October 17, 2019 | International, Other Defence
By: Hans Binnendijk and Jim Townsend
The incoming European Commission president, Ursula von der Leyen, will need to work with Washington to defuse a quietly simmering trans-Atlantic defense cooperation issue that, if left unsettled, could do more long-term damage to the NATO alliance than U.S. President Donald Trump's divisive tweets.
The United States for years has sought to stimulate increased European defense spending while minimizing wasteful duplication caused by Europe's fragmented defense industry. Europe has finally begun to deliver: Defense spending is up significantly, and the European Union has created several programs to strengthen its defense industries. But in the process, the EU has created a trans-Atlantic problem. These advances in Europe could come at the expense of non-EU defense industries, especially in the U.S.
The European Defence Fund, or EDF, established in 2017, is designed to support the cooperative research and development efforts of European defense industries, especially small and mid-sized firms. Three eligible companies from at least three EU countries need to apply in a coordinated fashion to receive project research and development funding, which can be up to a 100 percent grant for the research phase. Plans call for spending about $15 billion between 2021 and 2027 to strengthen Europe's defense R&D and stimulate innovation. Model projects include the Eurodrone and ground-based precision strike weapons.
A second related EU program, Permanent Structured Cooperation, or PESCO, also inaugurated in 2017, focuses more on efforts to foster defense cooperation among subsets of European states. Initially envisioned in the 2009 Lisbon Treaty, PESCO is an effort to develop a more comprehensive European defense consistent with EU's common foreign and security policy needs. Thus far, 25 of 28 EU nations have signed up, with 34 modest cooperative projects agreed to by the European Council.
The EU estimates that the inefficiency caused by the lack of adequate defense cooperation costs its members between $25 billion and $100 billion annually. These new EU programs, designed to pool and share scarce defense resources, are intended to help address that problem. But the exclusivity of these approaches favor the defense industries of EU members, and the hostile Trump administration rhetoric toward the EU is only supercharging this controversy.
President Trump's negative attitude toward NATO and European leaders has undercut European confidence in American trans-Atlantic leadership and strengthened a call in some European capitals for European “strategic autonomy.” Part of this autonomy is developing a more capable and independent European military supported by a stronger European defense industry. A stronger European military capability is a goal shared on both sides of the Atlantic, but not at the expense of defense cooperation. While European leaders understand that they are probably decades away from real, strategic autonomy and military independence, they are shaping the EDF and PESCO approaches to protect European defense industry by being fairly exclusive of U.S. or other non-EU defense industries.
This has U.S. defense officials worried. A May 2020 letter to the EU from two senior U.S. officials stated their “deep concern” about the programs' regulations. While current EDF and PESCO programs are small, U.S. officials are worried they will set precedents and will be a model for more ambitious European defense cooperation in the future. They fear not only that U.S. industry will be cut out, but that two separate defense industry tracks will be established that will undercut NATO interoperability and promote further duplication. Some U.S. officials have threatened U.S. retaliation unless changes are made.
EU officials respond that these criticisms are excessive. They note that some American defense firms established in European countries will be eligible, that there is nothing comparable to the “Buy American Act” in Europe, that plenty of trans-Atlantic cooperative projects can take place outside of these two EU programs, that the PESCO projects will be guided by both EU and NATO requirements, and that over 80 percent of European international defense contracts go to U.S. firms anyway. They also note that a deterrent to U.S.-EU defense cooperation is that U.S. arms transfer control regulations create potential American restrictions on the sale to third countries of any U.S.-EU cooperative weapons systems that contain U.S. technology.
NATO Secretary General Jens Stoltenberg, who seems caught in the middle, has supported both EDF and PESCO, so long as the results fill NATO capability gaps and do not lead to further duplication.
Flexibility will be needed on both sides of the Atlantic to defuse this issue before it becomes too difficult to manage. Some opportunities for third-country participation will be needed.
Possible approaches to level the playing field include focusing on modifying PESCO, which is still under development in the EU. One suggestion is to create a “white list” of NATO nations not in the EU (such as the U.S., Canada, Norway, post-Brexit United Kingdom and Turkey) that might be invited to participate in selected PESCO projects on a case-by-case basis. This would at least set a precedent that PESCO does not completely exclude third countries. And it would strengthen EU-NATO defense links.
