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22 Jul 22. Poland to buy jets, tanks and howitzers from South Korea, says minister. Poland will buy 48 FA-50 fighter jets, a first instalment of 180 K2 Black Panther tanks and howitzers from South Korea, Warsaw’s defence minister was quoted as saying on Friday, as the country strengthens its army because of the war in Ukraine.
The Feb. 24 invasion, which Moscow calls a “special military operation” has raised security fears among many former eastern bloc countries, and NATO member Poland has vowed to boost defence spending to 3% of gross domestic product (GDP) and more than double the size of its army to deter any attacks.
“This year, the first units will be delivered and in total there will be 180 (K2 Black Panther) tanks in the first order; ultimately, these tanks will be produced in Poland,” Mariusz Blaszczak said in an extract from an interview with conservative weekly Sieci published online.
Blaszczak said Poland would also buy howitzers and FA-50 fighter jets from South Korea.
“We are interested in purchasing three squadrons, that is 48 aircraft,” Blaszczak said. “The first aircraft would be delivered to Poland next year.”
The K2 Black Panther tank is made by Hyundai Rotem (064350.KS). The FA-50 fighter jet is produced by Korea Aerospace Industries (KAI) (047810.KS). (Source: Reuters)
22 Jul 22. Royal Navy tracks movements of Russian submarines into the North Sea. A Royal Navy warship has tracked the movements of two Russian submarines as they sailed into the North Sea.
British submarine hunter HMS Portland was on watch as cruise missile submarine Severodvinsk and Akula-class attack submarine Vepr made their underwater journey south along the Norwegian coast from the Arctic.
The Type 23 frigate shadowed the submarines as they surfaced separately in the North Sea, north west of Bergen, Norway, on July 16 and 19, before NATO and Baltic forces took over duties as they continued to St Petersburg for Russian Navy Day celebrations on July 31.
Portland and her specialist Merlin helicopter – both equipped with cutting-edge sonars, sensors and torpedoes for submarine-hunting operations – reported on the movements of the Russian Northern Fleet vessels.
One of the RAF’s new long-range maritime patrol aircraft, the P8 Poseidon, also worked closely with HMS Portland to hunt and track the submarines.
This operation comes soon after HMS Portland took part in NATO’s premiere submarine-hunting exercise. This large scale joint exercise proved to be the ideal prelude for this type of live operation.
HMS Portland’s Commanding Officer, Commander Tim Leeder, said: “Our success on operations marks the culmination of many months of specialist training and exercises. Critically, the cohesiveness of Royal Navy, RAF and our allies capabilities ensures that we are capable of conducting and sustaining these types of anti-submarine operations in the North Atlantic.
“It is testament to my sailors’ dedication and professionalism, alongside that of our allies, that we are able to conduct this strategically crucial role.” (Source: https://www.gov.uk/)
21 Jul 22. Germany: Economic growth will slow in 2022 as banks issue recession warning for 2023. The International Monetary Fund (IMF) has published a report estimating that Germany’s economic growth is set to decline substantially, having dropped from a 2% growth projection in May 2022 don to 1.2% as of mid-July. The IMF further notes that economic growth will continue on a negative trajectory to approximately 0.8% by 2023. However, alternative forecasts – including one published by Deutsche Bank – suggest that 2023 could actually see a recession take place, with German GDP shrinking by 1% in the best-case scenario, or as much as 6% in the event of a gas import ban by Russia. The IMF have called for Germany’s finance minister to suspend debt rules in order to mitigate the risk of a serious economic recession. As such, increased policy risk to firms and elevated risk to socio-economic health will remain for the short term. (Source: Sibylline)
21 Jul 22. Dassault chief confirms fighter prototype delay amid workshare dispute. The Franco-German-Spanish Future Combat Air System (FCAS) program remains in a monthslong standoff that risks pushing back the first flight of its signature fighter, a senior industry official said Wednesday. The program was supposed to enter its next phase late last year, but has been held up as prime contractors Dassault Aviation and Airbus Defence and Space have been unable to agree on the division of work for the next-generation fighter (NGF) aircraft element, Dassault Chairman Eric Trappier said in a mid-year earnings press conference.
“On the next-generation fighter, Dassault must be the uncontested leader,” Trappier asserted, adding that there has been some “issues of interpretation” between the two companies on what it means to be the prime contractor.
Dassault said in its financial statement released Wednesday that while it is the prime contractor for “Pillar 1,” meaning the next-generation fighter, “The prime contractor/main partner relationship is still to be clarified.”
“Dassault Aviation is seeking a clear statement of acceptance of its role as prime contractor by Airbus Defence and Space for the NGF,” the statement said.
The FCAS – also called SCAF, for its French name “système de combat aérien du futur” – program consists of seven technology “pillars,” of which the next-generation fighter is the centerpiece.
The other pillars include a new engine for the fighter jet, a next-generation weapon system, new remote carrier drones, advanced sensors and stealth technology, and an air combat cloud network. Dassault represents France’s participation in the program, while Airbus represents Germany, and Indra Systems leads Spain’s industry participation.
When the FCAS program was announced by France and Germany in 2017, the goal was to have a fighter demonstrator flying by 2025. By last year, that date had slipped to 2027, and now the schedule has shifted to 2028, Trappier said.
“We have already lost three years in two years,” he said, adding that if these workshare disputes reemerge between the two companies every two years, it will eventually become impossible to complete the program.
