Good news for many: sixteen thousand billion will continue the disaster next door

In addition to the fact that the NATO member states formulated a unified and tough message towards Russia and even named China as Moscow’s ally, they also made decisions that which are also significant from an economic point of view. The summit in Washington provided the member states with the perfect opportunity to demonstrate their joint action against Russian military aggression and their unwavering determination to maintain Ukraine and the European security system.

But the point is still that the member states assumed the necessary political and economic costs in order to increase the costs of Russian aggression,

And Russia’s military capabilities should be weakened

– is revealed by the analysis of the John Lukacs Institute (JLI) of NKE.

NATO is getting stronger

The strengthening of NATO is well indicated by the fact that In 2024, 23 out of 32 member states will meet the 2 percent GDP ratio requirement for defense spending. Within the defense budget, Compared to 2014, thirty countries reach the 20 percent modernization goal, Canada and Luxembourg are the exception, i.e. modernization has become general.

This positive trend did not stop even during the economic crisis caused by COVID, and then Russia’s military aggression in 2022 gave it a new impetus. That way

a ten-year average growth of 5.64 percent per year was achieved – in which the years 2023 (+9.3 percent) and 2024 (17.9 percent) stand out,

clearly indicating the intention to strengthen defense capabilities and expand defense industrial developments and orders. According to the institute’s experts, the “underperformers” include Spain and Italy, which are in a more vulnerable economic situation among the large member states, while Belgium, Croatia, Canada, Luxembourg and Portugal spend less on defense than expected.

The JLI Strategic Defense Research Program highlighted that a new NATO command will be established in Wiesbaden, Germany, from where the member states’ military support to Ukraine will be coordinated in the future. a NATO Security Assistance and Training for Ukraine (NSATU) in program.

JLI sees NSATU as representing some kind of tangible “result” for Kyiv on the one hand – since the membership invitation is still not a realistic option – and on the other hand, German involvement can be an alternative if necessary, if the American attitude changes. The various training activities provided to the Ukrainian armed forces, as well as the “capability coalitions”, which have ensured the delivery, operation and supply of certain critical weapon systems in bilateral or multilateral frameworks, will come under the authority of the command. These are already in place for F-16 fighter jets, air defense equipment, artillery equipment and various military equipment, as well as war materials, and the parties expect (also) more effective coordination from bringing them under joint command.

Coalition of the Willing

In the last year alone, Ukraine concluded twenty bilateral security agreements: with Belgium, Denmark, the United States, the United Kingdom, Estonia, the European Union, Finland, France, the Netherlands, Iceland, Japan, Canada, Latvia, Lithuania, Germany, Norway, Italy , with Portugal, Spain and Sweden.

Sixteen thousand billion forints

Outgoing NATO Secretary General Jens Stoltenberg confirmed that

assure Ukraine that it will receive at least €40 billion/$43 billion in additional military aid over the next twelve months

– which corresponds to the magnitude of the previous annual support. The use of this resource is also an area where NSATU can play a role: they will prepare two comprehensive assessments that will assess Ukraine’s defense and defense industry needs for the next year(s), and thus, on the one hand, they will be able to target development areas , on the other hand, to share the tasks between the member states – emphasized the JLI.

In addition, the member states also commit to a joint, coordinated expansion of military production capacity. Similar to the defense industry processes taking place in the European Union, the NATO member states also want to expand production capacities in those key areas, where the narrow production cross-section limits both the expansion of their own assets and munitions stock, as well as the production of support for Ukraine. In addition to air defense and artillery systems, this is especially true for interceptor missiles and ammunition, where the undertaking sets two goals:

1. the member states should create large, joint order packages enabling stable, predictable production (and the necessary capacity expansion investments) spanning several years, making the defense industry players interested and also making the procurement itself more cost-effective;
2. as well as the application of uniform standards that strengthen common use and enhance interoperability during new orders.

A virtual cash register

Tamás Csiki Varga, senior scientific associate at JLI, told Economx that the support intended for Ukraine is described quite well in the accepted Pledge of Long-Term Security Assistance for Ukraine – as an “appendix” to the Final Declaration. According to this, it includes military equipment, military materials, logistics, operation-maintenance and training support, transport and handling costs of the support elements, own administrative costs related to the provision of the support, handing over non-lethal devices, the expert listed.

So the 40 billion euros is actually a virtual treasury, in which they include at face value everything that arises as costs and consideration, i.e. far broader categories than just weapons. Tamás Csiki Varga calls it virtual because

Accordingly, there may be weapons, ammunition, etc. orders from it, but it is not yet visible, exactly what and where it will take place. Due to the currently emerging trend, air defense devices and interceptor missiles, drones and anti-drone devices, F-16s and their weapons, artillery and other ammunition, as well as long-range rocket artillery ammunition will certainly be part of them – explained the senior scientific associate of the NKE John Lukacs Institute .

That’s the only way it’s worth producing a weapon

Anton Bendarzhevský, the director of the Oeconomus Economic Research Foundation, also emphasized to our portal that too many details are not yet known, we can assume that the principle will be the same as in the case of the EU peace framework. If a country hands over its military equipment to Ukraine, it will be paid in the form of central support, that is, this country can purchase newer, better weapons instead of the old, less modern equipment handed over to Ukraine.

The NATO framework is also about the fact that member states can get rid of military equipment by giving them to Ukraine and then acquiring new ones from the common framework of the military bloc.

According to the security policy expert

an obvious and stated goal is to boost the Western defense industry, we have been hearing this for years, and this is happening now, because long-term contracts have been lacking in the sector until now.

These private companies will only expand their capacity if it is profitable for them.

If the war ends tomorrow and the billion investment remains in the production lines, then the expansion will not pay off, but if they receive long-term, 8-10 year government orders, if there is predictability, then these companies will embark on the necessary developments.

– emphasized Anton Bendarzhevskij, citing as an example the armament program launched in 2016, Zrínyi 2026, which modernizes the domestic armed forces, which is also a predictable ten-year state investment from this point of view.

In Europe, since the nineties, no serious money has flowed into military developmentbecause we naively thought that the war era was over, but today the situation has changed – added the expert of the post-Soviet region.

A European rush for arms

The Russian-Ukrainian war opened the eyes of the decision-makers in the Member States and the EU, and now billions of euros would be spent on defense policyfrom munitions to drone technology to the space industry.

It should also not be forgotten that military development is a business, even for the civil entrepreneurship sector. We also talked about these in the Economx Podcast Péter Siklósi with former Deputy Secretary of State for Defense Policy and Planning and With Áron Fellegiwith the vice president responsible for European Union affairs of EuroAtlantic Zrt.