust (SPY), is down nearly 8% this year.

"Russia's invasion of Ukraine, representing Europe's worst security crisis since World War II, has sparked global outrage," said Jack Ablin, strategist at Cresset Capital. "The court of public opinion clearly supports the Ukrainian people and their president, Volodymyr Zelenskyy."

Many of the ETFs and defense stocks have run up. But analysts still see upside for many remaining.

Targeting The S&P 500 Defense ETFs

With assets of more than $3 billion, iShares U.S. Aerospace & Defense is twice the size of its next biggest rival, the SPDR S&P Aerospace & Defense ETF (XAR).

But defense is not a massive area for ETFs. There are now only three major ETFs to choose from for investors looking to buy into the sector. The third is the relatively small Invesco Aerospace & Defensive (PPA), with $780 million in assets. And in what's perhaps the worst timing ever for an ETF, the VictoryShares Protect America ETF shut down late last year. And it's easy to see why: Shares of defense companies largely lagged the S&P 500 over the past five years.

The iShares U.S. Aerospace & Defense ETF, for instance, is up just 46.2% over the past five years. That chokes on the exhaust of the 84.2% gain by the S&P 500 during that time. Part of the underperformance is due to its No. 1 holding, a 23% position in Raytheon Technologies (RTX). Shares of Raytheon are down more than 10% in five years. That's all but tried the patience of defense and aerospace investors.

But S&P 500 analysts are starting to warm up to the sector — just not in the obvious places. They see the 32 stocks in the iShares U.S. Aerospace & Defense ETF, with current price targets, gaining an average of 14.3% over the next 12 months.

Analysts Like These Defense Stocks Best

Investors made no secret of the defense stocks they like best amid this new type of warfare. Eleven of the stocks in the iShares U.S. Aerospace & Defense ETF are up 15% or more from the time war erupted in Ukraine. And of those, analysts still see upside in more than half the stocks.

Take Maxar Technologies (MAXR). The company provides space imagery of the kind useful in monitoring military events in Europe. Shares are up more than 46% from the time war broke out to 35.80 a share. That gain alone added $882 million in market value for investors. But even so, analysts think this stock still has more than 13% upside until hitting its 12-month price target of 40.75. Additionally, the company is seen making 54 cents a share (or more than $41 million in profit) in 2022, snapping many years of losing money.

Looking At The S&P 500 Defense Giants

Analysts, though, are less bullish on the obvious defense giants that already ran up. Northrop Grumman (NOC) already pulled 9% past analysts' 12-month price target on the stock. Shares are up a powerful 18% since the war began, putting $10.9 billion into investors' portfolios. It's a similar story with Lockheed Martin (LMT). Following a 27% run-up just this year, and 16% since the war, shares blasted past analysts' price target by some 7%.

But opportunity still abounds. Nations will need to take serious looks at their defenses. Analysts think Defense Department contractor Kratos Defense & Security Solutions (KTOS) will be worth nearly 21% more than it is now in twelve months. And that's following a nearly 30% jump since the war.

Sources: IBD, S&P Global Market Intelligence based on holdings in iShares U.S. Aerospace & Defense ETF

SEE https://plawiuk.blogspot.com/search?q=PERMANENT+ARMS+ECONOMY

AS SILICON VALLEY TRIES TO ENLIST, THE PENTAGON STRANGLES INNOVATION

STEVE BLANK
APRIL 15, 2022
COMMENTARY


Looking at a satellite image of Ukraine online, I realized it was from Capella Space — one of our Hacking for Defense student teams who now have seven satellites in orbit. Hacking for Defense is a university course I and others created to connect students interested in learning lean innovation methods to solve the toughest national-security challenges.

They’re not the only startup in this fight. An entire wave of new startups and scaleups are providing satellite imagery and analysis, satellite communications, and unmanned aerial vehicles supporting Ukraine’s struggle.

For decades, satellites that took detailed pictures of Earth were only available to governments and the high-resolution images were classified. Today, commercial companies have their own satellites providing unclassified imagery. The government buys and distributes commercial images from startups to supplement their own and shares them with Ukraine as part of a broader intelligence-sharing arrangement that the head of Defense Intelligence Agency described as “revolutionary.”

At the onset of the war in Ukraine, Russia launched a cyber attack on Viasat’s KA-SAT satellite, which supplies internet across Europe, including to Ukraine. In response to a (tweeted) request from Ukraine’s vice prime minister, Elon Musk’s Starlink satellite company shipped thousands of its satellite dishes and got Ukraine back on the internet. Other startups are providing portable cell towers — both “backpackable” and fixed. When these connect via satellite link, they can provide phone service and Wi-Fi.

Drone technology was initially only available to national governments and militaries. In Ukraine, drones from startups are being used as automated delivery vehicles for resupply, and for tactical reconnaissance to discover where threats are.

Equipment from large military contractors and other countries are also part of the effort. However, the equipment listed above is available commercially at dramatically cheaper prices than what’s offered by the large existing defense contractors, and developed and delivered in a fraction of the time.

While we should celebrate the organizations that have created and fielded these systems, they illustrate much larger issues in the Department of Defense.

America’s national security is inexorably intertwined with commercial technology, such as drones, AI, machine learning, autonomy, biotech, cyber, quantum, high-performance computing, and commercial access to space.

Most of these companies were founded or funded by the Defense Department’s orphan-child — the Defense Innovation Unit. Established in Silicon Valley in 2015 by then-Secretary of Defense Ash Carter, the organization has offices in Austin, Boston, Chicago, and Washington, D.C. This is the one defense organization with the staffing and mandate to go head-to-head with any startup or scaleup. The Defense Innovation Unit is America’s most promising effort to bridge the divide between pressing national security requirements and the commercial technology needed to address them with speed and urgency. This capability is exactly what the Department of Defense needs. It accelerates the connection of commercial technology to the military. Just as importantly, the Defense Innovation Unit helps the department learn to innovate at the same speed as tech-driven companies.

