Russian soldiers patrol the area surrounding the Ukrainian military unit in Perevalnoye, outside Simferopol, on March 20. European nations took a variety of short- and long-term policy stances last week. (Getty Images)
PARIS — A deepening crisis in Ukraine has sharpened the defense policy of NATO member states in Eastern Europe, with the Estonia prime minister calling for higher military spending and Poland seeking early orders for missile defense and drones.
Warsaw and the Baltic states — Estonia, Latvia and Lithuania — have been among the most vocal following Russia’s military intervention in Crimea, while a European Union summit pledged on March 21 to sign political cooperation pacts with Georgia and Moldova, formerly Soviet republics.
Washington and EU allies have extended highly targeted financial sanctions against Russian and Ukrainian officials and businessmen, and France has stated any move on the defense industry front would be in a later stage of penalties against Moscow.
On the procurement front, much of last week’s attention focused on the planned — and controversial — €1.2 billion (US $1.6 billion) deal to deliver two French-built Mistral-class helicopter carriers to Moscow. A French parliamentary official said the country’s policy toward the deal lacked “coherence.” Domestic electoral politics lay behind that.
As images of Russian troops occupying bases and convoys rolling through Crimea blanketed the air waves, European nations took different approaches. Some pledged to increase defense budgets, others hastened arms deals, while still others took a cautious approach as events unfolded.
For French industry, there are “active discussions” with government but there is no ban on seeking business with Russia, a senior executive said.
For Poland, the developments on the Crimean peninsula are a solid reason to accelerate some of the acquisition programs for the country’s military, said senior government officials. These include the plan to modernize the Polish Air Force by expanding its fleet of UAVs.
“We initially planned that key decisions relating to this [program] would be made on the turn of 2014 and 2015, but I don’t see any reason why we shouldn’t be able to accelerate it,” Polish Defense Minister Tomasz Siemoniak said on March 18.
Poland’s Defense Ministry is planning to acquire several hundred combat and reconnaissance drones by 2022. The program is estimated to be worth up to 3 billion zloty (US $980 million), reported local news agency PAP.
The country’s drone program runs in parallel to the Russian military’s acquisition plans. In February, Russian Defense Minister Sergei Shoygu announced a program to fit the Russian Armed Forces with 320 billion rubles ($8.8 billion) worth of new drones in combat and reconnaissance variants by 2020.
In Estonia, Defense Minister Urmas Reinsalu told Parliament on March 19 that the Ukraine crisis has made security the top priority for Estonia, and that the efforts to increase its military capacities and coordination need to be doubled, reported local broadcaster ERR.
The policy of earmarking 2 percent of the country’s gross domestic product for defense spending is not enough, as Estonia needs to accelerate development of military capabilities, the minister said.
“We need two brigades to have real defensive capability. We will get one brigade up to readiness in a year’s time. With the current funding level, the complete arming and outfitting of the second one is envisioned after 2018,” Reinsalu said.
The setting up of joint military units is another form of regional defense cooperation, which is promoted by some of the East European allies. Poland’s Defense Minister and his Lithuanian counterpart, Juozas Olekas, recently reactivated a plan to form a joint battle group consisting of Polish, Lithuanian and Ukrainian troops. The initiative aims to strengthen the countries’ military ties and stabilize Ukraine, according to the ministers.
Britain has blocked the export of defense equipment to Russia and urged its EU allies to follow suit.
“We believe that under current circumstances there is a compelling case for EU member states to act on defense export licences,” British Foreign Secretary William Hague told Parliament last week.
London last week suspended 28 export licenses and said the authorities would not consider any further requests.
The suspensions cover export licenses for equipment, which could be used in Russian military operations in the Ukraine.
The impact on British industry will be minimal, as defense export deals with Moscow have been low compared with the French.
Armored vehicle seats, antennae for military aircraft, hand-held radios, engines for naval vessels and visors for pilots’ helmets are among the equipment for which delivery is now suspended.
The British have been more successful selling security equipment to the Russians — most of it cyber and most of it for the commercial sector and therefore outside the requirement for export license, industry executives said.
Security exports to Russia totaled around £110 million (US $181 million) in 2011 and 2012, and although the figures have not been released for 2013, there is no reason to suppose British exports in the sector greatly fell last year.
