Indian Council of World Affairs

Since February 2022, the Russia-Ukraine conflict has profoundly transformed Europe’s security environment, precipitating a notable escalation in defence expenditures across the continent.^[i] The surge in defence expenditures, reaching $2.4 trillion in 2023 — the ninth consecutive annual increase^[ii] — has prompted the European Union (EU) to undertake various initiatives, with the conflict catalysing a more proactive approach to military investment in Europe. This issue brief discusses the EU’s efforts, achievements, and challenges in enhancing Ukraine’s defence capabilities and the implications for Europe’s military-industrial complex. 

Background 

The EU’s defence capabilities have been compromised by years of underinvestment and fragmentation, leaving significant gaps in its ability to respond to emerging threats.^[iii] Decades of reduced national defence budgets and prioritisation of expeditionary operations over territorial defence have depleted force volumes and equipment stockpiles.^[iv] As a result, when the war in Ukraine began in February 2022, Europe was markedly ill-equipped to support a large-scale conflict on its soil. This vulnerability reinforced Europe’s reliance on NATO for collective defence and simultaneously fuelled a desire among the EU nations to achieve greater strategic autonomy and self-sufficiency in defence matters. 

As the EU grapples with its defence shortcomings, it has acknowledged the need for collective action, yet persistent obstacles have hindered progress. Despite a shared recognition of the importance of joint weapons production, industrial rivalries and divergent military priorities have frustrated efforts to achieve meaningful cooperation.^[v] Nevertheless, the EU has made strides in increasing defence spending, with eight consecutive years of growth. In 2023, European military expenditures reached $588 billion, a significant 16% increase from 2022 and a substantial 62% rise from 2014, driven largely by the ongoing Russia-Ukraine conflict.^[vi] Although most EU countries still fall short of NATO's 2% GDP defence spending target, the upward trend suggests a growing recognition of the importance of investing in defence capabilities.^[vii]

European Initiatives to Strengthen Defence Production and Aid Ukraine 

Building on the momentum of increased defence spending, the EU has seized the opportunity to reinvigorate its military-industrial complex and foster a more self-sufficient defence ecosystem. By supporting Ukraine’s defence capabilities and promoting its domestic arms industry, the EU is simultaneously pursuing a dual objective: to reduce its reliance on external actors and enhance its strategic autonomy. As a result, the EU has initiated several measures to achieve a robust and autonomous European defence posture. 

These efforts have culminated in initiatives such as the €500 million Act in Support of Ammunition Production (ASAP), which aims to boost industrial production to supply ammunition and missiles to Ukraine and help member countries replenish their stocks — making it a central part of the bloc’s industrial strategy.^[viii]

Furthermore, recent actions by the European Commission have focused on encouraging Member States to transfer military equipment to Ukraine and alleviating concerns about depleting stockpiles.^[ix] This has been achieved by incentivising the aggregation of demand for specific products like ammunition, increasing European production capacities, and jointly procuring to address capability gaps.^[x] Besides, the Common Security and Defence Policy (CSDP) has played a crucial role in shaping Europe’s response to the conflict. The CSDP’s impact is evident in the EU’s ability to mobilise resources and provide substantial support to Ukraine, demonstrating the EU’s commitment to regional stability and its role as a significant security actor on the global stage.^[xi] Building on this institutional momentum, European defence companies are now playing a complementary role in supporting Ukraine’s defence needs, providing immediate assistance and making long-term investments in technology transfers and training programs, strengthening their industrial base.

Notwithstanding these efforts, a critical funding gap remains, hindering Ukraine’s ability to procure essential weapons from its manufacturers.^[xii] To bridge this gap, the ZBROYARI: Manufacturing Freedom Initiative was conceived, whereby Ukraine’s allies purchase weapons from Ukrainian manufacturers and then donate them to Kyiv.^[xiii] This approach not only arms Ukraine but also strengthens its independent military-industrial complex. This unprecedented initiative marks the first instance of military products being bought from Ukrainian manufacturers with funds from other countries, marking a significant milestone for the Ukrainian Armed Forces and the nation’s economy.^[xiv] This global fundraising campaign, akin to strategic crowdfunding by nations, aims to raise $10 billion for Ukrainian weapons production in 2024. The Netherlands, Denmark and Canada have already committed €60 million, $28.5 million and $2.1 million, respectively.^[xv]

