The Weekly Wire: For Your Situational Awareness 7/24/20
The “Next Generation EU” Stimulus Package
Alix Leboulanger, Research Associate
Recent negotiations across European Union (EU) members regarding the €750 billion ($860 billion) stimulus package, branded “Next Generation EU” for FY2021-2027, ended successfully on Monday. However, funds initially allocated to Defense and Space are expected to be cut, in favor of other sectors highly impacted by the COVID-19 consequences on national economies.
With an aim to strengthen the EU’s strategic independence in terms of defense R&D and industrial cooperation with the European Defence Industrial Development Programme (EDIDP) and the Permanent Structured Cooperation (PESCO), plans originating from 2019 were expected to grant €13 billion ($15 billion) to the European Defense Fund and €16 billion ($18.5 billion) to the European Space Agency (ESA). Since 2018, the EDIDP has launched important collaborative research projects on future directed energy weapons, cyber security, artificial intelligence, counter-drones, air-defenses systems, collaborative networks, and many others. In June 2020, the European Commission validated a €205 million ($236.6 million) finance plan to support 16 additional military projects and three studies on future technologies, such as a railgun science and technology program. Some future projects could lead to more PESCO initiatives as well. PESCO has been buzzing recently, with the PESCO – European Patrol Corvettes program launched in November 2019, supported by Italy, Greece, Spain, France and potentially Portugal.
However, EU disagreements on possible defense funding allocations, other budget priorities, and the financial consequences of the COVID-19 pandemic have reshuffled the cards. According to the latest documents issued after the EU discussions on July 21, the European Defense Fund will only receive €7.02 billion ($8.09 billion), while funding to support European defense operations and mobility will receive €1.50 billion ($1.73 billion). Finally, ESA would only receive funds to support the Copernicus and Galileo programs, approximately €12.8 billion ($14.7 billion). Additionally, the outlook for future programs is looking grimmer, generating a source of concerns for some members as tensions across the Mediterranean Sea arise.
On July 22, it was announced that Italy, Sweden, and the UK have launched a new trilateral industrial framework for Future Combat Air Systems (FCAS). The framework builds on the bilateral agreements signed separately by Sweden and Italy with the UK in 2019 and paves the way for greater collaboration between the aerospace and defense industries of the three countries. Under the framework, industries in all three countries will work towards the development and eventual production that will first enhance the Typhoon and Gripen aircraft, and then lead towards a Future Combat Air System. As part of this agreement, Saab announced on July 20 that it will invest GBP50 million ($64 million) to create an FCAS hub in the UK to drive collaboration. However, it should be noted that Sweden’s work on FCAS is separate from a commitment to Tempest, with Sweden keen to avoid using the term during virtual briefings being held instead of the 2020 Farnborough Airshow. At this time, the emphasis is on the development of technologies. In the UK, team Tempest has been expanded to include seven new partners. These companies are General Electric UK, GKN, Collins Aerospace UK, Martin Baker, QinetiQ, Bombardier (Belfast), and Thales UK. These companies will work with the original UK partners (BAE Systems, Rolls-Royce, Leonardo UK, and MBDA UK) to produce UK sovereign capability.
On Monday, the Department of Defense (DoD) awarded a $862 million contract modification to Lockheed Martin that will see the US Air Force (USAF) acquire the 14 F-35As whose ownership had been in limbo since Turkey was removed from the F-35 program. The modification will pay for the 14 Lot 8 aircraft that are currently in production at Lockheed’s Fort Worth facility and pay to modify the Lot 10 and 11 F-35s to USAF standards. Those aircraft were already undergoing train-the-trainer operations for Turkish personnel at Luke Air Force Base and Eglin Air Force Base when the Turkish acquisition of the S-400 missile defense system abruptly cancelled the deal.
There is a precedent for such a move. In 1990, the US blocked arms sales to Pakistan due to the Pakistani nuclear weapons program. As a result, 28 completed F-16s from Peace Gate III and Peace Gate IV were stored at Davis-Monahan Air Force Base, as the US would spend the next decade looking for a buyer for the aircraft and negotiating a repayment to Pakistan. Then, in 2002, the DoD decided to use the aircraft as replacements for the retired F-16N aggressor squadrons, and the aircraft were split evenly between the Air Force and the Navy. The Navy’s F-16s are still in operation today as part of the Naval Aviation Warfighting Development Center (formerly the Naval Strike and Air Warfare Center, colloquially TOPGUN) at NAS Fallon. After the embargo was lifted in 2005, the Pakistanis would eventually purchase 18 additional new-build F-16s from Lockheed Martin, while receiving the now-former Air Force aggressors as Excess Defense Articles.
Additionally, Turkish officials have offered to supply its regional ally, Azerbaijan, with an array of weaponry in response to recent border clashes with Armenia that have left 21 soldiers and one civilian dead. Turkey’s Defense Industry Director Ismail Demir signaled his willingness to furnish Azerbaijan with supplies ranging from armed UAVs to missiles to electronic warfare systems, should the request be made. The skirmishes are the most recent chapter in a fraught history of post-Cold War Azerbaijani-Armenian relations. The violence also poses numerous threats to Turkish and international interests, as the border region in dispute hosts numerous pipelines that funnel oil and gas from the Caspian Sea to the global marketplace. Turkey maintains strong cultural and historical ties with Azerbaijan as well as a series of joint energy projects. In that vein, President Tayyip Erdogan recently stated that Turkey would not hesitate to “stand against any attack” on Azerbaijan, while Defense Minister Hulusi Akar accused Armenia of instigating the clashes and forewarned that it would be “drowned under the plot that they initiated.” It is unclear if the sharp rhetoric from Ankara will translate into Turkish forces being deployed to the Caucuses in the near future. Perhaps a safer bet would see Turkish defense firms embracing a more active role in the Azerbaijani Army’s long-overdue modernization efforts.
Austrian press revealed that Indonesian Defense Minister Prabowo Subianto sent a letter to his Austrian counterpart, Klaudia Tanner, proposing talks to negotiate a possible sale of Austria’s 15 Eurofighter Typhoons to Indonesia. Austria’s Typhoons have been embroiled in a corruption and bribery scandal, with a lawsuit underway against Eurofighter GmbH. The Typhoons were purchased for EUR 2 billion in 2002, and Austria is hoping to recoup EUR 1.1 billion through the lawsuit. Furthermore, Austria has been very dissatisfied with the cost of operating and maintaining the fighters. Plans to retire the fighters in 2020 have been discussed for years but the Austrian government remains split over whether to keep the fighters or replace them with different aircraft.
Indonesia enters this picture looking to expand its fighter fleet. An initial contract for 11 Su-35s was signed in 2018, but this deal has since been stalled due to lack of Indonesian Finance Ministry approval and fears of US sanctions should the deal go through. While the Su-35 deal has not officially been cancelled, Defense Minister Subianto appears to be looking for options should the deal fall through. Purchasing used Austrian Typhoons presents a relatively low-cost way to procure additional fighters with Indonesia’s limited budget. However, the high operational cost issue that Austria faced will affect Indonesia as well. Other fighter options include the Rafale, F-16V, and Gripen. Dassault has also sent a full-scale Rafale mock-up to Indonesia to market the fighter. Indonesian interest in the F-16V also remains, considering the Indonesian Air Force is already an F-16 operator.