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The European Defense Market: Disruptive Innovation and Market Destabilization
The global defense industry is shifting toward a new paradigm in which an emphasis on technology-driven capability development is being undermined by disruptive innovations emanating from the commercial sector. This evolution is likely to result in important effects on the defense market, lessening barriers to entry and turning upside down the approach to innovation. For the defense sector this entails that shifts in the organizational behavior of firms and military establishments are required if the full benefits of innovation are to be captured and integrated into defense capability development processes. This article analyses this shifting paradigm with the European defense market as a departure point. Briefly exploring the shifts in defense industrial processes since the 20th century, this article outlines the benefits of integrating the defense and civilian technological and industrial bases.
The Economics of Peace and Security, 2017, Vol. 12, No. 1 (written with Renaud Bellais)
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Another Russian invasion of Ukraine? A Scenario
In the summer of 2020, Russian forces entered Dnipropetrovsk International Airport (Ukraine’s fourth largest city), blockaded the M34 motorway that links Dnipropetro- vsk to Kiev and seized railway lines in the region. At the same time, Russia deployed the Admiral Grigorovich, Ladnyy and Smetlivyy frigates and the Azov and Caesar Kunikov landing ships in the Sea of Azov, sent air detachments and funneled supplies through the coastal cities of Mariupol and Berdyansk. Paratroopers, tank battalions and mecha- nised warfare equipment were then deployed to the Kherson, Zaporizhia and Dnipro- petrovsk regions via bases in Russia’s Southern Military District. Following Russia’s seizure of Crimea in 2014, the Russian military had modernised their air and land as- sault capabilities through regular training – with a view to one day deploying forces in southern and eastern Ukraine. Yet what appeared to be an act of war was in fact an act of humanitarian assistance – or rather, an act of war under the cover of humanitarian assistance.
Indeed, Ukraine was in need of humanitarian assistance due to mass flooding – only Russia went further than that. Once in control of the airport, it impounded all EU aid supplies sent to the region to help cope with the flooding and started its own deliveries of aid and supplies to the region via Crimea and the Sea of Azov. Although interna- tional calls on Russia were issued immediately to allow international humanitarian aid into the affected regions, it became clear that Moscow had taken full political and mili- tary control of the Kherson, Zaporizhia and Dnipropetrovsk regions. More than 5,000 personnel and 900 pieces of equipment were deployed in the three regions, including Spetsnaz brigades and elements of the 4th Air Force such as the Mi-8 transport aircraft and Ka-52 attack helicopters. These were not sufficient grounds for NATO to intervene: after all, this was not an Article 5 situation. Once accused of mainly supplying aid provi- sions to Russian-friendly populations and rebel groups, Russia expelled all remaining international observers and aid providers from the region. ‘What we are seeing in the south of Ukraine is a wilful attempt by Russia to deliver aid selectively and the imposi- tion of martial law’, claimed one Western diplomat. Yet ambassadors at the UN Security Council found no clear path forward on how to deal with the humanitarian disaster in Ukraine – especially given the presence of Russian forces on the ground.
EUISS Report, 2017, No. 34
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Promoting European Defence Cooperation and the Promise of Financial Incentives
The European Union (EU) has never directly funded defence research or military capability development before; so the fact that EU financial support for both defence research and joint capability development is now possible following the release of the European Defence Action Plan (EDAP) is curious and interesting. The fact that defence research and capability development are now seen as vital strategic investments on behalf of the EU marks a radical shift in the way the EU thinks about and supports defence. Following the release of the EDAP on 30 November 2016 and the unveiling of the European Defence Fund (EDIF1), the European Commission outlined how it intends to invest in defence. The fund is comprised of two ‘windows’. The first is centred on defence research, and will see the EU allocate €90 million for defence research from 2017 to 2020 out of the EU budget – €25 million of which has already been earmarked for 2017. In time, this ‘research window’ could be endowed with a €500 million per year allocation, called the European Defence Research Programme (EDRP). If agreed, this programme would be operational from 2020 onwards (Fiott and Bellais, 2016).