Consequently, with the EU’s defence industrial cooperation gaining traction, the European Commission and the European External Action Service (EEAS) published the European Defence Industrial Strategy (EDIS) in March 2024, outlining a comprehensive vision for the EU’s defence industrial development.^[xvi] This long-term outlook on EU defence industrial developments aims to address existing deficiencies, build on the 2022 Strategic Compass, and help set the agenda for the next Commission.^[xvii] The European Defence Industrial Strategy (EDIS) and the European Defence Industry Programme (EDIP) are designed to enhance the Union’s defence industrial readiness and reinforce its capacity to protect its citizens.^[xviii] Ultimately, the EU’s primary priority is to strengthen the European Defence Technological and Industrial Base (EDTIB) to achieve defence industrial readiness by improving spending, fostering collective investment and engaging private equity.^[xix]

Disparities in European Military Aid and Challenges in Collaborative Procurement

The EU’s efforts to bolster Ukraine’s defence capabilities have been multifaceted, yet significant institutional and structural hurdles persist in providing unified support to Ukraine. The EU’s treaty-based legal constraints, which prohibit using the EU budget for military purposes, have led to the establishment of the off-budget European Peace Facility (EPF) to support Ukraine.^[xx] Financed directly by member states, the EPF circumvents treaty restrictions but is hindered by unequal participation and funding, resulting in disjointed arms deliveries and military assistance.^[xxi] This has ultimately led to a significant shortfall in EU military aid, with the US committing over €43 billion,^[xxii] outstripping the EU’s total disbursement of €8.85 billion, highlighting the need for more cohesive and substantial European support.^[xxiii] Furthermore, the EU’s internal divisions and inconsistent approaches to military aid have resulted in stark regional disparities in both the amount and willingness to assist with many Member States reluctant to back their words with substantial financial commitments.

For instance, while Germany’s Zeitenwende is shifting Berlin’s long-standing defence policy, the country has been slow to send the military equipment other allies have provided to Ukraine for months.^[xxiv] In a recent statement by the country’s three-party government, Germany further cited their inability to provide Ukraine with fighter jets owing to their arsenal’s diminishing volumes of F-16s.^[xxv] Even France, until recently, had been lagging in its military aid to Ukraine, reportedly sending even fewer offensive weapons than Germany. Facing criticism from Germany for not meeting its aid commitments, France responded by publishing a comprehensive list of military equipment sent to Kyiv from the start of the war through December 31.^[xxvi] While these disparities in military aid often become points of contention within the EU, they also bring to light the often-overlooked contributions and commitments of Member States that have made significant, if less publicised, efforts. 

Notably, Poland has emerged as the largest provider of “lethal aid” to Ukraine, committing EUR 1.8 billion — a sum nearly 50% greater than Germany’s and eight times more than France’s.^[xxvii] Denmark, after ending a 30-year opt-out from the EU’s CSDP, has pledged to increase military spending towards the 2% of GDP NATO threshold. Other Member States are also stepping up, with Poland and Estonia leading the way by announcing plans to increase military expenditures to 3% of GDP in the coming years.^[xxviii]

Nevertheless, the EU’s defence industrial base continues to face significant challenges in meeting the demands of the ongoing conflict and the increased industrial production it necessitates. While companies such as Sweden’s Saab, the Nordics’ Nammo, Germany’s Rheinmetall and France’s Nexter and MBDA have ramped up production with their own funds, they are now seeking government contracts to ensure steady demand.^[xxix] Yet, overall collaborative procurement remains low, with the EU Member States often adopting a zero-sum logic and acquiring whatever is available on the market, frequently from non-EU suppliers.^[xxx] As a result, over a year into the conflict, contracts have been slow to materialise and the continent’s industrial base remains weakened by decades of underinvestment and external competition.^[xxxi] Defence ministries face the dual challenge of sending material to Ukraine while rebuilding and modernising their own stocks,^[xxxii] while trying to prevent supply chain shortages and intra-continental competition and duplication.^[xxxiii] Therefore, while the EU has made strides through the European Defence Industrial Strategy and increased production efforts, significant challenges remain in collaborative procurement and defence readiness. 

