Sunday, November 27, 2022

Ukraine war: Arms made at pace ‘highest since Cold War’ as Europe’s east aids Kyiv

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Eastern and Central Europe’s arms industry is churning out guns, ammunition, and other military supplies at a pace not seen since the Cold War as governments aim to aid Ukraine in its fight against Russia.

Allies have been supplying Kyiv with weapons and military equipment since Moscow went on a full-scale invasion of its western neighbour on 24 February, depleting their inventories along the way.

The US and the UK committed the most direct military aid to Ukraine until early October, a Kiel Institute for the World Economy tracker shows. 

But the likes of Poland and the Czech Republic are not too far behind, in third and ninth place, respectively.

Still wary of Russia — their Soviet-era main overlord — some former Warsaw Pact countries see helping Ukraine as a matter of regional security.

But according to both government officials and company reps, the conflict also presented new opportunities for the arms industry in many European countries.

Production cranked up as stocks dwindle

It is not just the ongoing war in Ukraine: many countries have increased their military and defence spending, both to replace what was donated and beef up what was previously in stock.

“There is a real chance to enter new markets and increase export revenues in the coming years,” said Sebastian Chwalek, CEO of Poland’s PGZ, a state-owned weapons and ammo consortium.

PGZ controls more than 50 companies making everything from armoured transporters to unmanned air systems and holds stakes in dozens more.

It now plans to invest up to 8 billion zlotys (€1.75 billion) over the next decade — more than double its pre-war target, Chwalek told Reuters. 

That includes new facilities located further from the border with Russia’s ally Belarus for security reasons, he said.

Other manufacturers are increasing production capacity and racing to hire workers, too, companies and government officials from Poland, Slovakia, and the Czech Republic said.

Immediately after Russia’s attack, some eastern European militaries and manufacturers began emptying their warehouses of Soviet-era weapons and ammunition that Ukrainians were familiar with as Kyiv waited for NATO-standard equipment from the West.

As those stocks have dwindled, arms makers have cranked up production of both older and modern equipment to keep supplies flowing. 

The stream of weapons has helped Ukraine push back Russian forces and reclaim swathes of territory, most recently in the south and the east of the country.

Chwalek said PGZ would now produce 1,000 portable Piorun MANPAD air-defence systems in 2023 — not all for Ukraine — compared to 600 in 2022 and 300 to 350 in previous years.

The company, which he said has also delivered artillery and mortar systems, howitzers, bulletproof vests, small arms and ammunition to Ukraine, is likely to surpass a pre-war 2022 revenue target of 6.74bn zlotys (€1.43bn).

A long tradition becomes a useful skill

Eastern and Central Europe’s arms industry dates back to the 19th century when Czech Emil Škoda began manufacturing weapons for the Austro-Hungarian Empire.

Under communism, huge factories in Czechoslovakia — the Warsaw Pact’s second-largest weapons producer — Poland and elsewhere in the area kept people employed, turning out weapons for Cold War conflicts Moscow stoked around the world.

“The Czech Republic was one of the powerhouses of weapons exporters and we have the personnel, material base and production lines needed to increase capacity,” its NATO Ambassador Jakub Landovsky said.

“This is a great chance for the Czechs to increase what we need after giving the Ukrainians the old Soviet-era stocks. This can show other countries we can be a reliable partner in the arms industry.”

The 1991 collapse of the Soviet Union and NATO’s expansion into the region pushed companies to modernise, but “they can still quickly produce things like ammunition that fits the Soviet systems”, said Siemon Wezeman, a researcher at the Stockholm International Peace Research Institute.

Deliveries to Ukraine have included artillery rounds of Eastern military-standard calibres, such as 152mm howitzer rounds and 122mm rockets not produced by Western companies, officials and companies said.

They said Ukraine had acquired weapons and equipment via donations from governments and direct commercial contracts between Kyiv and the manufacturers.

Balkan arms in Ukrainian hands strike Kremlin’s nerve

While some European countries are eager to provide guns and ammo to Ukraine, others are more hesitant, yet increasingly more involved.

In the Western Balkans, several arms producers have also been implicated in exporting their own merchandise to Ukraine since February, but the details — unlike in central and eastern Europe — have been kept under wraps.