Industry officials last year already acknowledged the tough roadmap to field the full FCAS system of systems by 2040. The team completed Phase 1A, an 18-month research phase, late last year, and has been stymied ever since.
Airbus, for its part, is ready to move forward on Phase 1B, a company spokesperson said in a Thursday email to Defense News.
“So far, fair and balanced agreements have been achieved for six out of the seven pillars. A similar agreement still needs to be achieved on the remaining NGF pillar,” the spokesperson said.
“Airbus does not contest the overall NGF pillar leadership of Dassault. However, Airbus sees itself as a main partner, at eye level, and not just a supplier,” they continued.
Despite the ongoing impasse, France’s new defense minister appears determined to push the FCAS program forward.
Sebastien Lecornu acknowledged the “stalling” of the program in his first hearing as ministry chief before the French Senate’s defense and foreign affairs committee Wednesday, but asserted that he was working with his counterparts in Germany and Spain to gain ground. He has meetings scheduled with each country’s defense minister by early September, he told the committee. Meanwhile, the United Kingdom-Italy-Sweden FCAS program aims to fly its own combat aircraft demonstrator by 2027, British Defence Minister Ben Wallace announced this week at the Farnborough Airshow outside of London. (Source: glstrade.com/Defense News)
21 Jul 22. Europe: Gas Shortages.
- Energy security risks in Europe have increased considerably since Russia’s invasion of Ukraine, with many countries triggering the EU gas warning system. This could allow governments to resort to gas rationing to ensure gas is supplied to households and critical infrastructures this winter.
- Russian gas deliveries to Europe will almost certainly remain limited (between around 20 to 40 percent of normal capacity). This will keep gas prices high and increase economic uncertainty in Europe, maintaining pressure on European governments going forward.
- Those countries which are most reliant on Russian natural gas imports are likely to introduce measures that will aim to reduce industrial gas consumption, especially in the chemicals, glass and refining sectors. In order to improve energy security and to compensate for limited Russian gas flows, consumption will have to be reduced by about 15 percent for the next ten months, according to estimates by the European Commission and the Brussels-based think tank Bruegel. In addition, EU countries are now maximising their liquified natural gas (LNG) imports.
Context
Energy security risks have increased significantly in Europe due to Russia’s reduction of natural gas flows via Germany’s Nord Stream 1 pipeline. Although Russia resumed the flows after a scheduled annual pipeline refurbishment between 10 and 21 July, these occurred at a limited capacity. Russia possibly wants to leverage maximum pressure on EU member states while keeping gas prices high. Despite the resumption of gas deliveries, it is almost certain that gas flows via the Nord Stream 1 pipeline will remain varied between around 20-40 percent capacity in the coming months. EU member states will almost certainly struggle to fill their gas reserves to 80 percent capacity until November. It is also possible that Moscow will halt gas deliveries entirely for a limited period in the near future to increase pressure on the EU during key decisions regarding the war in Ukraine. Moscow has already stopped delivering gas to Bulgaria, Denmark, Finland, the Netherlands and Poland after they refused to comply with a new payment scheme.
Several EU countries have already triggered the bloc’s gas warning system, which allows governments to adopt measures to ensure that households and critical national infrastructure are protected from gas shortages if gas flows do not increase. It is therefore likely that the most vulnerable countries, including Austria, Bulgaria, Germany and Hungary, will have to introduce rationing later in 2022 for certain industries, including refining, chemicals and glass sectors, as well as for large shopping malls and stadiums. According to current EU regulations, a solidarity scheme is in place in case of an extreme gas crisis. As part of this scheme, EU member states are expected to reach bilateral agreements to share gas when necessary. Nevertheless, the scheme might be hindered by logistical challenges, infrastructural shortcomings and a lack of political will. Limited gas exports via Nord Stream 1 will threaten energy security across Europe throughout 2022 The EU imported about 40 percent of its gas from Russia before the invasion of Ukraine. While most EU member states have stepped up their efforts to diversify their energy mix over the past six months, it is highly likely the volatility of Russian gas exports will trigger gas emergencies in several countries in 2022. This comes despite the resumption of gas deliveries via the Nord Stream 1 on 21 July. Fatih Birol, head of the International Energy Agency, issued a warning on 18 July that non-Russian suppliers of gas, including Azerbaijan, Norway, Qatar and the US, will not be able to meet the EU’s energy needs, regardless of diversification efforts. This is likely to trigger EU-wide energy shortages this winter.While Austria, Croatia, Denmark, Estonia, Finland, Hungary, Italy, Latvia, the Netherlands, Slovenia and Sweden have already triggered an ‘early warning’ gas alert level, the first of the EU’s three gas emergency levels, it is likely that member states will have to trigger the second (and possibly even the highest) level if Nord Stream 1 deliveries remain below 40 percent capacity in the coming months. The first level only ensures the close monitoring of gas supplies by governments. The second level is triggered when there is a substantial deterioration in the gas supply. It allows governments to adopt measures such as ensuring suppliers pass on rising energy prices to consumers to reduce demands. The EU’s highest gas warning level entails state control over energy distribution and potential restrictions for households and industrial users. On 14 July, the Russian energy giant Gazprom cited extraordinary circumstances regarding its inability to fulfil contractual obligations for at least three European gas suppliers. The declaration likely concerns gas deliveries through the Nord Stream 1 pipeline. Furthermore, it likely reflects Gazprom’s attempts to shield itself from compensation from disruption to future gas deliveries, suggesting that Russia intends to cap gas deliveries to Europe in the coming months. Moscow may even halt exports entirely via the pipeline in order to maximise pressure on European governments. Germany increased its gas supply warning to the second highest ‘alert’ level after Russia reduced its gas deliveries by about 60 percent on 23 June. Nevertheless, German government officials stated that they still expect markets to handle the crunch without the need for non-market-based measures. Germany is the largest net importer of Russian natural gas in Europe, with at least 35 percent of its supplies coming from Russia. As such, a complete halt of gas deliveries or further disruptions via the Nord Stream 1 will almost certainly prompt Berlin to trigger the highest warning level.