China views combining its military-civilian sectors as a national effort to develop a “world-class” military and become a world leader in science and technology. A key part of Beijing’s strategy includes developing and acquiring advanced dual-use technology.

Given that the Defense Innovation Unit is the Department of Defense’s most successful organization in developing and acquiring advanced dual-use technology, one would expect the department to scale the Defense Innovation Unit. The threats are too imminent and stakes too high not to. So what happened?

Congress cut the budget by 20 percent.

Why? The defense ecosystem is at a turning point. Defense innovation threatens entrenched interests. Given that the Pentagon budget is essentially fixed, creating new vendors and new national champions of the next generation of defense technologies becomes a zero-sum game.

The traditional suppliers of defense tools, technologies, and weapons — the prime contractors and federal labs — are no longer the leaders in next-generation technologies such as drones, AI, machine learning, autonomy, biotech, cyber, quantum, high-performance computing, and commercial access to space. They know this and know that weapons that can be built at a fraction of the cost and upgraded via software will destroy their existing business models.

Venture capital and startups have spent 50 years institutionalizing the rapid delivery of disruptive innovation. In the United States, private investors spend $300 billion a year to fund new ventures that can move with the speed and urgency that the Department of Defense now requires. The Pentagon’s relationship with startups and commercial companies, already an arms-length one, is hindered by a profound lack of understanding about how the commercial innovation ecosystem works and its failure of imagination about what it could do.

The department has world-class people and organization for a world that no longer exists.

A radical reinvention of America’s civil-military innovation relationship is necessary if it wants to keep abreast of its adversaries. This would use Department of Defense funding, private capital, dual-use startups, existing prime contractors and federal labs in a new configuration along the following lines.

Create a new defense ecosystem encompassing startups and mid-sized companies at the bleeding edge, prime contractors as integrators of advanced technology, federally funded research-and-development centers refocused on areas not covered by commercial tech (nuclear and hypersonics come to mind). Make it permanent by creating innovation doctrine and policy.

Create new national champions in dual-use commercial tech areas such as AI, machine learning, quantum, space, drones, autonomy, biotech, underwater vehicles, shipyards, etc., that are not the traditional vendors. Do this by picking winners. Don’t give out door prizes. Contracts should be larger than $100 million so high-quality venture-funded companies will play.

Integrate and create incentives for the venture-capital and private-equity ecosystem to invest at scale. Ask them what it would take to invest at scale — one example might be to create massive tax holidays and incentives — to get investment dollars in technology areas of national interest.

Recruit and develop leaders across the Defense Department prepared to meet contemporary threats and reorganize around this new innovation ecosystem. The threats, speed of change, and technologies the United States faces in this century will require radically different mindsets and approaches than those it faced in the 20th century. Today’s Department of Defense leaders of consequential organizations must think and act differently than their predecessors, even their predecessors from only a decade ago. Leaders at every level now need to understand the commercial ecosystem and how to move with the speed and urgency that China is setting.

Buy where you can; build where you must. Congress mandated that the Department of Defense should use commercial off-the-shelf technology wherever possible, but the department fails to do this. (See this industry letter to the Department of Defense for more details.)

Acquire at speed. Today, the average Department of Defense major acquisition program takes anywhere from nine to 26 years to get a weapon in the hands of a warfighter. The department needs a requirements, budgeting, and acquisition process that operates at commercial speed (18 months or less), which is 10 times faster than its current procurement cycles. Instead of writing requirements, the department should rapidly assess solutions and engage warfighters in assessing and prototyping commercial solutions.

Coordinate with allies. Expand the National Security Innovation Base to an Allied Security Innovation Base. Source commercial technology from allies.

Change is hard — especially on the people and organizations inside the Department of Defense who’ve spent years operating with one mindset only to be asked to pivot to a new one. But America’s adversaries have exploited the boundaries and borders between its defense and commercial and economic interests. Current approaches — both in the past and under the current administration — to innovation across the government are piecemeal, incremental, increasingly less relevant, and insufficient. It’s a politically impossible problem for the Defense Department to solve alone. Changes at this scale will require congressional action: hard to imagine in the polarized political environment. But not impossible.

These are not problems of technology. It takes imagination, vision, and the willingness to confront the status quo. So far, all are currently lacking. But if more can be found, we may see more successes like those seen in Ukraine.


Steve Blank is an adjunct professor at Stanford and a founding member at Stanford’s Gordian Knot Center for National Security Innovation. Steve consults for the national security establishment on innovation methods, processes, policies, and doctrine. Steve’s latest class at Stanford, Technology, Innovation, and Great Power Competition, is providing crucial insight on how technology will shape all the elements of national power.

Image: Starlink satellite launch

Will Korea Aerospace Industries Be Privatized?

The debate surrounding the possible privatization of KAI represents fundamental questions about the future of “K-Defense.”

By Chris H. Park
March 17, 2023

Korea Aerospace Industries (KAI) has played a pivotal role in developing South Korea’s domestic technical capacity for aircraft manufacturing. KAI has license-produced F-16 fighter jets since the 1980s and jointly developed the T-50 Golden Eagle training jet with Lockheed Martin. It also has collaborated with General Electric to develop and produce jet engines.

In 2022, the South Korean defense industry celebrated new global recognition by achieving $17.3 billion in arms exports, doubling figures from the previous year. Although the limelight focused on howitzers and tanks, South Korean planes made remarkable progress as well. KAI’s KF-21 fighter jet, developed over two decades, successfully completed a test flight, placing South Korea among the few countries with advanced supersonic fighters. Poland also purchased KAI’s KA-50 light combat aircraft as part of a $12 billion arms deal signed on the sidelines of the 2022 NATO Summit.