In other developments, British Defence Secretary Philip Hammond has offered the deployment of Royal Air Force Typhoon jets to reinforce the NATO Baltic Air Policing force, which flies quick reaction alert duties from a base in Lithuania.
US Air Force jets are flying quick reaction alert duties, but Polish F-16s are due to take over at the end of April.
NATO has promised to respond to the offer by April 1, a UK Defence Ministry spokesman said.
The British are continuing to deploy E-3D airborne early warning aircraft over Poland and Romania as part of a NATO mission to monitor the situation in the Ukraine.
Along with French and US allies, the British have also pulled out of the FR-UK-US maritime training exercise held annually with the Russians.
France has offered to send four fighters, fly a spy plane from the Avord base, central France, and provide cybersecurity
Meanwhile, Paris will decide in October whether to suspend the contract for the two helicopter carriers, Defense Minister Jean-Yves Le Drian said on March 20 during an aeronautics and defense conference organized by business daily Les Echos.
That is when the Vladivostok, the first ship, is due to be delivered. Contract law allows France the flexibility to cancel the Mistral deal.
Under arms sale contracts, the government must grant approval, not just for export, but also for handing over the system, a lawyer said.
The discretionary element in “any and all” arms deals is that authorization for delivery. The contract refers to government authorization but does not list all the factors, the lawyer said. There is an obligation for the prime contractor to make a “best effort” to get that authorization but that is not a 100 percent guarantee for delivery.
The installments should all be paid up and if the government fails to authorize the deal, the money must be paid back, the lawyer said.
On the other side of the deal, the client must also be satisfied the contract has been met and authorize the sale to be completed.
Russia would seek full compensation on the Mistral contract if France failed to deliver the ship, Deputy Defense Minister Yuri Borissov said on March 19, Agence France-Presse reported.
A defense specialist said the Coface export insurance agency would finance a compensation, and France could seek to resell the ships in the world market, or send them to the French Navy. That latter choice would stretch the defense budget, which is already under strain.
But if technology has been transferred to Russia, local shipyards could build those vessels, the specialist said.
Russia is a large market as Moscow plans to spend tens of billions on modernizing the forces, and a cancellation would close the sales door to France, the specialist said.
A cancellation would also raise a question over France’s credibility in the world arms market, the specialist said.
Deciding which country is a potential client is a political choice. Some two years ago there was doubt in the administration whether France should pursue sales to Russia, even after the 2011 sale of the two carriers, the specialist said.
A lack of political coherence can be seen in the foreign minister’s March 17 announcement of a possible cancellation, which surprised the Defense Ministry. Le Drian talked March 19 of a possible suspension, which he said was “extremely unlikely” and then put off a decision to October.
There are domestic electoral concerns with jobs considered to be at risk, the parliamentary official said.
Municipal elections are being held and Le Drian has a strong political base in Brittany, west France, where the carriers are built at the Saint-Nazaire shipyard.
“I am the defense industry minister, not just defense,” Le Drian said at the conference.
Labor unions at Saint-Nazaire fear job cuts if the Russian deal were canceled. Some 600 to 1,000 posts would go, a DCNS executive said.
On the shipbuilding front, however, STX won a letter of intention on March 19 for a €1.5 billion order for two giant cruise liners for MSC Croisière, an Italian-Swiss operator. With an option for two more, the deal was worth €3 billion. STX builds the Mistral ships, with DCNS as prime contractor.
In industrial terms, there is relatively little work left on the two ships, said Jean-Marie Poimboeuf, chairman of Groupement des Industries de Construction et Activités Navales, a naval trade association.
Vladivostok, the first ship in the Russian order, sailed out March 5 for sea trials. The vessel needs little work, but the second unit, Sevastopol, is due for delivery by the end of 2015. That is “more than half completed,” Poimboeuf said.
“The ships are easy to build,” he said. “The point of interest is the multimission concept.”
The ship’s design extends the carrier role to field command, carrying tanks, armored vehicles, landing craft, troops and field hospital.
There is also high value in the mission system, a defense consultant said.
The Mistrals are equipped with Thales communications and a multirole radar 3D new generation air and sea radar, DCNS Senit command and control, and Sagem Sigma navigation and Vampir surveillance systems.
France paid €570 million for development and manufacture for the first two ships of the class — Mistral and Tonnerre — for the French Navy, the Defense Ministry said in 2005.
Different Nations, Different Speeds
There is a political timetable and an industrial timetable.