German lawmakers passed a law on 7-8 July which paves the way for a price-sharing mechanism that would distribute higher gas prices across industries to prevent the gas crunch from impacting specific sectors disproportionately. Also on 7 July, German lawmakers granted the government the authority in the event of an emergency to halt power being generated from stations which are not considered essential. If the ‘emergency’ level is triggered, manufacturers will almost certainly need to decrease their production further, while local utility companies could also face collapse.
Besides Germany, various other EU countries are heavily dependent on Russian gas deliveries. Around 80 percent of Austria’s gas comes from Russia. In May, the Austrian energy minister stated that it could take years for Austria to diversify from Russian gas imports. Energy insecurity would therefore increase significantly if Russia cut back its gas deliveries to Europe significantly. Following the start of the refurbishment works on Nord Stream 1, OMV, an Austrian petrochemical company, stated that it is now receiving about 70 percent less natural gas from Russia.
Austrian gas storages are almost 48 percent full. Vienna is in talks with Norway, Qatar and some North African countries to explore increasing gas imports. At the end of March, the Austrian government triggered the first level of the gas supply warning; the government will likely order industries to draw up plans to use alternative energy sources where possible. If Russian gas deliveries remain well below the agreed levels and Vienna remains unable to fill its gas reserves to 80 percent capacity by November, the government will almost certainly introduce rationing measures, targeting industrial users primarily.
Italy is the second-largest consumer of Russian gas after Germany. While the country was able to cut its reliance on Russian gas from about 40 percent in early 2022 to about 25 percent in July, a complete halt to Russian gas deliveries would still elevate energy security risks significantly in the country. The Bank of Italy’s governor, Ignazio Visco, said earlier this month that a full cut to Russian gas exports could trigger a recession in the country.
Russia already halted gas deliveries to Italy by around 15 percent in June ahead of the EU’s decision to back Ukraine’s membership bid. Amid the scheduled refurbishment works on the Nord Stream 1 pipeline, gas deliveries to Italy decreased as of 11 July. In early July, gas reserves in Italy were about 64 percent full, and Rome is now actively working to source alternative suppliers. Prime Minister Draghi prioritised forging closer ties with a range of African countries to secure alternative sources of gas imports. Nevertheless, if Italy fails to fill its gas reserves sufficiently ahead of the winter, it is likely that rationing measures, primarily targeting industrial production, will be introduced.
The Czech Republic, Hungary, Poland and Slovakia are also heavily reliant on Russian gas deliveries. Of these four countries, Hungary possesses the highest reliance, with around 95 percent of its gas imports coming from Russia. Hungary’s gas storages were filled to only 44 percent capacity in July. Nevertheless, Hungary is the least likely to be targeted by gas cuts due to its political alignment with the Kremlin on several issues, including the war in Ukraine.
Despite the EU solidarity scheme, Hungary declared a state of energy emergency on 13 July, banning all exports of natural gas from the country. In response, the European Commission stated that “individual national restrictions affecting cross-border gas flows are unwarranted and will only exacerbate problems in the current gas market”. It added that upending the solidarity scheme on economic grounds is “never a legitimate justification”.
Around 85 percent of Slovakia’s gas comes from Russia. Bratislava has agreed on emergency LNG deliveries from Norway and several ‘unspecified countries’, one of which is likely to be Poland given the Poland-Slovakia interconnector expected to open in late 2022. Currently, Slovakian gas stores are filled to 64 percent capacity. However, experts claim that the government’s efforts to diversify the country’s energy mix is insufficient, and that Slovakia could face gas shortages this winter.
The Czech Republic is reliant on Russian imports for around 87 percent of its natural gas usage. Currently, Czech gas storage facilities are about 40-50 percent full. The Czechs have also negotiated bilateral agreements with Oman and Qatar over emergency LNG flows to move away from absolute reliance on Russian imports, which will substantially improve resilience in the longer term. Prague will also benefit from the Poland-Slovakia interconnector once it goes live due to Soviet-era energy infrastructure connecting both countries.
In addition, the German and Czech governments signed a preliminary bilateral statement on 11 July focusing on energy-sharing measures to improve energy resilience across the region. The joint statement does not constitute a legally binding agreement between both countries, nor does it fully outline what the final form of an energy-sharing solidarity scheme might look like.
With similar solidarity agreements already in place with Austria and Denmark, and a forthcoming agreement due to be signed with Switzerland, the Czech agreement will improve investor and business confidence in the face of impeding Russian gas cuts. Nevertheless, the Czech Republic still faces a substantial risk of punitive energy cuts by Russia due to its role in holding the EU Council Presidency and its backing of Ukraine’s EU membership bid.