The South Korean government — through the Export-Import Bank of South Korea — owns the majority stake in KAI. Privatization of the partly state-owned company has been a recurring topic for over a decade as various conglomerates express interest in an acquisition deal. Firms like Korean Air, Hyundai Motor and Hanwha Defense have previously floated acquiring KAI, to much public interest.

The latest rumor once again surrounds Hanwha, especially after it acquired Daewoo Shipbuilding and Marine Engineering in December 2022. Hanwha — as South Korea’s largest defense firm — has vowed to be the “Korean version of Lockheed Martin” and seeks to build on a successful year exporting howitzers and tanks to Egypt and Poland.

Not all are supportive, however. KAI President Kang Ku-young notably shared that 99 percent of senior executives oppose any acquisition deals, stating that “KAI has the organization and capabilities to walk the path of independent survival.”

There is a good reason why there is so much prolonged attention on privatizing KAI: the debate surrounding the KAI acquisition represents the fundamental questions about the future of “K-Defense” as it comes off its most commercially successful year.

Export Profit Pressure

Chae Woo-suk, the president of the Korea Defense Industry Association, stated that “KAI, which is bound by public corporate restraints, cannot make large investments with a long-term perspective like its competitors in developed countries.” Privatization is considered a viable solution to reduce the inefficiencies of a quasi-state-run firm and to enhance international competitiveness. For example, KAI has witnessed changes in management personnel with every presidential succession. Private ownership could bring greater stability to KAI with leadership and longer-term stewardship of its competitiveness. With the KAI acquisition, Hanwha would further establish itself as one of the largest defense companies in the world that could allocate more resources to its redoubled aerospace division. 

South Koreans consider their defense industry as — in former President Moon Jae-in’s words — the “future economic lifeline” of the country. 2022 marked a landmark year that demonstrated the growth and export potential of the South Korean defense industry. There now is immense pressure to not only sustain but build on recent gains, as the incumbent Yoon Suk-yeol administration vowed South Korea will become the world’s fourth largest arms seller by 2027.

Privatization will not be a panacea for KAI to overcome large technological hurdles to become a leading military aircraft manufacturer in the world. Some argue that the government should support KAI further until it attains greater technical capacity. The defense aerospace industry has a notoriously long time to recoup investments; private firms, faced with profitability concerns, may reduce investment.

The privatization of state-run firms, in general, has been a politically fraught subject in South Korea. Labor unions have already come out in opposition to KAI privatization. Further, Hanwha’s acquisition would raise concerns about monopoly control of South Korea’s defense industry. Competition breeds innovation and new technology in the defense industry. A smaller firm, LIG Nex1, reportedly is also bidding to acquire KAI, although questions remain whether it has sufficient capital to sustainably invest in KAI.

How Much to Indigenize?

In the 1970s, President Park Chung-hee jump-started the South Korean defense industry under the mantra of “self-sufficient defense” as a response to the Nixon Doctrine. The domestic industrial base could allay alliance abandonment fears and ensure a seamless weapons supply for the South Korean military. The strength of the South Korea-U.S. military alliance and South Korea’s alliance abandonment fears have since ebbed and flowed. Much of the alliance debate today centers around the strength of U.S. extended nuclear deterrence in light of redoubled North Korean ballistic missile and nuclear weapons program.

Indigenization, however, remains an important goal. The Yoon administration started the “component localization development support project” that provides state support for domestic firms developing core weapons components. This pursuit has particular significance to KAI because the most inchoate area of South Korea’s indigenous development has been military aviation. The Korea Defense Industry Association pinned South Korea’s overall defense indigenization rate at 77.2 percent in 2021; for aerospace, the rate is slightly over 50 percent. Further, indigenously developed planes constitute a smaller portion of the South Korean defense industry, which has historically focused on developing land-based systems and ships. Defense aerospace is thought to be the next frontier for domestic development and production.

KAI has been the main firm indigenously developing military aircraft, including next-generation fighter jets, helicopters, and unmanned aircraft. It also set benchmark indigenization rate goals for core components and developed advanced radar technology that countries, such as the United States, were unwilling to share. There are doubts about whether a private aerospace firm will direct sufficient support toward domestically developing and producing military aircraft. Skeptics of privatization notably argue that the KF-21 project would not have happened without active state involvement in KAI operations.

However, this raises the fundamental question of how much indigenization is desirable (or even technologically attainable). South Korea risks developing an inefficient autarkic defense industry if it places undue emphasis on indigenization. A large amount of capital and sophisticated technology is required to catch up to advanced producers. Intense fixation on increasing the indigenization rate — especially in areas like avionics where South Korea is far behind other countries — risks colossal costs and inefficiencies.

Stigma of Defense Corruption

Highly publicized investigations in the 1990s that implicated top military and political leaders revealed excessive waste and fraud in the South Korean defense industry. Reports of unexplained acquisitions spending and contractor malfeasance in the 2010s further ignited concerns about the ongoing challenges of transparency and accountability in the South Korean defense industry. The legacy of defense-related corruption continues to weigh on the public consciousness. Deep suspicions have generated intense public scrutiny and misunderstanding about the arms industry.

Today, general euphoria has taken over the South Korean defense industry due to monumental sales figures from 2022. Support and interest in the industry from bipartisan political leaders and the public remain high. However, future technological hurdles and research cost overruns may reignite public suspicions and media speculations as the stigma of defense-related corruption remains in the public consciousness.

KAI has been at the center of dealing with the fallout of the defense corruption investigations. Its executives recently were investigated for inflating costs as scrutiny piled on the firm’s heavy research spending amid technological hurdles. Most executives were acquitted, as the case appeared to be based on a spurious understanding of the defense industry.

