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September 24, 2019 | International, Aerospace, Naval, Land, C4ISR, Security

Defense Firms Angle for Eastern Europe

By Dominik Kimla and Hamilton Cook Posted September 19, 2019 In White Papers

One of the more dissonant aspects of NATO field exercises is, three decades after the fall of the Berlin Wall, the continued presence of Warsaw Pact weapons and equipment: Soviet-made T-series tanks, MiG fighters, Mi-17 helicopters, BM-21 rocket artillery, and more.

Like their western counterparts on the continent, Central and Eastern Europe (CEE) states have repeatedly delayed needed recapitalization as defense needs gave way to domestic imperatives. But times – and threat assessments – are changing.

By our analysis, cumulative CEE defense spending will be nearly $200 billion over the next five years, growing by nearly five percent per year. More than a quarter of that total, some $53 billion, will be spent on defense hardware procurement.

This represents a rare opportunity for Western defense firms – European and American – to seize a first-mover advantage. However, US companies must find new ways to credibly differentiate themselves from European competitors that may offer more financial and industrial incentives (and fewer regulatory hassles) in the long run.

Currently, US companies are well positioned for success as more aggressive US government advocacy has led to recent CEE customer wins for Black Hawk helicopters (Latvia, Poland, Slovakia), F-16 fighters (Bulgaria, Slovakia), HIMARS (Poland, Romania), JLTV (Lithuania), and Patriot AMD systems (Poland, Romania).

The US effort to steer CEE weapons-buying decisions picked up further momentum last year with the State Department-led European Recapitalization Incentive Program (ERIP), which provided $190 million in financing assistance to five Balkan countries (along with Slovakia) to replace ex-Soviet and Yugoslav-made equipment.

Even as ERIP expands, American companies will still have plenty of obstacles ahead. Historically, the limited new weapons procurement in most CEE countries included minimal offset or local industrialization requirements.

Going forward, reporting suggests that CEE countries, even as small as Croatia or Slovenia, will demand some form of local industrial participation and technology cooperation to develop their indigenous capabilities. This puts American firms at a disadvantage given the US government's still-stringent technology transfer regime.

Western European companies will differentiate themselves by proposing generous technology and work-sharing transfers, integrating local defense companies into their supply chains, and setting up a pan-European Defense Industrial Base.

The European Defense Fund (EDF) will fuel this by providing up to €13 billion over the next eight years to cultivate and secure these local ties. By financing collaborative R&D projects, prototype development, and disruptive, higher-risk defense innovation, the EDF will entrench Western European companies in CEE defense establishments over the medium to long term.

Yet, from the perspective of vulnerable members on NATO's eastern flank, only the US has the political power and defense capabilities to counter Russian meddling and aggression.

Given the ambivalence of Western European powers about confronting Russia, and the appearance of oft-fluctuating US commitment to NATO, CEE nations may see buying American not only as a means to get best-in-class (but more costly) weapons, but also as a binding mechanism to enhance US political and military commitment.

This dynamic was most vividly illustrated with Poland as it announced its intention to pursue the F-35, a platform historically out of Poland's “price range.” The purchase was also one of three major cornerstones for ensuring US investment in Polish security. The others were Poland's procurement of Patriot AMD systems and its agreement to – and its offer to fund – enduring US basing in-country.

However, Poland will still expect significant local industrial benefit as part of any arms transaction, as defense acquisitions continue to be as much a political and (parochial) economic exercise as a military one.

European firms have not stood idly by while the US competitors have targeted the region though, and they have gained their own CEE foothold. They have found success by targeting countries like Hungary, who recently purchased helicopters from Airbus along with tanks and howitzers from KMW.

While this is smaller than recent US sales, Western European contractors have an advantage: time. Every programmatic delay buys more time for the EDF to mature, extend its tendrils into every Western European foothold in the region, and bring the promise of increased industrial participation.

Thus, absent a dramatic softening of the US tech transfer regime, American contractors will need to push for more creative ways to provide credible differentiation from Western European competitors.

First, they can take advantage of the upcoming eastern shift of US operations in the region and establish logistics and maintenance centers that are able to serve both a country's new equipment and US forces in region, in a model similar to the F-35's maintenance depots in Australia, Japan, and the United Kingdom. This expands NATO's operational support footprint into the region and grants CEE countries access to a much larger sustainment enterprise.

Second, American firms should push for more aggressive releases of Excess Defense Articles. While older, this equipment still represents a substantial increase in military capability that many CEE countries otherwise could not afford.

This has been seen in Croatia, where 16 retired OH-58 Kiowa Warriors are providing the country with new capabilities it could not afford (and now cannot afford to replace) and a pair of UH-60Ms donated to the Croatia Special Forces have introduced the platform to the Croatian military ahead of an eventual Mi-8/17 replacement program. These introductions induct CEE customers to US-style CONOPS and equipping standards that increase switching-costs to European competitors.