Conclusion 

In conclusion, the Russia-Ukraine conflict has profoundly impacted Europe’s military-industrial complex, driving increased defence spending, strategic realignments and efforts to support Ukraine’s defence capabilities. As Europe navigates these challenges, it seeks to balance immediate defence needs with long-term strategic goals, underscoring the intricate interplay between military readiness, economic stability and geopolitical dynamics. While a growing emphasis is on boosting production in European defence industries, these efforts remain largely disjointed. Notwithstanding the progress in pursuing strategic autonomy, Europe still relies on external assistance to support its efforts, highlighting the need for cohesive action. Therefore, achieving complete self-sufficiency will require sustained investment and cooperation to enhance stability and resilience, particularly in supporting Ukraine and developing its domestic industry.

*****

*Diya Chaudhry, Research Intern, Indian Council of World Affairs, New Delhi
Disclaimer: Views expressed are personal.

Endnotes

[i] Cepparulo, Alessandra, and Paolo Pasimeni. "Defence Spending in the European Union." Available at SSRN 4855108 (2024).

[ii] Armaments, Disarmament and International Security SIPRI YEARBOOK 2024 Summary.

[iii] Cepparulo, Alessandra, and Paolo Pasimeni. "Defence Spending in the European Union." Available at SSRN 4855108 (2024).

[iv] Ibid.

[v] COKELAERE, HANNE, and MARI ECCLES. “Better Together: The European Effort on Joint Defense Projects.” POLITICO, June 14, 2023, www.politico.eu/article/better-together-european-effort-joint-defense-projects/. Accessed July 12, 2024.

[vi] “Trends in World Military Expenditure, 2023.” SIPRI, April 1, 2024, www.sipri.org/publications/2024/sipri-fact-sheets/trends-world-military-expenditure-2023.

[vii] MCLEARY, PAUL, and SUZANNE LYNCH. “The US Wants Europe to Buy American Weapons; the EU Has Other Ideas.” POLITICO, June 14, 2023, www.politico.eu/article/us-europe-buy-american-weapons-military-industry-defense/.

[viii] Crosson, Dylan, and Alessandro Marrone. “The EU’s Defence Industrial Policies – Walking the Walk with Euro-Defence Bonds.” CEPS, June 28, 2024, www.ceps.eu/the-eus-defence-industrial-policies-walking-the-walk-with-euro-defence-bonds/.

[ix] Ibid.

[x] Crosson, Dylan, and Alessandro Marrone. “The EU’s Defence Industrial Policies – Walking the Walk with Euro-Defence Bonds.” CEPS, June 28, 2024, www.ceps.eu/the-eus-defence-industrial-policies-walking-the-walk-with-euro-defence-bonds/.

[xi] “European Defence Fund (EDF) - Official Webpage of the European Commission. - European Commission.” Defence-Industry-Space.ec.europa.eu, defence-industry-space.ec.europa.eu/eu-defence-industry/european-defence-fund-edf-official-webpage-european-commission_en.

[xii] BARIGAZZI, JACOPO. “Ukraine Wants to Use EU Money to Grow Its Military-Industrial Complex.” POLITICO, May 6, 2024,

www.politico.eu/article/ukraine-want-use-eu-money-build-up-military-industrial-complex-oleksandr-kamyshin/. Accessed July 12, 2024.

[xiii] Kitsoft. “Міністерство з питань стратегічних галузей промисловості України - ZBROYARI Project: Denmark Becomes the First Country to Purchase Ukrainian Weapons for the Armed Forces at Its Own Expense.” Mspu.gov.ua, mspu.gov.ua/en/news/zbroyari-project-denmark-becomes-the-first-country-to-purchase-ukrainian-weapons-for-the-armed-forces-at-its-own-expense. Accessed July 12, 2024.

[xiv] Ibid.

[xv] Kitsoft. “Cabinet of Ministers of Ukraine - Ministry for Strategic Industries: The Netherlands Has Joined the ZBROYARI: Manufacturing Freedom Initiative.” www.kmu.gov.ua, www.kmu.gov.ua/en/news/minstratehprom-niderlandy-pryiednalysia-do-initsiatyvy-zbroyari-manufacturing-freedom. Accessed July 12, 2024.

