Berlin’s reluctance to approve re-exports of German-made tanks to Ukraine is damaging trust in the country’s defence sector, prompting warnings from Polish, Slovak and industry officials that future purchases and military co-operation are at risk.
The EU and Nato have sought to respond to the war in Ukraine by encouraging European governments to work on joint defence projects, but the furore over chancellor Olaf Scholz’s refusal to allow Leopard 2 tanks to be exported to Kyiv has given other countries a reason to question Germany’s partnership credentials, officials told the Financial Times.
“It’s always better to go national. If you have to go multinational, there may be some strings attached and there are some lessons learned that are indeed derived from the current crisis,” said Tomasz Szatkowski, Poland’s ambassador to Nato.
“The Leopard case is just one of them,” he added. “And we are implementing those lessons now with the new procurement decisions.”
Poland’s prime minister Mateusz Morawiecki said on Monday that Warsaw would formally apply to Berlin for permission to export Leopards to Ukraine, in a bid to pressure Scholz into approving the tank deliveries.
The war in Ukraine has been a boon for German defence producers. The Düsseldorf-based Rheinmetall, which manufactures the cannon and electronics for the Leopard 2 as well as a range of other vehicles and ammunition, has seen its share price more than double since last year’s invasion.
A promise by Scholz to overhaul Germany’s armed forces and increase its defence spending also raised market expectations of a flurry of orders for German arms manufacturers.
Germany has long been regarded as one of the world’s top manufacturers of tanks. Many countries, including the US, require customers to agree to re-exporting restrictions. But those restrictions usually do not apply to Nato partner countries such as Ukraine.
Several defence industry officials said that the country’s arms makers were fearful that the Leopard row would dent the sector’s potential.
One German defence industry lobbyist who declined to be named said his country’s re-exporting rules were seen as stricter than, for instance, France and UK’s. “Although the label ‘made in Germany’ still stands for quality, it is never entirely clear to the customer whether the export permits will be granted,” the lobbyist said.
Leopards, which are operated by a dozen EU armies, are widely viewed as well-suited for Ukraine’s needs. Multiple bloc foreign ministers used a meeting in Brussels on Monday to demand Germany agree to their export to Kyiv.
“Put simply, it is great news for any of Germany’s competitors in the defence space,” said a second defence industry official.
Last May, the EU responded to concerns over the bloc’s defence capabilities by setting up a new body tasked with exploring “future joint procurement projects”. But EU officials said that the Leopards experience could impact appetite for future co-operation with Berlin.
“The risk is that this idea takes hold that ‘if the Germans are involved, then we don’t know if we can fully trust it’,” said one bloc official involved in talks over closer defence co-operation.
“These are the times when trust is being built,” said Peter Bator, Slovakia’s ambassador to Nato. “If this [permission] is going to be refused by anyone, then it would definitely not contribute to trust.”
Sash Tusa, an aerospace analyst at the London-based Agency Partners, said that the row risked harming Germany’s plan for pan-European defence industrial co-operation on projects such as a joint fighter jet developed by France, Germany and Spain. Paris and Berlin have also floated plans for a common tank to replace both the Leopard and the French-made Leclerc.
“The French are clearly very worried that Germany will not be reliable,” said Tusa. “And what we are seeing now does not help this impression.”
Sven Weier, an analyst at the Swiss bank UBS, said that “whether it was tied into frustration [with Berlin] or not, we have already seen evidence for market share loss of German contractors.”
Weier noted that Poland bought tanks from the US and South Korea rather than Germany and that the Czech Republic and Slovakia purchased British combat vehicles. “Some decisions could have been in favour of Rheinmetall but weren’t.”
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2023-01-24 04:00:21Z
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