The Dynamics of Military-Industrial Cooperation in Europe in the 21st Century

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By Antoni Pienkos for the Warsaw Institute for Strategic Initiatives

INTRODUCTION

At the turn of the 21st century Europe went through a process of intensive institutionalization of military-industrial cooperation. The reasons behind the process were complex, but the most important ones include primarily defense spending cuts (their effects were demonstrated by the 1999 Kosovo operation), the gradual withdrawal of US military from Europe, the increasing importance of European Union as the European cooperation creator with simultaneous loss of interest in European defense reflected by the US. To respond to the listed challenges, at the same time considering the unpopularity of increasing military budgets, a new scheme of international military-industrial cooperation had been drawn. It aimed to facilitate joint determination of needs and defensive planning, as well as collective research and purchases. The scheme was not, however, as effective as it had been anticipated, and when met with the 2008 economic crisis, it eventually failed to reverse the diminishing defense readiness in Europe. To clearly illustrate the issue, first, the institutional solutions applied in Europe in the 21st century will be described in detail and then analyzed and compared with European Defense Agency’s (EDA) data on military spending and joint research projects in years 2005-2015.

SYSTEMIC SOLUTIONS IN MILITARY-INDUSTRIAL COOPERATION IN EUROPE

The launch of the EDA in 2004 was meant to be a decisive moment for the military-industrial cooperation in Europe. The institution was created as a result of proposal to consolidate the work of multiple other organizations – mainly Western European Armaments Group and Western European Armaments Organization – and to form a platform additionally overseeing other, smaller institutions and initiatives (such as OCCAR or multilateral and bilateral agreements) in that area[1]. Before EDA was formed, there were two conceptions for how it was going to function, mirroring the dispute over EU’s Common Foreign and Security Policy (CFSP) and Common Security and Defence Policy (CSDP), represented mainly by France and the United Kingdom[2]. Although the United Kingdom was traditionally skeptical about enlarging CFSP’s competences, London opted to create a coordinative organization focusing on identifying and eliminating the needs and faults in European defense capabilities. Such vision of EDA should have a modest number of employees and a small budget used to help EDA support itself and conduct conceptual and analytical projects. France, on the contrary, as a fierce advocate for a stronger CFSP, campaigned to make EDA an independent body able to perform its own armament and research programs, turning the agency into a national-like institution responsible for military purchases[3]. This vision required to secure a substantial funding for EDA and a vast staff base. Furthermore, EDA was to have a power to veto the political resistance of some of its member countries.

The final compromise led to foundation of a coordinative EDA with a strong structural authority within the EU (Steering Board, the agency’s decision making body, is led by the Head of the Agency and consists of member states’ defense ministers and a representative of the European Commission), but with a moderate budget of about €30 million per year and 130 employees[4]. Furthermore, there are 4000 experts from member states, who compose a network that aids the agency in its numerous projects. The scope of EDA’s duties show that the agency focuses on analytical and coordinative work, with the annual Capability Development Plan[5] being one of its best examples. On the other hand, the agency’s project management platform provides meritorious conditions for member countries to participate in joint military and research ventures. The platform model is based on establishing project teams, consisting of experts from various fields and of different nationalities who prepare the concepts and requirements needed to attain certain defensive capabilities, which are typically consulted with the Steering Board, giving them proper legitimacy. The majority of ventures (type A projects) use the formula of attendance and financial participation of all (or almost all) the member states, therefore limiting the occurrence of “stowing away”[6]. Additionally, willing countries can also undertake comprehensive cooperation – similar to the Permanent Structured Cooperation (PESCO), a scheme approved by the EU in articles 42 and 46 of the Treaty of Lisbon – (type B projects)[7].

Similar, to a certain extent, activity lies within the scope of the Organisation Conjointe de Coopération en matière d'Armement (OCCAR), which specializes in working with a small group of countries, simplifying the selection of joint tactical and technical necessities. The organization was established in 1996, but only acquired its legal status on January 28, 2001, when the OCCAR Convention was adopted[8]. Differently than in EDA’s case, OCCAR is only an intermediary, who purchases armaments in the name of participating countries. OCCAR’s activity is strictly linked with European defence companies, whose accelerated consolidation took place in late 1990s and early 2000s (e.g. European Aeronautic Defence and Space Company – EADS, AgustaWestland and MBDA[9]). Most of OCCAR’s programs are executed by one of the leading international European defence companies:

  • Principal Anti Air Missile System (PAAMS) executed by a consortium whose shares are owned by, among others, Thales Group, BAE Systems, MBDA, Airbus Group, Leonardo[10];
  • Airbus A400M Atlas produced by Airbus Group[11];
  • Tiger attack helicopter produced by Airbus Group[12];
  • MMCM - Maritime Mine Counter Measures, executed by, among others, Thales Group and BAE Systems[13].

