Russia’s misadventure in Ukraine sets off European re-armament - Broadsword by Ajai Shukla

Shares of European and American arms companies have surged since the start of the Russian invasion

By Vikas Gupta

Defence News of India, 14 Mar 22

Russia’s ongoing military invasion of Ukraine, which began on February 24 and is still ongoing, has been described as a turning point in Europe’s modern history.

Russian aggression catalyzed European rearmament, galvanized the European and American arms industry, rejuvenated the North Atlantic Treaty Organization (NATO), caused Germany to reassert European leadership, and galvanized provisional Japanese militarism.

For India, which enjoys the benefits of an arms buyers’ market and invokes the slogan “Atmanirbhar Bharat” to bargain hard for the establishment of Western arms production in the country, this unwanted shift towards a seller’s market is bad news.

Vendor’s Market in Defense

Ever since the Washington Treaty gave birth to NATO on April 4, 1949, its largest member and flagship, the United States of America (US) has been frustrated by the reluctance of NATO’s 30 member nations to meet their commitment to spend at least 2 percent of their gross domestic product (GDP) on their armies to ensure the alliance’s readiness to meet any military challenge.

Less than half of NATO members spend 2% of their GDP on defence. Among the most influential member countries, only the United States and the United Kingdom have reached the 2% target.

Europe’s largest and richest country, Germany, was among the most reluctant to build collective defense capabilities. Just two months ago, when Russia was building up forces against Ukraine and openly threatening war, Berlin categorically refused to supply Ukraine with lethal weapons. Instead, he sent defensive equipment to Kiev: a $5 million field hospital and 5,000 helmets.

In addition, German Chancellor Olaf Scholz has banned other NATO countries from sending German-made weapons to Ukraine. “Germany has not supported the export of lethal weapons in recent years,” he said.

In another event that would have seemed impossible until recently, former Japanese Prime Minister Shinzo Abe suggested that Japan should take responsibility for nuclear defense and that Japan should consider a NATO-style nuclear sharing agreement with the United States. This would make it possible to place American nuclear weapons on Japanese soil, which until now had been prohibited.

The new European rearmament

This attitude changed dramatically when Russian forces entered Ukraine on February 24. Germany immediately sent 1,000 anti-tank weapons and 500 Stinger air defense systems to Ukraine. Berlin also revoked its blockade on European Union countries that supplied German-made equipment to other countries.

A day later, in a speech to the Bundestag – Germany’s parliament – Scholz reversed decades of German security policy and proposed massive investments, including a €100 billion special fund, for building the Bundeswehr – the German army.

This is a huge increase in military spending, given that Germany only spent 47 billion euros on defense in 2021.

European and American defense industries reacted with joy to the prospect of a sharp increase in Western defense spending. The share price of Swedish defense conglomerate, Saab AB, has nearly doubled in the past three weeks. BAE Systems’ share price rose 23.16%, while that of French major Thales rose 33.35%. Leonardo SpA shares increased by 13.36%, Lockheed Martin’s share price increased by 12.16%, Leonardo SpA shares increased by 13.36% and share prices by Raytheon Technologies rose 3.4%.

For Indian micro, small and medium-sized enterprises (MSMEs) that are part of the supply chains of global aerospace and defense (A&D) companies, this could trigger a significant increase in orders.

A blow for the “Make in India”

Senior executives from European and US original equipment manufacturers (OEMs) welcome the renewed focus on business relationships with NATO militaries. Sidelined by three decades of defense spending cuts after the collapse of the Soviet Union, products made by these OEMs are suddenly in demand again.

“New Delhi pressed major Western defense companies to establish production in India under the Atmanirbhar Bharat (Self-Governing India) program, even when it made little economic sense. With New Delhi in the driver’s seat in a buyer’s market, Western defense contractors had no choice but to comply. This will no longer be the case,” said the head of a major equipment manufacturer.

Indian government officials are considering the prospect of New Delhi lining up for sophisticated weapons that would be given priority to a rearming Europe, in the face of an increasingly powerful Russia, backed by an emerging China.

Current situation

In Cold War-era exercises that played on the armored columns of the Warsaw Pact (Soviet bloc) rushing west through NATO countries, Soviet Union tanks invariably hit their objectives on the Atlantic coast – more than 1,000 kilometers from their launch pads – in 7 to 10 days, which implies an advance of approximately 100 km each day. Advancing through Ukraine, however, Russian tank columns moved no faster than 10-20 km per day.

For reasons that are still not entirely clear, Ukrainian tanks, unmanned aerial vehicles (UAVs) and missiles managed to limit the Russian advance to a negligible pace.

A meeting of the Russian propaganda media – the Joint Coordination Headquarters for Humanitarian Response in Ukraine – announced on Sunday: “Unfortunately, the humanitarian situation in Ukraine continues to deteriorate rapidly, and in some cities it is catastrophic. formations armed with [Ukrainian] nationalists mine residential areas, destroy bridges and roads, destroy survival facilities.

“The most difficult humanitarian situation has developed in Mariupol. Hundreds of thousands of people, including foreigners, are forcibly detained by nationalists who, threatening physical violence, stop any attempt to leave the city.

Russia fired missiles and hit the International Peacekeeping and Security Center in western Ukraine. This has brought the war dangerously close to the Polish border – and therefore to NATO – where the United States has sent troops to reinforce NATO forces, creating a potential flashpoint. The border is a lifeline for Ukraine, with more than a million refugees fleeing to safety in Poland as arms flow in the other direction.

Western analysts wonder what logic drove Russian President Vladimir Putin to invade Ukraine, given that the country (and earlier Georgia) was a long way from meeting NATO membership criteria.

While Ukraine succeeded in slowing the Russian advance, both the EU and NATO regained their mojo, and the Biden administration’s attention was diverted from China to the European theater. With Russia’s renewed dependence on China and the prospect of thousands of jihadist fighters on behalf of Moscow, Beijing is the biggest beneficiary of the crisis.