The regulation on joint military procurement of one billion euros, on the table of the European Parliament

The European deputies are to adopt today the Regulation on the consolidation of the European defense industry through joint procurement, a document that was debated yesterday in the European Parliament, the new financial instrument benefiting from a budget of one billion euros until December 31, 2024, an amount that will be used for joint acquisitions in the field of defense and for the consolidation of defense industrial capacities in the European Union.

"Russia's brutal and unprovoked war of aggression against Ukraine has become a turning point for European security (...) EU member states have become the target of Russia's threatening rhetoric and hostile actions, supported by Belarus. Despite facing fundamental threats to their own security, they continue to support Ukraine in providing assistance, including military assistance. Therefore, the instrument provides incentives for the participation of those EU member states that have significantly depleted their own stocks, incentives that mean a higher allocation from the Union for military procurements in which at least two states participate, as well as for European countries that decide to purchase additional quantities of military equipment for Ukraine and the Republic of Moldova. (...) Such a new instrument should be seen as an important step towards a European Defense Union and a single market for defense products, which is also intended to help drive transformative change in European defense technology and industrial dependencies (EDTIB), by stimulating the adoption of new technologies. The instrument will also contribute to strengthening the Union's strategic autonomy, its ability to protect its citizens and to strengthening the Union's global position in the context of increasing international security threats. European unity and interoperability are key to the future of the European security architecture", states the preamble of the respective regulation.

The quoted document also shows that, in the current context of the defense market marked by increased threats to security and the realistic prospect of a high-intensity conflict, member states have decided to rapidly increase their defense budgets, for the purpose of military acquisitions. 22 EU member states have committed to allocating 2% of GDP for defense spending, of which 20% represents the amount that will be spent on military equipment and technology, a percentage that, given the volume of demand, currently exceeds the capabilities of production from the European defense industry, capacities that were built for peacetime production, the cited document states.

"Consequently, we expect strong price inflation, as well as longer delays in delivery times, which could affect the security of the Union and its member states. Defense industries must ensure the production capacity necessary to process orders, as well as critical raw materials and subcomponents. In this context, manufacturers could prioritize important orders and leave vulnerable exposures that lack the critical size and financial means needed for major military procurement. The current geopolitical situation in the countries of the Eastern neighborhood has shown that, although duplication of efforts should be avoided, a diversified defense market can contribute to the variety of products that are quickly available on the market, and therefore can be beneficial in meeting urgent needs of the member states", it is also said in the preamble of the draft European regulation.

The future instrument will also consider securing supply chains in the field of the defense industry, by stimulating joint investments and joint public procurement, in order to increase the degree of interoperability of the armies of the EU Member States.

The collaborations between the member states in the defense industry, the consolidation and reformation of the industrial capacities in this field will thus be stimulated. The instrument is essentially an emergency mechanism needed to deal with the current situation generated by the conflict in Ukraine, and its structure and eligibility conditions will not interfere with the objectives of the European Defense Investment Program (EDIP).

Through the new regulation, the role of SMEs and start-ups would increase in the supply chain of the European defense industry, and the equipment would be replaced obsolete military that were designed and/or produced in the former USSR, with equipment based on the latest technology.

"This instrument will be based on and will take into account the work of the Joint Task Force on Defense Procurement, established by the Commission and the High Representative/Head of the European Defense Agency, a group that will coordinate very short-term defense procurement needs and will pursue the engagement of EU Member States and defense producers in the formulation of joint procurements to supplement, consolidate and increase the stocks of necessary military equipment that can be rapidly deployed, in the light of the military aid given to Ukraine by the Member States in its immediate neighborhood", it states the cited document.

According to the draft regulation, a joint military purchase is one made in cooperation by at least three EU member states, and the purchased products must be high-quality products in the field of defense and security, including all types of ammunition for ground combat , including specific missiles, medium- and long-range air-to-ground munitions, especially precision-guided munitions and cruise missiles, protected combat and combat support equipment, multi-domain command and control capabilities, communications systems and interoperable information, even medical equipment needed on battlefields.

Regarding the budget of the new European financial instrument, the draft regulation provides that from the entry into force of the cited document until December 31, 2024 it will be one billion euros, a budget that can also be used for technical and administrative assistance, such as preparatory, monitoring, control, audit and evaluation activities, including corporate information technology systems.

Budgetary commitments for activities spanning more than one financial year may be broken down over several years into annual instalments.

Among the eligibility criteria of joint procurement projects, in addition to the contribution regarding the replenishment of stocks, the creation of new supply chains throughout the European Union, the participation of European SMEs as contractors and subcontractors or in the process of manufacturing of the purchased products, as well as contributing to the diversification of the supply chain.