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Brussels is studying how European governments can sell weapons as easily as the Americans do.
In the wake of the Ukraine war, EU governments have significantly boosted military spending — but the juicy arms deals have often gone to U.S. defense contractors at the expense of European companies.
In order to claw back the initiative, the European Commission is raising the prospect of copying the U.S. Foreign Military Sales (FMS) scheme — a system where the Pentagon does the heavy lifting in securing arms sales by using the combined muscle of America’s industrial might and the political advantages of ties with Washington.
Europe doesn’t have any equivalent — which puts EU champions like Airbus, Leonardo and Thales at a disadvantage.
The European Commission is trying to figure out how to change that, according to an eight-page consultation paper seen by POLITICO.
“Should an EU equivalent of the U.S. FMS-scheme be considered, building on government-to-government schemes, to support procurement from the [European Defence Technological and Industrial Base] by EU member states and support to partners, including Ukraine?” the document reads. “If so, how should such a mechanism operate?”
In early 2024, Internal Market Commissioner Thierry Breton is expected to present a European Defence Industrial Strategy to help support the Continent’s European Defence Technological and Industrial Base (EDTIB). The consultation document is one of five papers circulated to national delegations to get their views on what the strategy should look like.
POLITICO previously reported on the first paper, which provides a broad overview of the main issues Brussels wants to tackle on both the supply and the demand sides.
The FMS scheme allows governments to buy directly from Washington without having to go through defense companies and can accelerate deliveries of equipment by drawing on U.S. Department of Defense stocks. According to a study referred to in the Commission paper, 95 percent of European purchases of U.S. kit since the war started have been made through the FMS scheme, for a total value of more than $60 billion.
Beating Uncle Sam
The plan for an EU FMS is still at a very preliminary stage — and could never end up seeing the light of day as its outcome will depend on feedback from EU countries. The EU is in a much more difficult position than the U.S. thanks to the tangle of competencies between Brussels and member countries — which largely call the shots on defense.
The consultation paper shows that Brussels is aware of the competitive edge given to U.S. defense contractors by the American system and is looking to provide Europe’s industry with the same kind of boost by ensuring government-to-government contracts can also become the norm on the Continent.
The paper doesn’t spell out whether such deals should be backed by national capitals or by the EU.
The large share of American weaponry in European defense contracts is a recurring issue identified as a top priority by the European Commission. “I’m fighting for [European countries] to buy European,” Breton told Le Figaro this week.
In October, the U.S. government announced plans to sell over $1.5 billion worth of missiles to European countries through the FMS scheme. Earlier this month, the U.S. DOD also approved the sale of M1A2 Abrams main battle tanks to Romania worth $2.5 billion.
On Tuesday, the CEOs of Airbus and Saab — two of Europe’s largest defense companies — called on European governments to be less reliant on U.S. weapons during a POLITICO event.
In its paper, the Commission points at long and complicated purchasing processes as a key disadvantage for Europeans, which ends up favoring “off-the-shelf procurement from third countries (e.g. through the US Foreign Military Sales Scheme).”
“Comparatively, using a one-stop shop offering quick solutions for procuring off-the-shelf equipment is deemed much simpler than launching a parallel procurement process within the EU,” the document reads.
Indeed, the U.S. FMS system allows governments to build a strategic relationship with the U.S. but also, crucially, to get some of the purchased equipment faster. The scheme foresees that some of the sold items can be taken directly from the Pentagon’s stocks.
As European countries seek to rearm in light of the Russian invasion of Ukraine, speed is of the essence and swift deliveries provide U.S. arms companies with a significant competitive advantage over their European rivals.
In the paper, the European Commission hints at looking for ways to also build stocks in Europe (the Commission wouldn’t own the stocks and EU countries would remain in the driving seat).
“How could [an EU equivalent of the U.S. FMS-scheme] support the availability of defence equipment from the EDTIB?” the document asks national delegations.
The EU has a track record in trying to use the market heft of one of the world’s largest economies on issues like allowing for combined purchasing of natural gas or taking the lead in buying COVID vaccines, but hasn’t done that in defense.
Jacopo Barigazzi and Joshua Posaner contributed reporting.