Countries less dependent on Russian gas will also face significant gas price increases and uncertainty
Those EU member states which are less dependent on Russian gas will still be affected by soaring energy costs and most other member states’ scramble to secure alternative suppliers. In addition, countries which are less dependent on Russian imports will need to be prepared to support more dependent member states through the EU’s solidarity mechanism in case of a serious gas crunch later in 2022.
France is less dependent on Russian gas than most other European countries. Its primary natural gas supplier is Norway (around 36 percent); Russia accounted for only about 17 percent of its gas imports earlier this year. France also receives gas from Algeria, the Netherlands and Nigeria. Gas deliveries to France were also halted by Moscow earlier in June in response to France’s support for Ukraine’s EU membership bid. Since France has access to four LNG terminals, any cuts to Russian gas deliveries to Europe will have a more limited impact on the country’s energy security. Nevertheless, any disruption to French LNG imports and electricity production, such as limited electricity production due to maintenance issues at a nuclear reactor, will limit Paris’s ability to fill its gas storages to 80 percent by November.
Gas reserves in France are currently about 68 percent full. Nevertheless, the economy and finance ministry recently said it was looking into specific companies’ and sectors’ needs in order to better understand which companies would need protection in case of an emergency. It is likely that companies with gas consumption of over 5 gigawatt hours (GWh) per year will be the first to be targeted by rationing measures, though the ministry suggested that construction material companies could be exempt from rationing.
At the end of May, Russian gas deliveries to the Netherlands were also halted due to disagreements over the currency of payments. However, the Netherlands is also less vulnerable to Russian gas cuts; the country imports around only 15 percent of its gas from Russia. The Netherlands relies heavily on domestic gas production and enjoys access to LNG facilities. The country’s Groningen gas field, the largest in Europe, has helped to reduce its reliance on Russian imports. The field could also be used to supply gas to neighbouring countries. However, although around 450 bn cubic metres of gas remain untapped at the time of writing, the government has reduced production activity at the Groningen field in recent years due to concerns about an increased risk of earthquakes in the area.
The Dutch energy minister, Rob Jetten, stated earlier this month that the Netherlands could increase production at the Groningen gas field if Russia cuts gas deliveries to Europe entirely. The LNG terminal in Rotterdam is also operating at almost full capacity, and the country has stepped up its LNG imports to compensate for reduced imports of Russian gas. Furthermore, Amsterdam has secured a new floating LNG terminal which will allow the Netherlands to double its LNG imports. The Netherlands also managed to decrease its gas usage by about 33 percent this year, further reducing reliance on Russian gas deliveries. As of July, Dutch gas storages are around 56 percent full.
Poland was previously reliant on Russian natural gas for about 55 percent of its total imports. Moscow halted gas deliveries to Poland in May due to a dispute about payment terms. Poland is among the most resilient of the Central and Eastern European nations, and is now importing gas from Italy and France as well as through the Baltic pipeline linking Poland and Norway. Additionally, Poland has stepped up its LNG imports, primarily from Qatar and the US, but also from Norway, Nigeria and Trinidad and Tobago. Polish gas storages are filled to 97 percent capacity as of July 2022; the country may play a vital role in shoring up less resilient neighbours in the region in the coming months, such as Slovakia.
In the coming year, LNG deliveries from the US to Poland could be redirected to other vulnerable countries in the region through interconnectors intended to be activated before winter. If the Poland-Slovakia interconnector is established, this will significantly improve regional energy security. If it is delayed, we anticipate a much greater risk to Slovakia and the Czech Republic.
Forecast
Although Russian gas deliveries resumed on 21 July, gas flows will almost certainly remain volatile and limited throughout 2022, hindering European countries’ ability to fill their gas storages to the required 80 percent capacity by November. While European countries have stepped up diversification efforts, LNG imports intended to offset the reduction in Russian deliveries are already reaching their limits; the EU is struggling to find additional alternative suppliers. As such, European gas consumption will need to be reduced by 15 percent on average in the coming ten months in order to prevent gas shortages this winter.
Several European countries will have to enforce even larger cuts to gas consumption so as to protect households and critical infrastructure from winter shortages. This is due largely to a lack of interconnectedness across the continent. The most vulnerable countries will need to reduce their gas demands by around 40-50 percent to prevent gas shortages; these include Bulgaria, Croatia, Greece and Serbia. Other countries, including
Denmark, France, Portugal, Spain and Sweden, will have to make minimal or no changes to their gas consumption in order to ensure energy security this winter.
In order to prevent winter gas shortages, countries more vulnerable to reduced Russian gas inflows, including Austria, Bulgaria, Germany, Hungary and Slovakia, are highly likely to adopt emergency measures to reduce demand for natural gas. They will primarily target non-essential industries. While no government has triggered the highest level of the EU gas warning system, countries which fail to fill their gas storages to around 80 percent in the coming months will almost certainly have to introduce emergency measures. Governments are therefore still drawing up emergency plans. The exact scope of these measures and the list of industries set to be affected are likely to be revealed in the coming months.