All of the countries in the region have long-standing expertise in Eastern-doctrine weapons, having been under socialist and communist governments during the Cold War.

Although not behind the Iron Curtain, the Socialist Federative Republic of Yugoslavia was known for producing arms — both licenced copies of Soviet ones and its own variants — and exporting them, mostly to African countries.

After Yugoslavia’s breakup in the 1990s, its former member states have since continued to produce weapons and design new ones.

Others like Albania were also privy to Soviet and Chinese military technology, as communist dictator Enver Hoxha switched alliances until isolating the country completely — but the arms production never ceased. 

Now a NATO member country, Albania has confirmed it had sent military aid to Ukraine as early as June, domestic fact-checking outlet Faktoje reported.

On 21 August, four Czechs, two Russians and a Ukrainian were arrested in two separate incidents involving alleged espionage of ammunition factories and arms depots in southern Albania.

The Czechs were released, while the Russian-Ukrainian trio have been put on trial for taking pictures of the facility in Poliçan. Additionally, the three were said to have injured two military guards with pepper spray in an attempt to escape the authorities.

The latter incident was believed to have been connected to the Poliçan factory’s planned reboot of its production of Eastern-standard ammunition, considered to be in rare supply in other parts of Europe.

In July, a Ukrainian cargo plane crashed in Greece, said to have been carrying ammunition exports to Africa. Serbian authorities have denied that the shipment was intended for Ukraine, stating that the ammo was purchased by and being delivered to the Bangladeshi army.

Last week, a video on social networks showed Ukrainian forces unpacking a mortar launcher with markings that suggest it was made in Novi Travnik, Bosnia and Herzegovina.

The entity-level government of the Federation of BiH (FBiH) is the majority stakeholder in the company, BNT. Neither BNT nor the entity authorities have commented on the footage.

According to a Bosnian outlet Slobodna Bosna, citing Arms Trade Treaty (ATT) reports, BNT made €32.2 million in sales in 2021. The Czech Republic was the third-biggest buyer, with almost €3.5m in purchases.

The weapons from the Balkan countries in the arms of Ukrainians, however, might have struck the Kremlin’s nerve.

Claims by the likes of Russian Foreign Minister Sergey Lavrov and President Vladimir Putin that Ukraine has “recruited mercenaries from Bosnia, Albania and Kosovo” — while Western-donated weapons have made their way to the countries’ black markets — have been dismissed by officials in the region and the international community as “blatant lies” and Russian propaganda.

‘Boost unseen in 30 years’

“Eastern European countries support Ukraine substantially,” Christoph Trebesch, a professor at the Kiel Institute, said. “At the same time, it’s an opportunity for them to build up their military production industry.”

Ukraine has received nearly 50 billion Czech crowns (€2bn) of weapons and equipment from domestic companies, about 95% of which were commercial deliveries, Czech Deputy Defence Minister Tomas Kopecny told Reuters. 

Czech arms exports this year will be the highest since 1989, he said, with many companies in the sector adding jobs and capacity.

“For the Czech defence industry, the conflict in Ukraine, and the assistance it provides is clearly a boost that we have not seen in the last 30 years,” Kopecny said.

David Hac, chief executive of Czech STV Group, outlined the plans to add new production lines for small-calibre ammunition and said it is considering expanding its large-calibre capability. 

In a tight labour market, the company is trying to poach workers from a slowing car industry, he said.

Defence sales helped the Czechoslovak Group, which owns companies including Excalibur Army, Tatra Trucks and Tatra Defence, nearly double its first-half revenues from a year earlier to 13.8bn crowns (€566m).

The company is increasing production of both 155mm NATO and 152mm Eastern calibre rounds and refurbishing infantry fighting vehicles and Soviet-era T-72 tanks, spokesman Andrej Cirtek told Reuters.

He said supplying Ukraine was more than just good business.

“After the Russian aggression started, our deliveries for Ukrainian army multiplied,” Cirtek said.

“The majority of the Czech population still remember times of a (Soviet) occupation of our country before 1990 and we don´t want to have Russian troops closer to our borders.”

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