Proponents of KAI privatization argue that a private firm — free from strings to the government in power — could avoid unnecessary scrutiny and more effectively deal with these issues. Company leadership that lasts more than the five-year presidential term and is unconnected to the incumbent administration could provide a more prudent public face through business downturns and technological hurdles.

The KAI acquisition debate raises fundamental questions about the future of the South Korean arms industry and the growth of its domestic defense industrial base. As South Korea looks to cement recent gains in the global arms market, political leaders in Seoul and defense manufacturers will have to balance competing priorities while facing an increasingly competitive international arms market.

PERMANENT ARMS ECONOMY

Kuleba: African countries interested in hosting Ukrainian defense plants on their soil

Igor Kossov
Sat, September 30, 2023

African countries are interested in buying Ukrainian weapons and creating Ukrainian defense manufacturing plants on their soil, Foreign Minister Dmytro Kuleba said on Sept. 30 at Ukraine's first international defense industry forum.

Kuleba said that as a geographic region, Africa was one of the top customers of Ukraine's defense contractors and its countries would like Ukrainian products to return to their markets.

Plagued by weapon and ammo shortages, Ukraine is not able to export anything defense-related at this time but is looking to return to being one of the world's leading armorers.

The production of Ukrainian weapons on African soil is seen as an alternative to currently-impossible exports, Kuleba said, calling it a "new trend."

Ukraine has stayed within the top 20 defense exporting countries for the majority of its independence, occasionally climbing to 11th place. The country is especially renowned for its advanced aircraft engines.

The forum united 252 defense contractors from over 30 countries, as the Ukrainian government tries to build closer relationships and joint production capacities with the world's leading arms manufacturers, to include localized production of foreign arms inside Ukraine.

Africa wants to place production of Ukrainian weapons on its territory – Foreign Minister

Ukrainska Pravda
Sat, September 30, 2023



Africa is interested not only in buying Ukrainian weapons but also in placing their production on its territory.

Source: Interfax Ukraine, citing Minister of Foreign Affairs of Ukraine Dmytro Kuleba at a panel discussion within the framework of the Defence Industries Forum

Quote: "Africa was one of the largest markets for selling Ukrainian military products before the start of a full-scale war. Today, Africa is waiting for the Ukrainian companies to come back to this market for the sale of weapons. For now, of course, this option is closed.

Once I was talking with the leader of an African country, and he looked me in the eyes so trustingly and said: ‘You have already been sent so many weapons; you definitely do not need so much. Maybe you could share some with us?’ That is, there is a different perception of our needs."

Details: Kuleba says that the second interest that Africa has shown is, in fact, placing the production of Ukrainian weapons and ammunition on the territory of Africa.

"This is a new trend," Kuleba said. The foreign minister believes that "the demand for the sale and production of weapons produced in Ukraine will be very high".

Ukraine hosts a defense industry forum seeking to ramp up weapons production for the war

HANNA ARHIROVA
Sat, September 30, 2023

 Ukrainian President Volodymyr Zelenskyy addresses a joint meeting of Congress on Capitol Hill in Washington, Dec. 21, 2022. Ukraine hosted an international defense industry conference as part of a government effort to ramp up weapons production within the country to repel Russia's full-scale invasion and reduce foreign dependence on arms deliveries.

 (AP Photo/Carolyn Kaster, File) 

KYIV, Ukraine (AP) — Ukraine hosted an international defense industry conference as part of a government effort to ramp up weapons production within the country to repel Russia's full-scale invasion and reduce foreign dependence on arms deliveries.

The event marked a new development in support of Ukraine, with the previous focus being on the delivery of weapons, repair of damaged equipment and military training of Ukrainian soldiers.

President Volodymyr Zelenskyy, speaking at the opening of the International Defense Industries Forum, said that around 250 defense companies from more than 30 countries had gathered Friday in Kyiv. Defense ministers and representatives of several countries also attended the event.

“Heroism alone cannot intercept missiles. Ukraine needs capabilities, high quality, high quantity, and quickly. There is no defense without industry,” said NATO Secretary General Jens Stoltenberg, who spoke by video link during the forum on the day after his visit to Kyiv.

Stoltenberg said that Wendy Gilmour, who is NATO's assistant secretary general for defense investments, was representing the trans-Atlantic alliance at the event.

Stoltenberg acknowledged that many allies have significantly depleted their stocks in order to support Ukraine. “This was the right thing to do, but now we need to ramp up production, both to meet Ukraine’s needs and to ensure our own deterrence in events,” he said.

Zelenskyy disclosed the details of his recent trip to Washington, where he agreed with U.S. President Joe Biden on “the establishment of a new industrial ecosystem that will strengthen both Ukraine and all the partners.” Zelenskyy described it as “one of the key outcomes” of his negotiations with Biden in Washington.

Zelenskyy’s chief of staff, Andriy Yermak, said that there will be meetings soon with representatives from the U.S. “to determine the road map of cooperation with the partners about localization of production, specifically in Ukraine."

During the forum, Zelenskyy announced the creation of the Defense Industries Alliance and added that 13 defense companies have already signed the corresponding declaration.

To support the cooperation and develop an industry complex, Ukraine plans to establish a special fund, which will be paid into through dividends from state defense resources and profits from the sale of confiscated Russian assets, Zelenskyy said.

Foreign Minister Dmytro Kuleba said the first talks about joint production with allies began last fall. “At first, we were talking about repairs within Ukraine, and then about joint production. And now, this topic is prevalent everywhere,” said Kuleba.

According to Kuleba, in discussions with the partners, there is also a tremendous interest in the experience and production capabilities of Ukrainian businesses.

“Just as we have benefited from Western weapons, Western arms manufacturers also gain unique advantages in the market to improve their models and create even more powerful weapons,” Kuleba said.

Ukraine's recently appointed Defense Minister, Rustem Umerov, said the country must do everything possible to produce all the necessary military services and products in Ukraine for the needs of its army. The other priority is the development of defense technologies that now play an important role on the battlefield.