The most likely scenario is that European governments will allow energy providers to pass on rising gas prices to consumers, pressuring industries to lower their own demands to reduce costs. If Russian gas exports decrease further or halt entirely, it is likely that governments will adopt rationing measures which target non-essential companies consuming the most natural gas, especially those in the refining, chemical and glass sectors. This will increase business operational and policy risks for these companies and industries in the short term. While several EU countries are less vulnerable to disrupted natural gas deliveries from Russia, soaring energy prices across the region will continue to elevate socio-economic health risks as well as costs for businesses. (Source: Sibylline)
21 Jul 22. Italy: Draghi’s Resignation. After opposition parties abstained from a vote of confidence in Italy’s national unity government, Prime Minister Mario Draghi handed in his resignation for the second time on 21 July. President Sergio Mattarella will now dissolve the parliament and announce early elections. PM Draghi is likely to remain in a caretaker capacity in the meantime.
SIGNIFICANCE
- Prime Minister Draghi previously submitted a resignation last week, after the right-wing Five Star Movement (M5S) declined to cooperate with a key vote on crucial reforms to Italy’s cost-of-living support package. However, that attempt was rejected by President Mattarella, and PM Draghi subsequently addressed the parliament on 20 July in an attempt to unite his government. Thereafter, coalition members Lega Nord, Forza Italia and M5S did not participate in the confidence vote which Draghi initiated in an attempt to unite his broad coalition government behind his policies.
- If early elections will be held this autumn, the right-wing bloc, including the far-right Brothers of Italy, is the most likely to win the majority of the votes as they currently lead opinion polls at 45 percent. If the far-right party converts these polls into electoral success sufficient to lead the next government, a moderate shift in Italian foreign policy is very likely. Giorgia Meloni, leader of Brothers of Italy, will likely be less vocal in her support for Ukraine than Prime Minister Draghi, as in recent years she has been outspoken in expressing her support for Russian President Vladimir Putin.
- This will also drive internal regional tensions with the European Union, especially on controversial issues such as migration and asylum policy, competition law, rule of law and judicial reforms. Domestically, a government led by the far-right Brothers of Italy could increase ethno-religious tensions within the country due to their historic anti-migrant/anti-refugee stance, which would also increase the risk of domestic unrest and targeted anti-ethnic violence.
FORECAST
After 18 months of relative stability since PM Draghi formed his national unity government, political instability risks will increase significantly in Italy in the coming months. Due to potential early elections, it is unlikely that the parliament will adopt the budget for 2023 this autumn, increasing economic uncertainty in the country and negatively impacting socio-economic health. Without a government enjoying broad parliamentary support, the next government will be unable to push through the structural reforms of the tax, justice and procurement systems that are needed to get the greenlight for the transfer of the next tranche of European Recovery Funds by the European Union, that could further contribute to a potential economic downturn in the country.
If early elections are called, the right-wing conservative bloc led by the far-right Brothers of Italy is expected to win the election. In that case, it is highly likely that regional tensions with the European Union will increase, and the right-wing bloc is unlikely to enjoy the broad support of the government, therefore, their ability to push through the reforms required for transer of the Recovery Funds will be limited. Nevertheless, Brothers of Italy has been pushing for a laxer regulatory environment in Italy, therefore if they are elected to lead the next government policy risks for businesses could see a slight decrease, despite a rise in domestic unrest risks and regional tensions with the wider European Union. (Source: Sibylline)
20 Jul 22. Airbus mulls fighter options. Europe’s Airbus, locked in a dispute with Dassault Aviation over the next stage of a Franco-German-Spanish fighter project, is thinking about other options but is focused on making the project work as planned, its chief executive said on Wednesday.
Airbus (AIR.PA) is a key partner for Germany in the plan to build a manned and unmanned Future Combat Air System (FCAS) to replace Rafale and Eurofighter jets in cooperation with Dassault Aviation, which is working on behalf of France.
The companies have completed 18-months of initial work known as phase 1A, but are split over workshare for the next stage, a flying demonstrator known as phase 1B.
Dassault, maker of France’s Rafale, has threatened to walk away from FCAS and implement an unspecified plan B if there is no agreement with Airbus, which is part of Eurofighter.
Asked at the Farnborough Airshow whether Airbus had its own plan B in case of a breakdown, Chief Executive Guillaume Faury stressed the importance of sticking to current proposals.
“There’s a plan A and plan A is FCAS…There are other options, we think of other options but we are working for plan A,” he told Reuters in an interview.
“We want to make it happen. I don’t want to be discussing plan B. That will undermine the likelihood to get to plan A, because plan A is plan A and remains plan A,” he said.
Like Britain’s rival Tempest project, FCAS would involve a warplane flanked by swarming drones using sensors and stealth.
Announcing half-year results on Wednesday, Dassault stressed it had been chosen as lead contractor for the core warplane or New Generation Fighter (NGF), with Airbus appointed “main partner”.
That mirrors the lead taken by Airbus in the four-nation Eurodrone project, where Dassault is a sub-contractor, it said.
ACCEPTANCE
“The prime contractor/main partner relationship is still to be clarified,” Dassault said. “Dassault Aviation is seeking a clear statement of acceptance of its role as prime contractor by Airbus Defence and Space for the NGF (in symmetry with Eurodrone).”
Dassault Chief Executive Eric Trappier has voiced impatience about the impasse and warned that the plan to enter service in 2040 is already slipping towards 2050.
Asked how close the two sides were to an agreement, Airbus’ Faury said, “closer, day by day”. Asked when an agreement could be reached, he said, “this year”.