The second ‘window’ within the defence fund focuses on defence capability development. This ‘capability window’ aims to pool national resources with a view to financing joint capability development projects. Based on how much the European Defence Agency’s (EDA) participating member states (pMS) have spent on collaborative equipment projects in the past, the Commission estimates that a reference figure of approximately €5 billion per year for the ‘capability window’ could be enough to launch various capability projects. From 2010-2014, the EDA’s pMS spent an average equivalent amount of €7.56 billion per year on collaborative projects. To encourage member states to actively participate in the ‘capability window’, the European Commission has innovatively suggested the potential use of a number of financial incentives. The hope is that such incentives could stimulate defence cooperation between European states in ways not seen before. This is new terrain for the EU. It is worth reflecting on the EDIF and whether financial incentives can potentially serve as a ‘game changer’ for European defence cooperation.
ARES Group Comment, 2017, No. 16
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Defence in Detail
Abstract
The following pages bring together data on defence spending from three different sources: the International Institute for Strategic Studies (IISS), the North Atlantic Treaty Organization (NATO) and the Stockholm International Peace Research Institute (SIPRI). Data for 2016 from the EDA were not available at time of publication. IISS and SIPRI figures dis- played below are available for all 28 EU member states, whereas NATO figures are available for the 22 EU member states also party to the Alliance (EU-NATO 22 hereafter).
In contrast to previous editions of the Yearbook, data are presented in US dollars instead of euros to maintain compatibility with the full databases and international comparisons offered by each organisation. Each organisation has a different methodology for collect- ing and harmonising data between different countries, leading to slight discrepancies be- tween the datasets. After briefly explaining the methodologies of each organisation, this section commentates on the differences the data show for 2014-2016.
NATO countries send data on defence expenditures, defined as ‘payments made by a na- tional government specifically to meet the needs of its armed forces or those of its allies’, directly to the NATO Defence Planning Division, which then harmonises what each state counts and adjusts the figures according to their methodology.5 With the exception of Bulgaria, defence expenditure levels for all allies include pensions. Gross Domestic Prod- uct (GDP) levels and deflators are taken either from the OECD or DG ECFIN, and NATO uses average annual exchange rates from the International Monetary Fund (IMF) Interna- tional Financial Statistics (IFS) database.
IISS uses primary sources data (official budgetary documentation and correspon- dence with governments) to assess the defence spending levels of EU-NATO coun- tries. IISS attempts to approximate the NATO definition (e.g. by including military pensions) where data is available. In addition to reporting an independent assessment of defence budgets, the IISS Military Balance also reports defence expenditure levels ac- cording to NATO. IISS exchange rates are derived from GDP figures in the IMF World Economic Outlook database by dividing the domestic currency figure by the US dollar figure to obtain the number of units of domestic currency per US dollar. GDP deflators and inflation rates also come from the IMF World Economic Outlook database.
EUISS Yearbook of European Security 2017
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The CARD on the EU Defence Table
In the 14 November 2016 Council conclusions, member states recognised that there was a need to ‘deepen defence cooperation and ensure more optimal use, including coherence, of defence spending plans’. Although the European Defence Agency (EDA) has been working towards these objectives since 2004, a more ‘structured way to deliver identified capabilities based on greater transparency, political visibility and commitment from Member States’ is still required.
If the EU Global Strategy (EUGS) called for the ‘gradual synchronisation and mutual adaptation of national defence planning cycles and capability development practices’, the coordinated annual review on defence (‘CARD’) announced at the end of 2016 is the mechanism designed to meet these objectives. The High Representative/Vice-President (HR/VP) is expected to deliver proposals for the CARD in June 2017, with a view to fully establishing the annual review by the end of the year. Accordingly, it is worth reflecting on whether and especially how CARD can change the way defence cooperation operates in Europe.