The process of institutionalization of military-industrial cooperation in Europe is, as may be clearly noticed, closely linked with transnational consolidation in European military industry. Such situation creates appropriate conditions for synergy and mutual understanding between the producers and the customers, although, at the same time, medium and small enterprises find it harder to remain competitive on the market, occasionally forcing them to join in with bigger companies and, to a degree lose their independence.

THE SCALE OF MILITARY-INDUSTRIAL COOPERATION IN EUROPE

While observing the developments in military-industrial cooperation in Europe that have occurred since the launch of EDA in 2004, the qualitative and quantitative change cannot go unnoticed. When compared to the overall GDP and public spending of member states, the defence expenditure has dropped significantly. In 2005, the average defence spending of an EDA member state amounted to 1,55% of its GDP and 3,59% of overall public spending, whereas in 2015 the figures were 1,24% and 2,79%, for the GDP and public spending, respectively. In absolute values, there was an insignificant increase from €192’900 million to €199’909 million in 2015, which in no way matched with the economic growth in Europe[14]. Moreover, the number of member states increased when Bulgaria and Romania joined the EU in 2007 and Croatia in 2013, furthermore increasing the absolute values without affecting the percentage indicator (the indicator that gives the best comparison when related to other countries and regions)[15]. The comparison of aggregated defense spending per capita – €302 for every member state in 2005 and €289 in 2015[16] – appropriately illustrates the negative trend. In all of the already mentioned statistics the crucial change occurred between 2008 and 2009, highlighting the destructive influence of the 2008 financial crisis (only the GDP percentage does not change, because the GDP itself dropped significantly).

The data on defense spending is worth comparing with investment spending, understood as the aggregated orders for new equipment and research and development spending in the military sector. In 2005, the investments amounted to €33’735 million (€26’380 in military equipment purchases and €8’821 million in R&D), while in 2014 it was €34’687 million (€25’896 million in purchases and €8’790 million in R&D)[17]. Despite the increase in absolute values, the capital expenditure on defense has not, in fact, increased in the given period, which is often explained by rising personnel and operational costs. At the same time, the number of active military personnel in the member states decreased considerably, suggesting a higher concentration of investment per soldier. The number of soldiers in active service dropped from 1’855’517 in 2005 to 1’423’097 in 2014. Accordingly, the per soldier investment grew from €13’775 in 2005 to €18’495 in 2014. Without a doubt, the per soldier investment growth was one of the key factors in the increase in number of soldiers in operational readiness (from 232’558 in 2005 to 276’395 in 2014)[18]. These developments reflect the evolution of European armies towards fully professional forces, prepared to participate in highly specialized expeditionary operations. The direction of this evolution is, however, already being reconsidered due to a new security environment of EDA’s member states influenced by Ukrainian conflict and Syrian civil war.

The question is how these values compare to joint defense purchases and R&D? Has the growth of EDA been accompanied by increasing spending on joint defense ventures? In 2005, joint defense purchases of EDA members summed up to €3’799 million, about 10% of all spending in that sector, whereas at their peak, in 2009, the purchases reached €8’233 million – 19% in the sector – and then dropped to €5’727 million – 16% – in 2014[19]. When it comes to R&D in the military sector, the joint projects in 2005 were estimated at only €189 million. In 2009 they peaked at €431 million, and ended up at €183 million in 2014[20]. The situation could be subjected to a change after the recent decision to launch Preparatory Action (PA) on CSDP-related research, which is meant to transform into European Defence Research Programme in years 2021-2027, as forecasted in EU’s financial perspective, not to mention proposals to create European Defence Fund. For now, it appears the amount of money spent on joint projects is not likely to increase, but without it, the military-industrial cooperation will not be able to effectively counter the negative trends in military investment.