Faury was speaking at the Farnborough Airshow where Britain said on Monday it was collaborating with Japan and Italy on Tempest, with plans for a demonstrator flight in five years.
“I think the fact that Team Tempest brings in Japan reinforces, if that were necessary, the need for cooperation at a large scale on those important problems,” Faury said. (Source: Reuters)
20 Jul 22. Czechs want F-35 fighter jets, CV-90 fighting vehicles. The Czech government agreed on Wednesday to open talks with the United States on supplies of the F-35 Lightning II fighter jets made by Lockheed Martin Corp to replace leased Gripen fighters from Sweden’s Saab AB, Prime Minister Petr Fiala said.
The NATO member country will also lead talks to buy fighting vehicles from a Swedish subsidiary of BAE Systems (BAES.L) after cancelling a tender for the supplies.
“This is another step to modernise the army and meet our alliance commitments,” Fiala told a news conference shown live on television.
“These are important decisions at a time when the security of Europe and the Czech Republic faces new challenges caused by Russia’s aggression in Ukraine.”
Defence Minister Jana Cernochova said the country wanted 24 F-35s, and talks should be concluded by October next year.
The country now has 14 Swedish-made Gripen jets under a leasing agreement until 2027. Lockheed Martin said in June it could deliver the first F-35 fighter jets to Czech neighbour Germany in 2026, and expected more orders for the aircraft in Europe including possibly Greece and the Czech Republic.
The U.S. Department of Defense agreed with Lockheed Martin to build about 375 F-35 fighter jets over three years, the two parties said on Monday.
The Czech government also cancelled a long-dragging $2.6 bn tender for around 210 tracked fighting vehicles which included BAE Systems, General Dynamics (GD.N) and Rheinmetall. (RHMG.DE)
It will instead talk to the Swedish government on deliveries of the CV-90, Cernochova said, referring to armoured vehicles made by a Swedish subsidiary of BAE Systems. (Source: Reuters)
19 Jul 22. Turkey nearing $4bn in annual defense exports. Turkey’s defense and aerospace exports in the first half of 2022 reached a record high of almost $2bn, up 48 percent from the same period in 2021, official statistics revealed on July 19. According to the Turkish Exporters’ Assembly (TIM), Turkish exports may come close to or exceed the $4bn mark by the end of 2022, an annual all-time high.
“The rise in exports, which came after two years of decline during the pandemic in 2020 and 2021, should be attributed primarily to aerospace, and home-made drones in particular,” said Ozgur Eksi, an Ankara-based defense analyst. “These numbers tell us that the Turkish industry’s dependence on local sales is diminishing and exports are helping Turkish companies to become self-sufficient.”
Turkey has supplied 96 drones to international clients, including Poland, the first European buyer of the famed TB-2, developed by Baykar Makina. Defense industry officials say potential buyers of Turkish-made drones include the United Kingdom, Hungary, Latvia, Lithuania, Saudi Arabia, Bosnia-Herzegovina, Serbia, Slovakia, Uruguay, and Albania.
According to SaSaD, an umbrella organization for Turkey’s defense and aerospace manufacturers, total business in 2021 reached $10.1bn. Exports totaled to $3.2bn, exceeding imports, at $2.6bn, by 23 percent. Turkish companies won new orders worth $8.5bn in the same year. The industry employs 75,000 people and spends $1.6 bn annually on research and development. (Source: Google/Defense News)
19 Jul 22. Leonardo and BAE Systems are actively progressing UK-Italy collaboration opportunities on the demonstrator aircraft as part of the Future Combat Air System (FCAS) programme, in the framework of a cooperation path launched by Italy and the UK in the Defence sector. This approach allows the companies of the two countries to identify shared areas of collaboration and begin joint analysis on possible activities of shared interest, after the two companies reached a collaboration agreement within the Future Combat Air System (FCAS) programme. In the same context, lies an agreement between Leonardo’s Italian and UK electronics businesses and Elettronica SpA related to demonstration activities on advanced sensors and systems.
The FCAS program pursues the development of a technologically advanced multi-domain system of systems, underpinned by highly innovative and disruptive technologies, with a 6th generation core platform, and intended for the renewal of Eurofighter fleet. This ambitious project will allow participating countries to maintain national sovereignty in the Combat Air sector, while redesigning future operational and industrial capabilities in the aerospace sector.
The collaboration between Leonardo and BAE Systems focuses on the application of Model Based System Engineering (MBSE) design methodologies and the joint development of enabling technologies for the national sovereignty of the future system. These activities are the natural evolution of the innovation processes already initiated by the partner companies, and assume strategic importance as they explore a technological frontier not yet reached by European industry.
Furthermore, in line with this strategy, Leonardo’s Italian and UK electronics businesses and Elettronica SpA have agreed to collaborate in the domain of sensors and communications, aiming to support the technological development of the FCAS project, including demonstration activities related to future on-board electronics. This initiative will deepen the established collaboration of these companies at the international level, jointly defining the potential architecture for an integrated set of sensors and communications equipment with innovative capabilities and highly integrated features.
19 Jul 22. The First Sea Lord today urged nations not to ignore China as they focus on the fallout of Russia’s invasion of Ukraine.
In a wide-ranging 25-minute keynote address to the Council on Geostrategy at The Naval and Military Club in London, the First Sea Lord, Admiral Sir Ben Key, outlined the lessons of events in eastern Europe and their impact on the Navy and the nation it serves, emphasising the ever growing importance of maritime power as means to promote peace, security, and prosperity.
