Growing Tensions and the EU Arms Industry

By Mert Turan

For decades, EU defence capabilities have relied heavily on the acquisition of American equipment and munitions. Whilst there have been effective European efforts to increase defence cooperation within the Union, such as through the introduction of the EDF, EDA, and CSDP, more has to be done to ensure independence in this sector. Only 20% of arms imports within the EU came from providers within the Union since 2022, with American arms making up most of the arms imports. The EU’s reliance on American weapons is a growing issue; Trump will likely dramatically change American foreign policy, having already pulled support from Ukraine and perhaps even threatening European sovereignty (Trump potentially restating his interests of acquiring Greenland). Trump is likely more interested in focusing on the Pacific, as China is testing its next-generation fighter jets and ramping up its production of modern equipment. Some sources estimate that the Chinese air force could potentially outnumber the USAF 12 to 1 in the region by 2027 after all. In this article, I would like to bring attention to the current issues facing the European arms industry, and highlight the importance of establishing an integrated European arms market.

Europe: A Fractured Defence Industry

For decades, EU countries have become increasingly reliant on arms imports, with the main reason being the lack of a strong and cohesive domestic arms industry to rely on. Because each country has its own military doctrines, the various arms industries focus on satisfying those doctrines. This phenomenon also leads to the issue of pooling funds together for larger cooperative projects - which has historically been problematic within the EU. The fragmentation means that the EU arms industry struggles to keep up with demand shocks, as individual companies do not have the capacity to satisfy modern military needs - turning policymakers to rely on American arms. This poses security risks for the EU, as imported arms are restricted and (partially) controlled by the US government.

Although there is some level of cooperation between arms companies throughout the EU, as seen by the likes of the Eurofighter and the FCAS (future combat air system) projects, more cooperation and funding is necessary. The lack of contracts within the Union have incentivised EU defence companies to focus on the non-EU export market to make larger profits.

This incentive has been the main issue for the industry’s fragmentation, and the European Parliament has acknowledged this long-standing issue. In 2015, the Directorate-General for External Policies made a report highlighting that exports have led “[EU] Member States to prioritize the international markets at the expense of European joint initiatives.” While efforts have since been made to enhance cooperation within the EU through the likes of the European Defence Fund, they have ultimately failed in establishing an integrated European defence market. Arms manufacturers continue to compete amongst themselves, following their own paths to make a profit rather than cooperating on larger projects. This capitalist approach continues to have detrimental effects on an already fractured arms market within the EU.

The focus on exports has also compromised the quality of EU-made arms. Weapons and munitions designed for export purposes (to non-EU countries) are typically not equipped with the latest technology, as these usually contain classified information. There is a risk that this may discourage companies from integrating and developing new advanced technologies, as their main focus is making profits through their exports. Furthermore, this may have contributed to the EU being significantly behind in certain technological fields, such as in SAM systems, compared to non-EU arms manufacturers.

This export oriented approach cannot solely be blamed on individual companies. The continued lack of contracts, funds, and other incentives from European member states makes the lucrative potential of non-EU exports more appealing.

Geopolitical Threats and Current Efforts

Tensions in Europe are continuing to rise. Russia continues its war against Ukraine, and Trump has effectively pulled support from Ukraine. This puts the EU in a precarious position, as they might suffer shortages in military equipment and munitions while a war (that the EU is heavily investing in) is being waged on the continent.

The geopolitical situation has made it clear that the EU cannot continue relying heavily on arms imports in the long term. Despite this, data shows that there has been a rise in arms imports from the US. While American weapons accounted for 35% of all arms imports across Europe between 2014-18, it accounted for 55% of imports between 2019-23 (rather than from other European countries). While these imports have increased due to the short-term requirements of increased defence capabilities due to the war in Ukraine, it highlights either an unwillingness or incapability to quickly ramp up arms production in a time of crisis. Furthermore, the over reliance on non-EU equipment also predates the conflict (see figure 1). These statistics highlight a serious issue in the European arms industry, as it displays that past efforts to integrate the market have either failed or had little effect, making American arms more appealing for policymakers. In March 2024, the European Defence Industrial Strategy was published, with the aim to increase arms acquisitions from within the EU to 50% by 2030, and 60% by 2035. Whether this can be accomplished is yet to be seen, but it is a promising move in the right direction.

Conclusion

It is clear that the European Parliament and Commission have acknowledged the importance of military self-sustainability. So far, they have made limited moves to promote cooperation amongst the EU arms sector, mainly through funds, new institutions and joint research projects. Although these are crucial first steps, it is likely not enough to establish an integrated arms market, which is a must if the EU wants to compete with the American arms industry and become fully self-sustainable. This is especially important now, as American foreign policy is likely to change significantly for at least one presidency. In other words, the various companies within the EU’s arms industry must be either convinced, incentivised or forced to put EU militaries first, with the combined goal of ensuring that the Union becomes fully (or at the very least, mostly) self-sustaining.

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