WASHINGTON and MADRID — A new initiative by the Trump administration to subsidize U.S. weapons sales to some former Warsaw Pact countries could rankle European defense leaders, some of whom are fuming over Washington’s recent request for full access to European Union defense coffers.
The European Recapitalization Incentive Program, or ERIP, a new tool developed with U.S. European Command to speed the process of getting allied nations off Russian gear, plans to spread $190 million to six countries: Albania, Bosnia and North Macedonia, plus the EU member states of Croatia, Greece and Slovakia.
It’s a relatively small amount of money, but the promise of expansion, along with the fact those funds will be used expressly to get countries onto American-made products, likely means European defense firms will keep a wary eye on the program’s future, once they fully get wind of it.
Asked about a European response to ERIP, analysts noted that the advent of the funding stream could set off a flurry of activity among European defense contractors, who could see it less as a move to benefit allied nations and more as an industry power grab from American companies that would benefit from smaller nations with limited budgets addicted to U.S. kit.
The program kicks off in the wake of tense trans-Atlantic relations and a push by defense officials in Washington to have unfettered access to the emerging pot of European defense money, namely the European Defence Fund and the associated collaborative projects known as PESCO.
Washington’s terse request to allow non-EU members into an initiative designed to beef up the bloc’s organic defense capabilities was seen by some in Europe as evidence that America may be focused more on selling its own weapons than letting Europe become a defense player in its own right.
“From a European manufacturer perspective, you look at this and think how much of this is altruistic and how much of this is about trying to ensure U.S. market access and lock some countries into an American approach?” questioned Douglas Barrie of the London-based International Institute for Strategic Studies.
“This is a big deal, if they are successful in making this program go,” said Jim Townsend, a former Deputy Assistant Secretary of Defense for Europe now with the Center for New American Security. “If you’re a European defense company, you’re going, ‘I hope the Americans don’t make this financial assistance into a big program,’ because it’s going to undercut them.”
And, “if you’re an American arms dealer you want to get in on that. That’s manna from heaven for them.”
The six countries are divided into two focus areas: Albania, Bosnia and Slovakia replacing helicopters; and Croatia, Greece and North Macedonia replacing infantry fighting vehicles. Those are two areas with plenty of European suppliers who would love to keep away their American competitors.
In particular, Barrie noted, the countries supporting Airbus and Italy’s Leonardo would likely move to protect their helicopter market share, while multiple nations have indigenous ground vehicles they want to sell.
Fundamentally, both analysts agreed that if these countries with limited defense budgets get American subsidies to start buying U.S. gear, they are likely to stay with that equipment in the long term, including the lucrative maintenance tails. That means bad news for European manufacturers, and may lead to some sort of response.
“If I was an industry in Europe” and saw this program growing, Barries mused, “then I would be tempted to be whispering in my government’s ear to do something similar.”
And the program could expand, making it more of a challenger for European firms. Sometime in late June or early July, the U.S. State Department is expected to make a decision on whether to launch a second ERIP round, based on reprogrammed fiscal 2019 dollars.
If approved, officials will start identifying new projects at the end of the fiscal year, which could include new countries, such as Poland, Hungry or the Baltic nations, where European firms have been hoping to compete.
Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.
Sebastian Sprenger is associate editor for Europe at Defense News, reporting on the state of the defense market in the region, and on U.S.-Europe cooperation and multi-national investments in defense and global security. Previously he served as managing editor for Defense News. He is based in Cologne, Germany.