EUISS Policy Brief, 2017, No. 17
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Patriotism, Preferences and Serendipity: Understanding the Adoption of the Defence Transfers Directive
The 2009 adoption of the EU directive on intra-Community transfers of defence equipment (‘ICT directive’) (2009/43/EC) aims to harmonize defence transfer licencing in the EU. The directive is part of a ‘defence package’ – along with a directive on defence procurement (2009/81/EC) – that is geared to liberalizing and regulating the European Defence Equipment Market (EDEM). A major theoretical question is why the EU Member States would agree to the ICT directive when it did not ultimately make much difference to the functioning of the EDEM. A number of competing theories exist that help explain why the 2009 ‘defence package’ was adopted. In the hope of engaging with this theoretical debate, and expanding our empirical understanding of the ICT directive, this article contends that insights from judicial politics, economic patriotism and liberal intergovernmentalism are best placed to explain why the EU Member States eventually adopted the directive.
Journal of Common Market Studies, 2019, Vol. 55, No. 5
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European Defence: The Year Ahead
After several months of intense work, the European Union ended 2016 having agreed to a number of fresh initiatives designed to articulate (and act on) a new level of ambition for security and defence. Under the overall direction laid down by the EU Global Strategy (EUGS), a specific plan on security and defence (SDIP) was published on 14 November 2016 – elements of which were endorsed at the Foreign Affairs Council on the same day and the 15 December 2016 European Council. Additionally, the European Commission published a European Defence Action Plan (EDAP) on 30 November 2016, and the EU and NATO agreed to act on the Joint Declaration they had signed at the Warsaw Summit in July by adopting conclusions for 42 action points on 6 December 2016. The EU therefore starts 2017 with a range of policy options to enhance defence cooperation: aligning these initiatives to produce coherent policy in the future is now a priority.
EUISS Policy Brief, 2017, No. 1
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Understanding EU Foreign Policy: Theory
The institutional context in which the European Union conducts its external action – starting with the Common Foreign and Security Policy (CFSP) and the Common Security and Defence Policy (CSDP) – is complex, sometimes unclear, and highly fragmented. Moreover, the large number of players and formats for shaping, making and implementing decisions hardly facilitates a thorough understanding of the modus operandi of the Union in this domain. This volume is intended to offer interested readers a portrait of how the European Union conducts diplomacy – as well as defence, development and other related policies. It offers an overview of how the EU has evolved as a foreign policy actor especially since the entry into force of the Lisbon Treaty, and includes analyses of the main players in the EU system and their interplay, conveying both past dynamics and present trends. The book examines both the broader institutional context (European Commission, Parliament and Council) and the specific CFSP/CSDP set-up (the ‘multi-hatted’ High Representative of the Union for Foreign Affairs and Security Policy, the European External Action Service and other bodies) with a view to highlighting the challenges and opportunities they create for Europe’s foreign policy. It also describes the policies that underpin the EU’s external action, as well as covering the geographical dimension and analysing the Union’s array of ‘strategic partnerships’ throughout the world.
EUISS Book Chapter, 2017
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The EU, NATO and the European Defence Market: Do Institutional Responses to Defence Globalisation Matter?
The European Union (EU) and North Atlantic Treaty Organisation (NATO) are both institutions through which European states can engage in European defence–industrial cooperation. Each organisation embodies a unique set of institutional tools through which to manage issues such as the high and rising costs of defence procurement, technological innovation, defence R&D, standardisation, multinational capability programmes and interoperability. In short, the EU and NATO are institutional tools through which European states can manage the positive effects and negative consequences of defence globalisation. By drawing on an innovative conceptual framework derived from the institutional interaction literature, this article analyses how the EU and NATO interact with one another for defence–industrial issues. In doing so, the article principally aims to provide a conceptually informed analysis of the appeal of each body as a mechanism for defence–industrial cooperation and how each institution affects the other.
European Security, Vol. 26, No. 3
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EU Defence Research in Development
On the 14 November 2016 EU member states welcomed the presentation of the Implementation Plan on Security and Defence (SDIP) by the High Representative/Vice-President. The plan serves as a follow-up to the EU Global Strategy (EUGS) with a specific focus on security and defence, but, more than this, the SDIP presents ideas that are directed at turning the EU’s vision on security and defence into action.
With the presentation of the SDIP, and the European Commission’s forthcoming European Defence Action Plan (EDAP), the focus will now turn to producing tangible results.
EUISS Policy Brief, 2016, No. 43
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Daniel Fiott 