Additionally, formal procedures might be established for closer cooperation between the PESCO project selection process and NATO's defense planning process. This will help avoid duplication and identify at NATO those areas where NATO nations outside the EU could cooperate on PESCO projects,
The U.S. might also consider amending its arms export control legislation to waive the third-country transfer review requirement for the export of U.S.-PESCO joint projects if the sale would be made to a country to which the U.S. would have made a similar sale.
EU internal negotiations on EDF are finished, and changes will be hard to make. Plus, EDF provides R&D funding grants that use European financial resources. While some $118 million in U.S. Defense Advanced Research Projects Agency funds go to European firms, that is about 3 percent of DARPA's budget. So the U.S. might ask for some modest reciprocity from the EDF. But more constructively, DARPA and the EDF might co-fund R&D for joint U.S.-EU projects.
The United States has much to gain from a strong European defense industry. Europe has much to gain from cooperation with the U.S. defense industry. All NATO allies need to stimulate defense innovation to compete effectively with Russia and China. Both sides of the Atlantic have much to lose if this issue further disrupts NATO's already shaky political equilibrium. Hopefully von der Leyen's experience as a former German defense minister will help her to understand the urgency and to find a solution to this problem.
Hans Binnendijk is a distinguished fellow at the Atlantic Council and formerly served as the senior director for defense policy on the U.S. National Security Council. Jim Townsend is a senior fellow at the Center for a New American Security and formerly served as deputy assistant secretary of defense for European and NATO policy.
June 28, 2021 | International, Aerospace
Le constructeur européen ajoute une corde à son arc dans la course à ce contrat qui porte sur 30 à 40 appareils de combat. , Airbus a décidé de frapper fort pour rafler le contrat suisse, rapporte La Tribune.
February 4, 2020 | International, Aerospace
Tucson will become the new headquarters for a combined business unit made up of Tucson-based Raytheon Missile Systems and a Massachusetts-based Raytheon business when parent Raytheon Co. and United Technologies Corp. finalize their merger. A Raytheon Missile Systems spokesman confirmed Friday that Tucson will become headquarters for the new Raytheon Missiles & Defense business, which will combine Missile Systems and Raytheon Integrated Defense, now headquartered in Tewksbury, Massachusetts. “We shared with our employees that upon merger close, our consolidated businesses will be named Raytheon Missiles & Defense and Raytheon Intelligence & Space," Raytheon spokesman John Patterson said. "They'll be headquartered in Tucson, Arizona and Arlington, Virginia respectively. We look forward to sharing more information once the merger closes — anticipated early in the second quarter of this year.” Raytheon — Southern Arizona's largest employer — announced in late October that Wes Kremer, president of Raytheon Missile Systems since last March, will become president of the combined missile and integrated defense unit as part of the merged parent company, which will be called Raytheon Technologies Corp. Raytheon Intelligence & Space will be formed from Raytheon's Space and Airborne Systems and Intelligence, Information and Services units, and UTC Mission Systems and Raytheon's Forcepoint cybersecurity unit. Together with two of UTC's current businesses — engine maker Pratt & Whitney and Collins Aerospace — they will form the four main business units of the merged company. But the company said it would not announce the headquarters location of the new business units until the merger was finalized. The so-called "merger of equals" will create an aerospace and defense behemoth with annual revenues of $74 billion, second only to Boeing in the industry. Raytheon and United Technologies shareholders have approved the merger of the two companies, which is also contingent on United Technologies' successful spinoff of its Carrier heating, ventilation and air-conditioning business and its Otis Elevator subsidiary. The deal is also subject to federal anti-trust approval, which is expected after the Defense Department said it had few concerns about the merger. Raytheon is the Tucson region's largest employer with about 13,000 local workers. The company has been working to expand its campus at Tucson International Airport amid a plan to add more than 2,000 jobs. Raytheon also has significant operations at the University of Arizona Tech Park. The company makes many of the nation's front-line defense systems, including the Tomahawk cruise missile and the Standard Missile series of ship-defense and ballistic missile interceptors, and more recently has been working on hypersonic missiles and laser weapons to defeat drones and other threats. https://tucson.com/news/local/raytheon-chooses-tucson-for-headquarters-of-combined-missiles-defense-unit/article_ee884dfe-4489-11ea-8617-6b5185c6107b.html