“Our vision is to develop world-class military products,” Umerov said.

___

Follow AP’s coverage of the war in Ukraine: https://apnews.com/hub/russia-ukraine


Dozens of international firms join Kyiv's new defense industry alliance

Igor Kossov
Sat, September 30, 2023 

President Volodymyr Zelensky on Sept. 30 announced the creation of an international alliance between defense industries. They will work together to build capacities to defend against outside aggression.

Any defense contractors are welcome to join, as long as they share Ukraine's values of resisting hostile encroachment and upholding international law, the Ukrainian leader said.

Zelensky made his speech at Ukraine's first ever international forum for defense industries, which was attended by 252 companies from over 30 countries spanning Europe, the Americas, Asia and Australia.

"We have developed a basic declaration as the foundation of this alliance. It can be joined by weapons and military equipment manufacturers from all around the world, who share our intent to provide real protection against aggression," Zelensky said.

"Today, this declaration already includes 13 prominent companies that, together with Ukraine, are ready to build the new arsenal of the free world."

The Foreign Ministry soon came out with a statement that 38 companies from 19 countries already joined up.

Among other capabilities, the alliance will eventually pave the way for Ukraine to localize production of licensed foreign weapons on Ukrainian soil, said Andriy Yermak, head of the president's office. During his recent visit to Washington, Zelensky and U.S. President Joe Biden agreed to have their teams hammer out a roadmap for this kind of localization.

Yermak pointed out that before independence, Ukraine was the scientific and manufacturing center of the Soviet Union.

Zelensky also announced the creation of a special defense fund that will support the development of new weapons and existing military assets and programs. It will be financed with dividends from state defense companies and the sale of seized Russian assets.

Several major defense contractors such as Rheinmetall have previously expressed interest in opening factories on Ukrainian soil, in spite of the threat posed by Russian attacks.

38 companies from 19 countries join Defence Industries Alliance

Ukrainska Pravda
Sat, September 30, 2023


Ukrainian companies have signed 20 documents with foreign partners as part of the International Defence Industries Forum, and 38 companies from 19 countries had joined the Defence Industries Alliance by the time the forum closed.

Source: Ministry of Foreign Affairs of Ukraine

Quote: "As part of the forum, Ukrainian companies signed 20 documents with foreign partners. These are agreements and memoranda on the drone manufacturing, repair and production of armoured vehicles and ammunition. Joint production, technology exchange, and component supply are among the cooperation formats."

Details: The Ministry of Foreign Affairs also reported that 38 companies from 19 countries had joined the Defence Industries Alliance by the time the forum closed.

Every weapon and military equipment manufacturer from different countries in the world can join the Alliance.

The First International Defence Industries Forum (DFNC1) in Kyiv brought together 252 companies from over 30 countries that produce a full range of weapons, military equipment and defence systems. Three Ukrainian ministries, including the Ministry of Strategic Industries, the Defence Ministry and the Ministry of Foreign Affairs, jointly organised the forum.

Tanks, artillery, drones, ammunition manufacturers, innovative software developers and unique complex technology owners from partner countries took part in the event. In addition, the Ukrainian state and private businesses of the defence-industrial complex, both extensive groups of companies and defence-tech startups, also joined.

The forum was opened by President Volodymyr Zelenskyy. Prime Minister Denys Shmyhal, Defence Minister Rustem Umierov, Foreign Minister Dmytro Kuleba, Minister of Strategic Industries Oleksandr Kamyshin and President's Office Head Andrii Yermak delivered their speeches to guests. Josep Borrell, High Representative of the European Union for Foreign Affairs, NATO Secretary General Jens Stoltenberg and representatives of the partner countries made special video messages. Eric Schmidt, founder of Schmidt Futures, delivered his speech too. Honorary speakers of the forum were Slovak Defence Minister Martin Sklenár and Wendy Gilmore, NATO Assistant Secretary General for Defence.

Background: President Volodymyr Zelenskyy announced the creation of a Defence Industries Alliance and the establishment of a special Defence Fund.

AMERIKA'S BILLIONS FUND
Israel’s defense industry unveils new weapons at Paris defense confab


Tom Weber

Seth Frantzman
Sun, June 12, 2022

JERUSALEM — Israel’s Ministry of Defense International Defense Cooperation Directorate, or SIBAT, is expected to helm a strong showing of the country’s defense industry at the Eurosatory defense exhibition beginning on June 13 in Paris, inaugurating an Israeli pavilion featuring 56 local companies.

Amira Ilany, director for Europe and North America at SIBAT, said that “Europe is one of the most important markets that we have.” She said Israel is seeing interest in its “cutting-edge technologies” all over the world. Israel has three large defense companies: Rafael Advanced Defense Systems, Israel Aerospace Industries and Elbit Systems.

SIBAT officials are expected to help promote the country’s small and medium enterprises, in particular. The government views these smaller companies “as an important part of the ministry’s value system. We deem it of the highest importance to strengthen these innovative industries, and many of them will be participating in the upcoming Eurosatory exhibition,” said Ilany.

For the dozens of Israeli companies on the Eurosatory show floor the main theme is advanced technology. That includes the use of artificial intelligence, precision in either identifying threats or targeting systems, unmanned platforms and high-end applications for ground forces, autonomous systems, real-time data links, thermal sights and surveillance technologies.

These innovations, some of which are operational in Israel or already being demonstrated abroad, build on Israel’s recent multi-year defense plan, dubbed Momentum. The plan focuses on pushing technology to frontline units and knitting together formations using data and communications. Israel’s political leadership has recently highlighted a move into laser air defenses, and across the spectrum of Israel’s defense industry there is a drive to incorporate AI as well as doubling down on target recognition and situational awareness.