CONCLUSION

The previously mentioned systemic and institutional solutions, based upon EDA and OCCAR, as well as financial trends in programs of joint purchases and research could not reverse the depreciation of European defense capabilities, although EDA provides a promising platform for cooperation in this field[21]. The main reason for such situation include not only the 2008 financial crisis, which had s strong impact on defense expenditures in Europe, but also the lack of will to overcome political differences traditionally associated with joint military projects. Factors hindering successful cooperation are rather dependent on the synchronization of requirements, work management (and protection of own, national military companies) and delivering defense policy issues under international control. Without tackling these challenges, a military-industrial cooperation in Europe will, nevertheless, remain an important supplement of national armaments programs, but will not become a quality solution to current issues. The question that is soon likely to be answered is how the change in EU’s security environment (affected by the conflict in Ukraine, the war in Syria, and the election of Donald Trump who insist on increasing the responsibility of European countries for their defense) will influence the form of cooperation. Moreover, the EU is now facing a serious threat to its integrity, caused, among others, by the lack of a common vision as for what the Union should look like in the future and how deep should the integration go. This, in turn, can lead the further institutionalization within the EU’s Common Security and Defence Policy to a downturn or a complete halt, because CSDP still is one of EU’s most neuralgic points of integration.

Antoni Pienkos is the director of Warsaw Institute for Strategic Initiatives analysis division and a PhD candidate at the Faculty of Political Science and International Studies of the University of Warsaw.


[1] Inception, EDA’s official website, http://www.eda.europa.eu/Aboutus/our-history/inception, access January 9, 2017.

[2] Daniel Fiott (ed.), The Common Security and Defence Policy: National Perspectives, Egmont Paper 79, Egmont – The Royal Institute for International Relations, Brussels 2015, http://www.egmontinstitute.be/wp-content/uploads/2015/05/ep79.pdf, access January 9, 2017.

[3] Giovanni Faleg, Alessandro Giovannini, The EU between Pooling & Sharing and Smart Defence - Making a virtue of necessity?, CEPS Special Report number 61, Centre for European Policy Studies, Brussels 2012. 

[4] European Defence Agency 2012 Financial Report, https://www.eda.europa.eu/docs/default-source/documents/2012-financial-r..., access January 9, 2017.

[5] Capability Development Plan, EDA’s official web page, https://www.eda.europa.eu/what-we-do/eda-priorities/capability-developme..., access January 9, 2017.

[6] [6] EDA Category A Programme on “Unmanned Maritime Systems”, EDA Factsheet, http://www.europarl.europa.eu/meetdocs/2009_2014/documents/sede/dv/sede3..., access January 9, 2017.

[7] Towards Enhanced European Future Military Capabilities: European Defence Agency Role in Research & Technology, https://www.eda.europa.eu/docs/default-source/eda-publications/eda-r-t-2..., access January 9, 2017.

[8] OCCAR's history, OCCAR’s official web page, http://www.occar.int/188, access January 9, 2017.

[9] How EADS Became Airbus, http://www.wsj.com/articles/SB10001424052702303370904579298443216948558, access January 9, 2017.

Fifty Years of European Technological and Operational Excellence, http://www.mbda-systems.com/about-us/history/; Key Events, http://www.leonardocompany.com/en/chisiamo-aboutus/storia1_history1/cron..., access January 9, 2017.

[10] Corporate, http://www.eurosam.com/corporate/; About us, http://www.mbda-systems.com/about-us/, access January 9, 2017.

[11] Military Aircraft, https://airbusdefenceandspace.com/our-portfolio/military-aircraft/, access January 9, 2017.

[12] Tiger HAD – The combat-proven attack helicopter, https://www.airbushelicopters.com/website/en/ref/Tiger_51.html, access January 9, 2017.

[13] New UK-French mine countermeasures contract awarded, http://www.baesystems.com/en-uk/feature/the-maritime-mine-counter-measur..., access January 9, 2017.

[14] Defence Data Portal, EDA’s official web page, https://www.eda.europa.eu/info-hub/defence-data-portal, access January 9, 2017.

[15] 10 years in 50 dates, EDA’s official web page, https://www.eda.europa.eu/Aboutus/our-history/10-years-in-50-dates, access January 9, 2017.

[16] Defence Data Portal, EDA’s official web page, https://www.eda.europa.eu/info-hub/defence-data-portal, access January 9, 2017.

[17] Technical upgrades do not reflect the R&D and military purchase spending precisely.

[18] Defence Data Portal, EDA’s official web page, https://www.eda.europa.eu/info-hub/defence-data-portal, access January 9, 2017.

[19] This data consists not only of purchases made within EDA’s structures, but all that were made by at least 2 member states regardless of the base platform they used for the purchase. Definitions, EDA’s official web page, https://www.eda.europa.eu/info-hub/defence-data-portal/Definitions, access January 9, 2017.

[20] Defence Data Portal, EDA’s official web page, https://www.eda.europa.eu/info-hub/defence-data-portal, access January 9, 2017.

[21] The intervention in Libya being its primary example, where 12 years after unpleasant experience in Kosovo, European countries were still not able to execute autonomous operation without American support.

 

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