Finally, American contractors should extol the wider advantages of buying into the US defense enterprise. The opportunity to tap into the extensive US training enterprise during and after the acquisition process would be a boon to CEE nations overhauling their militaries.

While this has most recently been highlighted by international F-35 customers conducting their initial training at Luke Air Force Base amid the expansive Western US training range infrastructure, it is an opportunity that can be granted to non-Air Force customers, particularly given the establishment of a new Combat Training Center in Drawsko Pomorskie, Poland.

Meanwhile, the Foreign Military Sales process grants international contractors access to DoD buying power, not only for the acquisition itself, but also for the all-critical procurement of spare parts and weapons reloads decades down the line.

As they pursue long-overdue military modernization CEE countries will have to balance competing economic, political, and security imperatives. While going with US defense prime contractors provides top-tier capability and stronger ties with the only NATO member that can credibly deter Russian military adventurism, Western European firms will offer the lure of technology sharing and a more lucrative package for local industry. How CEE nations strike that balance will shape the military-political alignment of Europe's eastern flank for the next generation.

https://www.avascent.com/news-insights/white-papers/defense-firms-angle-for-eastern-europe/

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  • Air Force orders freeze on public outreach

    March 13, 2018 | International, Aerospace

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    By: Valerie Insinna , David B. Larter , and Aaron Mehta WASHINGTON — The Air Force is slashing access to media embeds, base visits and interviews as it seeks to put the entire public affairs apparatus through retraining — a move it says is necessary for operational security, but one which could lead to a broader freeze in how the service interacts with the public. According to March 1 guidance obtained by Defense News, public affairs officials and commanders down to the wing level must go through new training on how to avoid divulging sensitive information before being allowed to interact with the press. The effort, which represents the third major Defense Department entity to push out guidance restricting public communication over the past 18 months, creates a massive information bureaucracy in which even the most benign human-interest stories must be cleared at the four-star command level. Before settling on retraining its public affairs corps and commanders, the service considered an even more drastic step: shutting down all engagement with the press for a 120-day period, a source with knowledge of the discussions said. Instead, the service settled on the retraining plan, a temporary move which Brig. Gen. Ed Thomas, director of public affairs, said could be completed “in the coming weeks.” “In today's challenging information environment marked by great power competition, we will continue to be as transparent with the American public as possible while protecting sensitive information on our operations and capabilities,” Thomas told Defense News. “We owe both to the public, and it is vitally important for the public to understand what we are doing on their behalf and with their tax dollars.” But two former Air Force secretaries and an influential congressman all raise the same concern: that intentionally or not, this will send a message that engaging with the public simply isn't worth the risk. Rep. Mike Gallagher, R-Wis., told Defense News the memo fits into a trend of recent moves inside the Defense Department towards less transparency, which could ultimately undermine DoD's efforts to address long-standing problems. Gallagher serves on the Seapower and Projection Forces Subcommittee, which oversees several key Air Force programs like the B-21 bomber. “I fully support the National Defense Strategy's focus on great power competition,” Gallagher told Defense News, “but I think the department has it backwards; It is precisely because of the scale of the challenges before us that transparency is more important than ever. I worry that by failing to discuss problems, we will only ensure there is no public pressure to fix them.” Shrinking Air Force access The renewed focus on operational security stems from the Trump administration's recently released national defense strategy, according to the Air Force guidance. That document, which was marked as “for official use only,” was distributed to public affairs officials following a February 2018 memo on operational security signed by Air Force Secretary Heather Wilson and Chief of Staff Gen. Dave Goldfein. “As we engage the public, we must avoid giving insights to our adversaries which could erode military advantage,” the March 2018 guidance read. “We must now adapt to the reemergence of great power competition and the reality that our adversaries are learning from what we say in public.” Until wing-level spokesmen have been certified by their corresponding major command, responses to reporter queries that potentially could include details about “operations, training or exercises, readiness or other issues which may reveal operational information to potential adversaries” are subject to approval by the Air Force's public affairs headquarters at the Pentagon, known as Secretary of the Air Force Public Affairs or SAF/PA. Exceptions can be made for human interest stories, community engagement pieces or other lighter, fluffier news, which can be approved by major command public officials. What this means is that if public affairs officials at Lackland Air Force Base in Texas haven't received their training, a local story about military working dogs would need the approval of Air Education and Training Command before being allowed to proceed with an interview or any engagement. Beyond limiting the Air Force's interactions with journalists, the new guidelines pose new restrictions on public appearances such as air show demonstrations, trade shows, industry conferences and think