The result is that Israeli companies go to Europe with a cluster of recently developed technologies or increased capabilities for existing systems that they have unveiled recently, many pegged to Eurosatory.

For example, Rafael announced its new Spike NLOS 6th-generation precision missile on June 9. Rafael’s Spike family is used by 39 countries. In Europe it is sold under the name Eurospike, a joint venture between Rafael, Diehl Defence GmbH and Rheinmetall Electronics.

Rafael says its newest variant has improved standoff range (up to 50km), can be launched in a salvo of up to four missiles and can be fired from one platform, such as a helicopter, and handed off for guidance to operators on the ground. It incorporates image-matching abilities, according to the manufacturer

Alongside the new missile, Rafael said it is exhibiting a “new concept called the NLOS Mission Taskforce,” or NMT, a technology package enabling small units to engage faraway or hidden targets.

Rafael links the importance of these systems to the overall need for mobility on the battlefield as well as force protection with systems like its Spyder air-defense system and I-Dome, the mobile version of Iron Dome.

“The security situation in Europe has exposed the need for such defense technologies, ones that can cover vast areas and are easily deployed and relocated according to the needs of the assets in the given arena,” the company said in a statement.

A partnership of Israel’s Uvision and Rheinmetall also appears to be a nod to the Ukraine conflict because they will present an integration of the UVision loitering munitions systems into “next-generation manned and unmanned infantry fighting vehicles.”

These weapons will provide “frontline forces with a new independent ability to locate, track and accurately eliminate heavily-armored targets from long ranges, in challenging battlefield conditions,” UVision said in a statement.

IAI stressed the importance of threat detection for units on the move. The company said it will unveil the Othello-P product, “a passive, high-performance Gunfire Detection System (GDS) with integrated artificial intelligence processing.”

The system is designed to detect gunfire, RPGs and subsonic munitions, such as handguns. It can be installed on various types of vehicles as well as unmanned platforms. IAI stressed in a statement that the system came out of its Innovation Center, which is staffed with engineers who previously served in the Israel Defense Forces.”

The war in Ukraine is something of a backdrop for the Defense Ministry and many Israeli companies showcasing new technology. “We have learned from experience. With the crisis in Europe, all countries are assessing the situation over there for force building,” said Ilany.

“Other countries are assessing [their needs] for defense systems all over the world, everyone is watching quite carefully and I believe each nation will take the responsibility for finding how they can keep and protect their nation and I believe that this will lead to a substantial wave of increasing in investment in defense systems all over the world,” she said.

Among the other new technologies presented, there is a focus on unmanned systems or add-ons to existing unmanned capabilities. For example, Steadicopter is highlighting its new Golden Eagle, which the company says is “the first-ever unmanned helicopter with precise-hit capabilities.” It is based on the existing Black Eagle 50E platform and now uses artificial intelligence and Smart Shooter’s Smash Dragon system, which is essentially a rifle incorporated into a drone.

Robotican is unveiling Rooster, “a hybrid drone-robot for indoor and underground tunnel scanning missions.” It also makes a drone interceptor called Goshawk. Meanwhile, drone specialist Third Eye Systems has a new version of its Chimera payload for UAVs, which provides day and night sensors and vision-based object recognition.

As the Ukraine war surpasses 100 days the tectonic changes in defense posture in the United States, Europe and other countries have meant a new focus on Israel’s defense industry as off-the-shelf suppliers.

This includes reports about German interest in the Arrow 3 air defense system as well as persistent questions about whether Israeli systems like Spike could be supplied to Ukraine.

Israel’s Ministry of Defense, Foreign Ministry and defense companies have declined to comment on these reports, but Israel is keenly aware of monitoring end users and third countries acquiring Israeli systems.

“There is a deep process internally in the Ministry with relevant entities including the Ministry of Foreign Affairs representatives. We check every request ... we take into consideration humanitarian challenges and government stability when we check licensing processes,” says Ilany. “We check and each customer should bring us the end-user certificate and it is something we conclude through the process and licensing.”

SEE LA REVUE GAUCHE - Left Comment: Search results for PERMANENT ARMS ECONOMY 

MILITARY INDUSTRIAL COMPLEX
Biden’s Pentagon Pick Has Deep Defense Industry Ties. Now It Could Complicate His Nomination.
Retired Army Gen. Lloyd Austin sits on the board of Raytheon.

Dan Spinelli Reporter Bio 

MOTHER JONES DECEMBER 9,2020


Chip Somodevilla/Getty

Joe Biden, in defending his decision to nominate retired Army Gen. Lloyd Austin as his Defense secretary pick on Tuesday, cited Austin’s “intimate knowledge of the Department of Defense and our government,” adding that those qualities make him “uniquely matched to the challenges and crises we face.” Outside of government, those qualities were also uniquely matched to a post-military career spent cultivating ties between people in power and the defense industry.

After retiring from the Army in 2016, Austin joined the board of a defense industry giant, set up his own consulting firm, and became a partner at a private equity firm that invests in defense and aerospace companies. He quickly cashed in, earning at least $1.4 million since he joined the board of United Technologies Corp. in 2016. Earlier this year, UTC merged with Raytheon, giving Austin a seat on the board of one of the country’s most powerful defense contractors. Last year, Raytheon received more than $16 billion in federal government contracts, the fourth-most of any company.

The progressive flank of the Democratic Party, which has debated how to oppose Biden’s Defense secretary pick even before the announcement, expressed concern with Austin in a barrage of statements on Tuesday. Common Defense, a veterans group, called his nomination “a grave, democracy-threatening mistake.” Win Without War Executive Director Stephen Miles said the “historic nature of this nomination is indeed laudable,” but called on Austin to “address the ethics concerns raised by his connection with Raytheon” and “at minimum, commit to recusing himself from any decision relating to Raytheon.”


“They have exploited these connections to keep the bombs flowing. How well equipped will General Austin be to resist these pressures? Will he tip the scales in favor of his former company?”