[xvi] Crosson, Dylan, and Alessandro Marrone. “The EU’s Defence Industrial Policies – Walking the Walk with Euro-Defence Bonds.” CEPS, June 28, 2024, www.ceps.eu/the-eus-defence-industrial-policies-walking-the-walk-with-euro-defence-bonds/.

[xvii] Ibid.

[xviii] “EDIP Is a Regulation Proposed by the Commission to Start Implementing Concrete Measures Identified in EDIS.” Defence-Industry-Space.ec.europa.eu, defence-industry-space.ec.europa.eu/eu-defence-industry/edip-future-defence_en#:~:text=The%20European%20Defence%20Industry%20Programme. Accessed July 12, 2024.

[xix] “Defence Industry.” Defence-Industry-Space.ec.europa.eu, defence-industry-space.ec.europa.eu/eu-defence-industry/edis-our-common-defence-industrial-strategy_en.

[xx] Crosson, Dylan, and Alessandro Marrone. “The EU’s Defence Industrial Policies – Walking the Walk with Euro-Defence Bonds.” CEPS, June 28, 2024, www.ceps.eu/the-eus-defence-industrial-policies-walking-the-walk-with-euro-defence-bonds/.

[xxi] “European Defence Fund (EDF) - Official Webpage of the European Commission. - European Commission.” Defence-Industry-Space.ec.europa.eu, defence-industry-space.ec.europa.eu/eu-defence-industry/european-defence-fund-edf-official-webpage-european-commission_en.

[xxii] Karnitschnig, Matthew. “America’s European Burden: How the Continent Still Leans on the US for Security.” POLITICO, June 14, 2023,

www.politico.eu/article/america-europe-burden-continent-leans-security-defense-military-industry/.

[xxiii] Blockmans, Steven, and Leonardo De Agostini. ASSESSING the EU’S MILITARY ASSISTANCE to UKRAINE Too Little but Not Too Late to Do Better. 2022.

[xxiv] Ibid.

[xxv] Neubert, Kjeld. “Germany Will Not Provide Ukraine with Fighter Jets.” www.euractiv.com, July 16, 2024, www.euractiv.com/section/politics/news/germany-will-not-provide-ukraine-with-fighter-jets/?utm_source=Euractiv&utm_campaign=c50ac4db8b-EMAIL_CAMPAIGN_2024_03_15_11_14_COPY_01&utm_medium=email&utm_term=0_-c120410112-%5BLIST_EMAIL_ID%5D. Accessed July 18, 2024.

[xxvi] KAYALI et al., “Under Fire: France Insists It’s No Slacker on Military Aid to Ukraine.” POLITICO, March 4, 2024, www.politico.eu/article/ukraine-aid-france-strikes-back-and-publishes-weapons-data-macron-kiel-taurus-scalp/#:~:text=France. Accessed July 18, 2024.

[xxvii] Blockmans, Steven, and Leonardo De Agostini. ASSESSING the EU’S MILITARY ASSISTANCE to UKRAINE Too Little but Not Too Late to Do Better. 2022.

[xxviii] Ibid.

[xxix] KAYALI, LAURA, et al. “Europe’s Military Buildup: More Talk than Action.” POLITICO, June 14, 2023, www.politico.eu/article/europe-military-industry-defense-buildup-war/.

[xxx] Crosson, Dylan, and Alessandro Marrone. “The EU’s Defence Industrial Policies – Walking the Walk with Euro-Defence Bonds.” CEPS, June 28, 2024, www.ceps.eu/the-eus-defence-industrial-policies-walking-the-walk-with-euro-defence-bonds/.

[xxxi] KAYALI, LAURA, et al. “Europe’s Military Buildup: More Talk than Action.” POLITICO, June 14, 2023, www.politico.eu/article/europe-military-industry-defense-buildup-war/.

[xxxii] Ibid.

[xxxiii] Blockmans, Steven, and Leonardo De Agostini. ASSESSING the EU’S MILITARY ASSISTANCE to UKRAINE Too Little but Not Too Late to Do Better. 2022.