tank events, which can move forward if authorized by SAF/PA's engagement division. And although Air Force band performances will be permitted to continue, all band members who interact with the media must receive training from public affairs. Exactly what constitutes sensitive information is unclear. The Air Force's guidance lays out “potential engagement areas” alongside topics that could possibly pose “operational security risks.” Classified information and vulnerabilities are included in the latter area, but so are details about flag exercises, the number and location of operational assets, or information related to current readiness — some of which are routinely shared with the public. The guidance notes that “neither list is all inclusive,” and that public affairs professionals “use sound discretion and exercise discretion when evaluating all engagement opportunities.” Pausing a turnaround The guidance comes as the Air Force was finally repairing a damaged public affairs reputation. The service infamously clamped down on talking after the 2008 firing of both its chief of staff and service secretary, which had a chilling effect across the service. The situation culminated in a 2016 informal poll by Foreign Policy magazine, which found reporters ranking the Air Force as the worst service to deal with. That result resonated heavily within Air Force leadership, triggering promises of more open lines of communication. Deborah Lee James, Wilson's predecessor as Air Force secretary, told Defense News it was her belief the service needs to be more open, not less. “I have not seen the memo. However, I am sorry to hear about this development. If true, it certainly runs against the grain for what I tried to do as secretary of the Air Force,” James said. “Sometimes there's positive news to talk about, and our airmen can be the best communicators. Sometimes there's negative news to talk about. But much better that we be the ones to describe that news and frame it for the American people.” Whit Peters, who from 1997-2001 served as both Air Force secretary and undersecretary, acknowledged there are times when the military needs to keep information back for security reasons. He said the memo restrictions remind him of the way the service handled information during the conflict in Bosnia. But he also warned the memo may have a chilling effect far beyond its printed text. “The penumbra of this memo is worse than the memo itself. If you're already an Air Force officer, who is disinclined to talk to the press, this just gives you one more reason to think it is not career enhancing to talk to the press,” Peters said. “And that is unfortunate because the Air Force at all levels needs to be talking to the American public about what a valuable service it provides.” “I still think the Air Force does not do enough publicly to explain its mission and to explain why it needs to rejuvenate its whole fleet, both in air and space,” Peters continued. “So I would hope this doesn't get in the way of the Air Force telling its story on why it's important, and why it needs to be funded by the taxpayers.” The Navy: A Case Study A test case for the potential impact of the memo can be seen in the recent status of the Navy. In March 2017, Chief of Naval Operations Adm. John Richardson issued a memo that directed admirals to continue to engage with the media. But it also implored Navy officials not to give “too much” information — even unclassified information — in a public setting. “When it comes to specific operational capabilities however, very often less is more,” he said in the memo. “Sharing information about future operations and capabilities, even at the unclassified level, makes it easier for potential adversaries to gain an advantage.” The memo, which was broad and lacked specific guidance, created a persistent atmosphere of uncertainty throughout the Navy where leaders and program managers have been unsure about what they can talk about and what they can't. And last October, Secretary of Defense Jim Mattis released a memo calling for employees to be “vigilant” in preventing leaks. “It is a violation of our oath to divulge, in any fashion, non-public DoD information, classified or unclassified, to anyone without the required security clearance as well as a specific need to know in the performance of their duties,” he said. The information chill both inside the Navy and DoDwide has been noticed by lawmakers, who have called on the military to err on the side of transparency. Rep. Mike Gallagher, R-Wis., discusses the budget and transparency at the Surface Navy Association's annual symposium on Jan. 10, 2018. At a Navy conference in January, Gallagher dismissed Richardson's concerns about giving away secrets in the press, arguing that if the Navy doesn't talk about what it's doing, members of Congress can't convince their fellow members not on defense committees, let alone their constituents, that more resources are necessary. “Despite the old adage that ‘loose lips sink ships,' non-existent strategic communications can sink entire navies,” he continued. “If the bias is towards silence to prevent adversaries from finding out about unique capabilities or potential weaknesses: guess what, there will never be a public constituency for acquiring or mitigating them. “And, oh by the way, our adversaries probably have a decent idea of what we're up to anyways.” The powerful chairman of the House Armed Services Committee, Rep. Mac Thornberry (R-Texas), spoke out in January as well, saying that while secrecy is important, so is transparency, saying it makes a difference in DoD's bottom line. “As we've talked before, some of the folks in DoD are reluctant to talk too openly about our shortfalls because you're broadcasting that to your potential adversaries,” Thornberry said. “And I admit, it's a fine balance. But if we're going to convince my colleagues who are not on this committee, as well as the American people, to fix these things, I think we do have to at least talk somewhat openly about what our problems are.” https://www.defensenews.com/breaking-news/2018/03/13/air-force-orders-freeze-on-public-outreach/

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