The Massachusetts based contractor has made off particularly well by selling weapons to Saudi Arabia and its allies as part of the controversial Saudi intervention into Yemen’s civil war, an ongoing catastrophe that has spiraled into the world’s worst humanitarian disaster. “Since the Yemen war began, Raytheon has booked at least a dozen major sales to the kingdom and its partners worth more than $5 billion,” the New York Times reported in May. Congress has repeatedly passed resolutions that oppose further sales to Saudi Arabia and its Middle East allies, but firms like Raytheon have relentlessly lobbied the Trump administration to keep the spigot flowing, despite American weapons being connected to massive civilian casualty events in Yemen. President Trump has vetoed bills to block arms sales in the past and is expected to do so again, pending how Congress votes on similar legislation this week.

If Austin’s gets a seat in Biden’s Cabinet, it raises questions of how sincerely he believes in Raytheon’s activities and whether he would advocate for a continued transfer of weapons. Last year, Biden called for the United States to stop providing financial and military support for the Saudi war in Yemen, reversing a policy that originated under the Obama administration. He also said he would make Saudi Arabia, which has come up for increasing criticism in Congress since its state-sanctioned murder of Washington Post journalist Jamal Khashoggi, into “a pariah.”

Under Trump, who appointed former Raytheon lobbyist Mark Esper as Defense secretary, Raytheon has been able to secure influence at the highest levels of government. “They have exploited these connections to keep the bombs flowing. How well equipped will General Austin be to resist these pressures? Will he tip the scales in favor of his former company?” says William Hartung, director of the Arms and Security Project at the progressive Center for International Policy. “These are questions that should not need to be asked—these kinds of potential conflicts should not be present in an independent secretary of Defense able to make the right decisions on arms to Saudi Arabia and other key security issues.”

In recent years, the boardrooms of major US defense contractors have become something of a feeder school for senior Pentagon leaders. Trump’s three Defense secretaries who served for any extended time—James Mattis, Patrick Shanahan, and Esper—had roles at General Dynamics, Boeing, and Raytheon before joining his administration.

“If President-elect Biden is serious about enacting reform upon taking office, he would be better served by a Defense secretary without ties to one of the top five contractors. We need defense leaders who are ready to make decisions that are right for the American people, not former industry officials who stand to be influenced by their ties to contractors,” said Mandy Smithberger of the Project On Government Oversight, which tracks the industry ties of current and former government officials. “The revolving door between the Defense Department and industry has contributed to far too many decisions that benefit defense contractors at the expense of the American public, and I’m disappointed to see that Biden isn’t committed to mitigating industry influence on the government.”

Austin’s nomination was applauded by the Congressional Black Caucus, who pushed for Biden to nominate a Black Defense secretary, but many other Democrats in Congress have already voiced opposition to his nomination—a point that especially matters for this Cabinet position, since Austin would require a congressional waiver to serve as Defense secretary. He only retired from the Army four years ago and federal law requires a seven-year cooling off period before a military leader can serve as secretary of Defense, a civilian role. (The cooling off period initially extended for 10 years, but Congress reduced it in 2007.) Mattis, who was in a similar situation as a retired Marine Corps general, ultimately received a waiver from Congress, but some prominent Democrats who opposed a waiver for Mattis, including Sens. Elizabeth Warren (D-Mass.) and Richard Blumenthal (D-Conn.) have said they will similarly not support one for Austin. Rep. Elissa Slotkin (D-Mich.), who worked at the Pentagon while Austin was leading US troops in the Middle East, said she has “deep respect” for his work, but “choosing another recently retired general to serve in a role that is designed for a civilian just feels off.” She didn’t rule out voting for his waiver, but her reluctance speaks to some of the frustration among Democrats that Biden would pick a retired general after the outsize influence military leaders had at the Defense Department over civilian officials during Mattis’ tenure.




Austin’s 41 years in uniform evidently didn’t disqualify him in Biden’s eyes. Industry connections haven’t appeared to hurt Biden’s national security appointees either, many of whom served outside of government in similar consulting jobs. Avril Haines, Biden’s nominee for director of national intelligence, was a principal at WestExec Advisers, a consulting firm co-founded by Secretary of State nominee Antony Blinken and Michèle Flournoy, an ex-Obama Defense official who was among Biden’s finalists for the Defense secretary job. Austin, Flournoy, and Blinken are all partners at Pine Island Capital Partners, a private equity firm founded by former executives at Merrill Lynch, Coca-Cola, and Goldman Sachs, though Blinken is currently on leave. A spokesperson for the firm did not immediately respond to a request about Austin’s status; he joined the firm in late July, according to a press release on its website. Austin also sits on the board of Nucor, an American steel producer, and Tenet, a health care firm.

“Joe Biden has pledged the most ethically rigorous administration in American history, and every cabinet member will abide by all disclosure requirements and strict ethics rules—including recusals when appropriate,” Andrew Bates, a Biden spokesperson, said in a statement, adding that Austin, if confirmed, would “divest of his interest in Pine Island and in Raytheon.”

Pine Island’s holdings include two defense contractors: InVeris Training Solutions, which produces “advanced technology-enabled virtual and live-fire training systems,” and Precinmac Precision Machining, which makes parts for rocket launchers and other weapons. InVeris, formerly known as Meggitt Training Systems, was a subsidiary of a British firm that signed multiple contracts to produce parts for the F-35, the troubled aircraft that has been plagued by years-long problems. Congress has held multiple hearings related to production problems with the F-35, the most expensive weapons program in US history, and pressured Lockheed Martin—the contractor who gave work to Meggitt—to pay back the US government for the cost of defective spare parts. Before being acquired by Pine Island, Meggitt Training Systems signed a $78 million contract with an undisclosed Middle Eastern government to build an outdoor training facility. Congress will have the opportunity to probe those business deals at Austin’s confirmation hearing, which is shaping up to be one of the more unpredictable ones of the early Biden administration.