August 17, 2020 | International, Aerospace
Michael Bruno As public companies reported their latest quarterly results amid the recent financial carnage in the aerospace and defense sector, it was hard to find genuine optimism. With COVID-19 gutting the commercial aerospace manufacturing sector and maintenance, repair and overhaul segment, and expectations hardening around flat or worse defense spending, most corporate managers provided slimmed-down outlooks for the foreseeable future. But one segment stood out for its near-universal positivity: space. It may have almost taken an implosion of the airliner business and historic federal deficit spending against a pandemic to get there, but suddenly outer space looks like the best place to be in business. “Space continues to be an opportunity for companies to drive growth in a flat-to-down environment,” Jefferies analysts wrote in an Aug. 10 report. As the recent earnings season showed, numerous companies are being lifted by space business. “The primes are having such strong growth there,” Credit Suisse analyst Rob Spingarn noted in a July 31 teleconference. For instance, L3Harris Technologies sees space—both space-based and ground support—as its fastest-growing opportunity, with a combined $10 billion pipeline of long-term opportunities and several bid proposals awaiting responses that total around $1 billion in the near term. “We feel very encouraged by the space business as a whole,” said L3Harris Chairman and CEO Bill Brown. Several others below the marquee prime government contractor level are also benefiting, according to Jefferies analysts Sheila Kahyaoglu and Greg Konrad. “Kratos Defense and Security is benefiting from the need for low-Earth-orbit (LEO) satellites in real-time data processing, and Mercury Systems is getting pulled in, given an increased need for data processing power at the edge.” What is more, both Booz Allen Hamilton and Parsons indicate that space is even a target area for mergers and acquisitions. President Donald Trump's administration's spending and focus on space, from the new U.S. Space Force to a NASA mission to return Americans to the Moon in the coming years, certainly helps set the tone. Significantly, there is a commercial sector race to establish LEO-based communication and Earth observation services—albeit one driven by billionaires and their personal passions for a space legacy. A more subtle shift, though no less significant, is occurring down the value chain, where there is an emerging middle market for space services. Companies such as Parsons, Virgin Galactic and KBR have reengineered their companies and are making money by providing support services for the space effort—in ways that are not as sexy as SpaceX's NASA crew transport mission but just as real when it comes to making a profit. “We had nice year-on-year growth in the space business, just under double-digit growth there,” KBR CEO and President Stuart Bradie said Aug. 6. The former Halliburton business, once publicly associated with military logistics support during the George W. Bush administration, now is the world's only government-licensed provider training astronauts for commercial space missions. “Investors often overlook that KBR has transformed its portfolio since 2015 and still perceive the firm as an engineering and construction play, given its heritage as a unit of Halliburton,” Cowen analyst Gautum Khanna noted in June. But acquisitions of Wyle Labs, Honeywell Technology Solutions and Stinger Ghaffarian Technologies in 2016-18 “put KBR on the map as a noteworthy government services competitor.” Government services, especially space, now are responsible for 70% of the company's annual revenue. Interestingly, the space market is expanding so fast that KBR itself may have competition for astronaut training. In June, NASA signed a Space Act Agreement with Virgin Galactic to develop a private orbital astronaut readiness program for space tourists. “As part of this, we will offer our existing space training infrastructure at Spaceport America and customized future Astronaut Readiness Program . . . allowing these private astronauts to become familiar with the environment in and en route to space such as G forces and zero G,” Virgin Chief Space Officer George Whitesides said Aug. 3. “This initiative has been largely driven by the considerable demand among our existing customer base to participate in orbital space flights.” There have also been plenty of space company setbacks in recent months, with OneWeb's bankruptcy heading the list. But it should come as no surprise that business success in space is hard. Maybe what is surprising is that space is already proving lucrative for public investors, and the market looks set to grow. https://aviationweek.com/defense-space/space/amid-financial-wreckage-ad-space-rises-above