The head of the Royal Navy said the conflict in Ukraine had underscored both the importance of the sea and global trade on the oceans and the value of the best equipment, operated by highly-motivated, professional armed forces.
But he warned while “Putin has, through his actions, created a new Iron Curtain from the Baltic to the Black Sea… focussing solely on the Russian bear risks missing the tiger in the room.
He continued: “The world has woken up to the risks that Russia’s invasion poses, and the need for nations to meet their NATO spending targets as a matter of urgency.
“Today we see Russia as the clear and present danger, but China will pose the greater long-term challenge.
“Having overestimated some of Moscow’s military capabilities, we can’t now risk underestimating those of Beijing.”
The First Sea Lord believes China is potentially on the way to building the largest navy in the world, backed up by a massive coastguard and maritime militia, making the Royal Navy’s allies and partners in the Indo-Pacific – including the USA, Australia, France and Japan – crucial in ensuring the continuance of the rules based order that has promoted peace and prosperity since the end of World War 2.
Admiral Key told the conference that thanks to investment, the Government’s long-term shipbuilding strategy and a growing ‘tilt’ to the Indo-Pacific region in recent years, the Royal Navy was in a strong position to meet the challenges ahead.
“We find ourselves in a time when the geopolitical landscape is changing before our eyes. We’re seeing increased state-on-state tensions, and transnational issues like the pandemic and climate change which are driving us to adapt,” he said.
“The reality for us in the Royal Navy, is that recent events haven’t knocked us off course. We’re already modernising and transforming the Royal Navy, we’ve cut back on duplication, invested in automation and freed up more people for the front line.”
The Royal Navy’s renewed interest in the Indo-Pacific has been underlined in the past 18 months by sending HMS Queen Elizabeth’s carrier strike group, embarked with the latest F-35B stealth fighters from the RAF, Fleet Air Arm and US Marine Corps, to the Pacific Rim last year and stationing two patrol ships on a long-term mission in the region, HMS Spey – currently in Singapore – and HMS Tamar, currently working with the US Navy on a peace and goodwill mission around Pacific islands.
And away from the Pacific and events in eastern Europe, the sea remains Britain’s lifeblood – perhaps more than ever. (Source: Royal Navy)
19 Jul 22. UK MoD announces further crackdown on unacceptable behaviour in the Armed Forces. Launch of new policies and a strategy to tackle poor behaviours in the Armed Forces. Two more polices and a new strategy have been announced today as part of Defence’s commitment to crack down on unacceptable sexual behaviour in our Armed Forces. The new procedures, will build on measures already introduced by the Ministry of Defence to tackle unacceptable sexual behaviours in the UK Armed Forces and improve the experience for everyone, and in particular women in the Armed Forces. The policies and new strategy have been created alongside the Zero Tolerance policy: Discharge for sexual offences and sexual instructor-trainee relationships that was announced earlier this year as part of the wide-ranging programme of work that has been delivered across Defence
Minister for Defence People, Leo Docherty said:
Abusive, discriminatory or predatory behaviour has no place in our Armed Forces and these measures send a clear message that these types of behaviours will not be tolerated.
As a forward thinking and modern employer, the Armed Forces are a place where our serving personnel can thrive, and we will continue to expect the highest values and standards of each and every one of them.
Key details of the publications include:
Zero Tolerance to Sexual Exploitation and Abuse Policy: Sexual exploitation and abuse involves sexual activity where there is an imbalance of power. This policy supports Defence’s commitment to crack down on unacceptable sexual behaviour and prohibits all sexual activity which involves the abuse of power, including buying sex whilst abroad. The policy will ensure that every allegation will be responded to, no matter where the allegation takes place, and introduces a presumption of discharge for anyone found to be engaging in the targeted behaviours, including buying sex whilst deployed outside the UK.
Tackling Sexual Offending in Defence Strategy: This strategy prioritises victims and aims to reduce the prevalence and impact of sexual offending in the Armed Forces. This will be done through the application of preventative measures such as awareness-raising, training and better understanding the most prevalent types of offenders. Survivors who do not think they will be believed will be reassured and encouraged to come forward and seek support, and the adoption of recommendations from reviews into the Service justice System will encourage increased reporting, engagement and successful prosecutions.
Zero Tolerance to Unacceptable Sexual Behaviour Policy: A Victim/Survivor Focused Approach: This applies to all UK Armed Forces personnel and follows the recently published Zero Tolerance to Sexual Offending and Sexual Relationships Between Instructors and Trainees policy which introduced mandatory discharge for anyone convicted of a sexual offence. This new policy places greater emphasis on the support for victims, with a presumption of discharge from the Armed Forces for any person who behaved in a sexually unacceptable way. This policy builds trust and confidence in Defence’s ability to deal with unacceptable behaviours and demonstrates that supporting people who are victims of unacceptable sexual behaviour is a top priority.
These new measures demonstrate significant progress against the recommendations made by Rt. Hon. Sarah Atherton MP in her report ‘Protecting Those Who Protect Us: Women in the Armed Forces from Recruitment to Civilian Life’.