SEE: PERMANENT ARMS ECONOMY

 

The US wants Europe to buy American weapons; the EU has other ideas

Washington wants European defense euros to go to American companies; EU leaders hope to boost their own industries.

Illustration by Doug Chayka for POLITICO

BY PAUL MCLEARY AND SUZANNE LYNCH
JUNE 14, 2023 

At NATO summit after NATO summit, European leaders get a clear public message from Washington — increase spending on defense.

In private, there’s another message that’s just as clear — make sure a lot of that extra spending goes on U.S. weapons.
European leaders are resisting.

“We must develop a genuinely European defense technological and industrial base in all interested countries, and deploy fully sovereign equipment at European level,” French President Emmanuel Macron said at the GLOBSEC conference in Bratislava last month.

The decades of cajoling from Washington are paying off. Although most EU countries aren’t yet meeting NATO’s target of spending 2 percent of GDP on defense, the alliance has seen eight years of steady spending increases. In 2022, spending by European countries was up by 13 percent to $345 billion — almost a third higher than a decade ago — much of it a reaction to Russia’s full-scale invasion of Ukraine.

Now the question is how that money will be spent.

The U.S. wants to ensure that European countries — which already spend about half of their defense purchasing on American kit — don’t make a radical switch to spending more of that money at home.

Some European leaders are hoping that’s exactly what happens, but it’s an open question whether the Continent’s defense industry can make that happen.

“Traditionally, there was a suspicion about a change in Europe’s defense capabilities which dates back more than 25 years,” said Max Bergmann, director of the Europe, Russia, Eurasia Program at the Washington-based Center for Strategic and International Studies. “What direction would the EU go, would it mean the EU would decouple from NATO, what would the impact be on U.S. defense industrial policy?”

 
Buying at home

The current tensions in Brussels are over whether new EU-wide defense policy should be limited to EU companies — a position driven by Macron and Internal Market Commissioner Thierry Breton, a Frenchman. That confirms suspicions stateside about European protectionism when it comes to allowing U.S. companies to compete for EU contracts.

“Our plan is to directly support, with EU money, the effort to ramp up our defense industry, and this for Ukraine and for our own security,” Breton said last month.

But there’s an uncomfortable fact for the backers of European strategic autonomy: When it comes to arms, Europe still depends on the U.S.

While European companies have deep expertise in defense — building everything from France’s Rafale fighter to Germany’s Leopard tank and Poland’s man-portable Piorun air-defense system — the scale of the U.S. arms industry, as well as its technological innovation, makes it attractive for European weapons buyers.

The most common big-ticket item is Lockheed Martin’s F-35 Joint Strike Fighter, at a cost of $80 million a pop. There is also an immediate surge in demand for off-the-shelf items like shoulder-fired missiles and artillery shells.

“Following Russia’s invasion of Ukraine, European states want to import more arms, faster,” said a report by the Stockholm International Peace Research Institute (SIPRI).
Buying abroad

The war in Ukraine has underscored the dominance of the U.S. defense industry.

A host of European countries are buying Javelin anti-tank missiles produced by Raytheon and Lockheed Martin; Poland this year signed a $1.4 billion deal to buy 116 M1A1 Abrams tanks, as well as another $10 billion agreement to buy High Mobility Artillery Rocket Systems produced by Lockheed Martin; Slovakia is buying F-16 fighters, while Romania is in talks to buy F-35s.

Those deals are raising fears in Europe over whether they can wean themselves off of U.S. defense suppliers. In one example, France and Germany worry about Spain’s intentions as it kicks the tires on F-35s while also being a partner in developing the European Future Combat Air System jet fighter.

But the need to restock weapons depots and continue shipping materiel to Ukraine is urgent, and after decades of contraction, the Continent’s defense industry is having a difficult time adjusting.

“Our European allies and partners, they’ve never experienced anything like this,” said a senior U.S. Defense Department official, referring to the spasm of spending brought on by Russia’s invasion. The official was granted anonymity to discuss the situation. “They don’t yet have the defense production authorities they need [to move quickly] and they’ve really been looking to us to try to get a handle on how they can increase production, and I think they’re learning a lot from us.”

To help Europe get there, the United States has expanded the number of bilateral security supply arrangements it has with foreign partners since the Russian invasion, signing new agreements with Latvia, Denmark, Japan and Israel since October. These allow countries to more quickly and easily sell and trade defense-related goods and services.

The Biden administration also signed an administrative arrangement with the European Union in late April to establish working groups on supply-chain issues, while giving both sides a seat at the table in internal meetings at the European Defence Agency and the Pentagon.

But there are limits to how far and how fast both sides are able and willing to go.

In the near term, capacity issues and political will means the rhetorical sea change in EU military spending is unlikely to make a huge dent in U.S. military industrial policy.

While the past 18 months have seen a huge spike in defense budgets — Germany announced a special debt-financed fund worth €100 billion after the Russian invasion of Ukraine; Poland’s defense expenditure is set to reach 4 percent of GDP this year — EU-wide projects are facing significant headwinds. European companies say they need longer lead times and long-term contracts to make needed investments.

“You need that visibility and certainty to make those investments. We’re in a chicken game between governments and industry — who are the first ones that are putting the money on the table,” said Lucie Béraud-Sudreau, director of the military expenditure and arms production program at SIPRI.

Ultimately, the global defense boom means that there should be plenty of military spending to go around, at least in the short term as countries rush to prove their worth to their NATO and EU allies and the Russian threat remains acute.

Paul McLeary reported from Washington and Suzanne Lynch from Brussels.

SEE 

LA REVUE GAUCHE - Left Comment: Search results for PERMANENT ARMS ECONOMY