“Long term relations are important for industry,” a defense executive said.
The countries near Russia are right to be afraid and have a faster timetable, the executive said. French industry finds the situation tougher. It hopes the political situation will improve so it can pursue the Russian market. Postponing a decision until October is “the right approach” as that helps protect the long term interests.
A second consultant said “there is politics and realpolitik,” where France must send out political messages along with European allies, but also wants to protect business prospects.
In land systems, “There are some significant projects,” a French senior executive said. “There is no freeze on talks with Russia for arms sales.”
In September, Renault Trucks Defense partnered with Russian manufacturer UralVagonZavod to show a mock-up of a 30 ton, 8x8 infantry fighting vehicle, named Atom, for the Russian Army’s tender, specialist website FOB reported. The Atom was shown at Russia Arms Expo, a trade show.
“It is still in the early stages,” a Renault Trucks Defense spokeswoman said. “We are at the start of the process.”
In other market prospects, MBDA is competing for a big Polish missile defense program with two offerings involving Aster and the joint Medium Extended Air Defense System.
Warsaw will speed up the tender, a Defense Ministry spokesman said on March 20, Reuters reported. Poland now plans to decide in the next few weeks on the supplier and sign an agreement for this year.
In Germany, Siegmar Gabriel, federal minister for economic affairs and energy, on March 19 halted a planned export of a high-end battle simulation facility to Russia.
German company Rheinmetall was to supply the Russian Army with the facility under a deal signed in 2011.
Late last week, the US threatened sanctions against Moscow’s defense sector. The US government also announced it would punish 16 individuals in Russian President Vladimir Putin’s inner circle in response to the country’s invasion of Ukraine.
In addition to defense, an executive order signed by President Barack Obama could allow the US Treasury Department to target Russia’s financial services, energy, mining and engineering sectors, according to administration officials.
“We are now looking and thinking about ways we could actually operationalize this executive order, should we decide to do it in response to continued or escalated Russian aggression,” a senior administration official said.
Russia’s economy relies heavily on natural gas exports to Europe. If European nations diversify suppliers and seek energy elsewhere, it could hurt the Russian economy, according to Elena Pokalova, a professor at National Defense University in Washington who is an expert in Russian and Ukrainian issues. She stressed that this is her personal opinion, not the opinion of the US government.
“That seems to be the only potential way of solving the situation or resolving the situation where energy flows would diminish to the European Union, which would create problems for the Russian economy, which would then turn [Russian President Vladimir Putin’s] attention back to domestic issues rather than international,” Pokalova said.
US officials say they are concerned about continued Russian military movements that could threaten southern and eastern Ukraine.
“It would be a substantial escalation for Russia to move into southern and eastern Ukraine,” another senior administration official said.
Shoygu told US Defense Secretary Chuck Hagel during an hour-long, March 20 phone call that Russian troops near the Ukraine’s eastern and southern borders were there for exercises only, Pentagon Press Secretary Rear Adm. John Kirby said.
“The two leaders agreed to keep the dialogue open,” Kirby said.
Obama administration officials said they have no plans to send US forces to Ukraine, but are in talks with Kiev about ways to address immediate needs.
Ukraine has requested a mixture of lethal and non-lethal material, Kirby said.
“I think it’s safe to say that right now, the focus of that review is on the non-lethal side of things,” he said.
Those non-lethal items include ready-to-eat meals.
“I don’t want to go into them by detail and give you a shopping list, but … in general it’s on the order of medical supplies and uniform equipment and that kind of thing,” Kirby said of the Ukrainian request.
Hagel spoke by telephone with Ukrainian Defense Minister Ihor Tenyukh on March 19. Administration officials say the US is trying to avoid a war between Russia and Ukraine.
It would be “pretty much suicide” for Ukraine to engage in a war with Russia, Pokalova said.
“I wouldn’t see any of these sides involved escalating the conflict to the military level where any involvement from NATO or from others outside would happen,” she said.
Pokalova said it is hard to predict whether Ukraine will have a stronger relationship with the US or NATO once tensions in the region settle down.
“I can [see] Ukraine working closer and closer with the EU,” she said. “I’m not sure how this would work out with NATO.” ■
Jaroslaw Adamowski in Warsaw, Andrew Chuter in London, Marcus Weisgerber in Washington and Albrecht Müller in Bonn contributed to this report.