FTI Consulting Public Affairs Snapshot: Tales from Munich – Hope for the West, prepare for the worst?

The ‘Davos of Defence’, the Conference offered a unique tableau (as so many star-powered diplomatic summits often do), of the international fault-lines faced by the West. Whilst the latest tribulations in the US-China relationship simmered in the background, Ukraine was the primary focus of discussion. The US Vice-President, Kamala Harris formally accused Russia of committing “crimes against humanity,” underscoring the severity of the moment.

The gathering sent a clear message, with the Cold-War peace dividend having melted away, the West now requires a broad, longer-term strategy. The Western alliance is looking to how it can meet the extensive defence requirements precipitated by the War in Ukraine, following years of underinvestment in defence capabilities. Notably, whilst the Conference was attended by over 30 European Heads of Government and a number of North American delegates, no Russian officials were invited this year.

Yet, despite the confident rhetoric in respect of defending Eastern Europe democracies from Russian aggression, particularly from the United Kingdom, many Western nations are under pressure. They must deliver a step change to bolster stretched supply chains and munitions stockpiles, before political and economic costs begin to bite too heavily on the alliance’s resolve to support Kyiv.

These imminent decisions carry important consequences for industry and present a dilemma for policymakers during a time of global economic strain. This challenge is felt particularly in the UK ahead of the March Budget. Whilst the UK has set out an ambitious path on defence spending, the uncertain economic backdrop will have a bearing on how much the Chancellor can commit to, and how soon.

The Conference began with an address from President Zelenskyy, which framed the weekend’s discussions. Naturally, as part of Kyiv’s impressive campaign to lock in Western support (now targeting fighter jets), the Ukrainian President urged allies to speed up weapons deliveries, warning leaders that delays also threatened their security. Zelenskyy described the war in Ukraine as a ‘David-vs-Goliath’ struggle for freedom. Zelenskyy’s main message: “speed.”

The concerns expressed by Zelenskyy were echoed by Moldova’s President, Maia Sandu who, in the panel, “Beyond the Alliance: Partnering up for European Security”, sought to draw the Conference’s attention towards the destabilising efforts Russia is making in her country to subvert democracy and sow civil unrest; particularly in its occupied eastern province of Transnistria, which has been under de-facto Kremlin control for close to thirty years.

Early out of the blocks at the Conference was UK Prime Minister Rishi Sunak, who called for a “military strategy for Ukraine to gain a decisive advantage on the battlefield… and a political strategy to win the peace.” Despite the UK’s own current stretch in funding for defence, Sunak ambitiously asserted that allies need to “double down on our military support.”

With memories of the failed Minsk agreement and Budapest Memorandum still raw, Sunak spoke of how until Ukraine is eventually accepted into NATO, the international community must do more to deliver a framework for Ukrainian security. Sunak committed to continue providing Ukraine with NATO-standard weaponry and has set the goal of drafting a new charter ahead of the NATO Vilnius Conference in July, to ensure the security of not only Ukraine, but similarly imperilled democracies in Moldova and Georgia.

As alluded to, Sunak’s rhetoric was ambitious, however of course this activity over the weekend (let alone the ambitions set by his European partners on procurement), further rachets pressure on that all-important 15 March Budget.

Lying at the heart of deliberations on Ukraine was how exactly Western partners intend to both supply Kyiv and their own shrinking weapons stockpiles. The implications of the weekend’s rhetoric for industry could be tremendous, however it remains to be seen if funding can match ambition.

One of the stand-out procurement proposals was made by Kaja Kallas, the Prime Minister of Estonia. Kallas has circulated a proposal to form a European consortium of countries to jointly procure 1 million artillery shells for Ukraine at the cost of €4 billion. Estonia hopes that this programme (similar to that of the EU’s COVID-19 vaccination scheme), could offer an effective model for the procurement of other weapons needed by Ukraine’s military and provide greater investment certainty to the defence industry.

The President of the European Commission, Ursula von der Leyen used her address to endorse the joint procurement approach. She said that the EU would “move mountains” to get Ukraine the ammunition it requires. The President told delegates that “we could think of, for example, advanced purchase agreements that give the defence industry the possibility to invest in production lines now to be faster and to increase the amount they can deliver… It is now the time, really, to speed up the production, and to scale up the production of standardised products that Ukraine needs desperately, for example standardised ammunition.” Reporting from the Financial Times has highlighted that the European Commission has already allocated some €500 million to incentivise joint arms deals, however this is a fairly meagre sum when the scale of the procurement endeavour ahead is considered.

Echoing von der Leyen was the EU’s High Representative for Foreign Affairs and Security Policy, Josep Borrell. Borrell warned that the war will be finished unless allies identify new ways to speed up ammunition deliveries to Ukraine. Borrell told delegates that “we have taken too much time to make critical decisions such as providing battle tanks… when everybody knows that in order to win a classical war, a classical war with manoeuvres of heavy arms, you need battle tanks. You will not win this war without this kind of arms.” A special meeting of EU defence ministers is planned for 8/9 March which will offer European countries a further chance to discuss the present issues in greater detail.

Summing up the deliberations, the Chair of the Conference, Christoph Heusgen, said bluntly that “Europe has to do its homework… European and German defence spending has to go up… We have to have the capabilities to support Ukraine, but also to build up our own defence.” This message was echoed by the NATO Secretary General, Jens Stoltenberg who told the Conference that the Ukraine crisis demonstrates that security is global and that “we also know that Beijing is watching closely, to see the price Russia pays, or the reward it receives for its aggression.”

President Macron of France doubled down on his own commitment to supporting Kyiv (to “intensify our efforts… for an extended conflict”) and suggested that Paris could host a multinational Conference on European air defence, whilst calling for massive defence investments. The President said that “I hope that with our German, Italian and British partners – and all those who wish to join us in Europe – we will be able to organise a conference in Paris on Europe’s air defence.” Although unclear with little detail, such an effort could be intended to calculate the possibility of a joint effort to supply Ukraine with fighter jet aircraft, and also better coordinating air defence across the continent.

Also backing the calls for greater defence spending was the German Chancellor, Olaf Scholz, who said that Germany intends to “permanently” adhere to NATO’s 2% spending target, whilst the German defence minister, Boris Pistorius said that “it must be clear to everyone: It will not be possible to fulfil the tasks that lie ahead of us with barely two percent.” However, it is worth noting reports that despite these claims and Germany’s €100 billion increase to its defence budget, the country will likely fail to meet the 2% GDP target both this year and next on present levels.

Clear in Munich this weekend was the fact that the West’s ambition to stand up to international adversaries is mounting. However, in the coming months NATO partners will need to follow through on their commitments to larger-scale defence and security-related investments, which will prompt tough budgetary decisions in European capitals (look no further than the current wrangling between the UK’s MOD and Treasury).

However, whilst greater investment ultimately dangles the prospect of greater opportunities for industry, we will need to wait to see if the growing rhetoric to reverse European military decline will be fully matched with hard cash. It seems for now the proof will be in the pudding.