In parallel to these new publications, an extensive programme of work has been delivered across Defence as part of the Government’s Response to Sarah Atherton’s Inquiry. This includes training developments around the concept of consent, transformation of the Service Complaints system, the stand-up of the Defence Serious Crime Unit HQ, delivery of improvements to uniform and equipment for women, and the Servicewomen’s Health Improvement Sprint, which will ensure our Armed Forces are delivering against being a truly inclusive employer. (Source: https://www.gov.uk/)
19 Jul 22. Brussels plans to finance joint EU weapons procurement for the first time. Proposal aims to help bloc’s armies restock and improve military hardware in response to war in Ukraine. Under the proposal, the European Commission would give financial incentives for consortiums of at least three member states to purchase weapons. The European Commission will for the first time provide financing for the joint procurement of weapons by member states to help their armies restock and improve military hardware in response to the war in Ukraine. The proposal, unveiled by internal market commissioner Thierry Breton on Tuesday, would give financial incentives for consortiums of at least three member states to purchase weapons. It seeks to channel the increase in EU defence spending towards co-ordinated procurement and to prevent larger member states from monopolising the continent’s arms companies. If approved by member states and EU lawmakers, the €500mn initiative would mark the first time Brussels has used EU taxpayer money to fund joint arms procurement. The proposal follows the EU’s landmark decision to spend bns of euros to fund weapons supplies to Ukraine following Russia’s invasion — shipments that have drained national arms stockpiles. “Today we are taking a historic step forward in European defence integration,” Breton said. “This initiative will make it possible to replenish part of the stocks following Europe’s united and supportive response by way of transfer of arms to Ukraine.” He added: “And by contributing with the European budget, we are creating an incentive for member states — many of which have announced a significant increase in defence spending — to buy together. This will make it possible to spend public money better, and to boost our European industrial base.” The war in Ukraine has led to a sea change in EU military thinking, both in terms of the perceived Russian threat and in prompting governments to reverse years of defence spending cuts and raise collective budgets by more than €200bn. The commission’s proposal would see Brussels reimburse about 10 to 15 per cent of new arms’ costs if bought from an EU defence company by a group of EU states in the two years following February 24 of this year — the day Russian president Vladimir Putin launched his attack on Ukraine — according to a senior EU official with knowledge of the plan. While officials admit that the €500mn budget will only stretch to a fraction of budgeted EU defence spending over the next two years, that tranche is envisaged as a first instalment that could be increased if the initiative is successful. “It’s not a lot. But it is not nothing,” said the senior EU official. “It’s a major breakthrough conceptually, politically and legally . . . but if we want this to be credible then we need a big number.” Some member states have already discussed common purchases of portable surface-to-air missiles, anti-tank missiles and artillery under the commission initiative, the official added. Recommended The Big Read Europe’s defence sector: will war in Ukraine transform its fortunes? The EU has long attempted to coerce its members into making joint arms purchases and pooled investments into new weapons systems, in an attempt to make its members’ armed forces more compatible and co-ordinated. While previous efforts foundered as governments sought to instead protect their national defence industries or rely on US equipment, officials hope the surge in defence spending prompted by the war in Ukraine and the threat posed by Russia to the EU’s eastern flank will provide significant motivation. In 2020, just 11 per cent of EU states’ national defence budgets was spent in collaboration with other bloc governments — well below the 35 per cent target set by Brussels’ own European Defence Agency. That has resulted in the EU’s armies using various and often incompatible weapons systems. (Source: FT.com)
18 Jul 22. UK deploys Chinook helicopters to support Nato EFP in Estonia. This deployment will allow Chinooks and its crew to train with the forces from allied and partner nations. The UK Royal Air Force (RAF) has deployed its Chinook CH-47F helicopters to support Nato’s enhanced forward presence (EFP) in the Baltic region. Based at RAF Odiham, the RAF’s Chinooks from 27 Squadron have already arrived at the Amari Air Base (AB) in Estonia.
As part of this UK-led Nato EFP, the deployed helicopters will support the British Army’s 2 Rifles and Royal Welsh battlegroups.
During the course of its deployment in Estonia, the RAF’s Chinooks will enhance the reach and agility of the Nato battlegroups by transporting equipment and personnel around for various exercises in Finland and the Baltic States. The Chinook Force conducted a familiarisation event on 12 July to demonstrate the capabilities of the RAF’s helicopters for the allied forces.
Apart from Chinooks, the French Mirage 2000, F-35 fighter jets from the US, and Belgian F-16 Fighting Falcons are also operating from the Amari AB in Estonia, as part of Nato’s Air Shielding mission.
Aviation Task Force 3 officer commanding wing commander Butler said: “The Chinook Force relishes the opportunity to work alongside Nato and facilitate the essential training being conducted by the EFP battlegroup.
“The media day on the 12th was a great opportunity to showcase some of the Chinook’s capabilities and demonstrate our support for the Nato mission.”
The latest deployment aims to provide an opportunity for the RAF’s helicopters to train with the forces of various allied and partner nations. Furthermore, the deployment will allow the Chinook crew to learn how to operate effectively in the Baltic Region. The Chinook helicopters are capable of transporting 10t of equipment and up to 40 troops. It can travel at a maximum speed of 300kph. (Source: airforce-technology.com)
18 Jul 22. Italy: Government Collapse Likely. Prime Minister Mario Draghi will address the Italian parliament on 20 July to ascertain if he possesses the necessary support to lead a national unity government. Nevertheless, the collapse of the government is looking increasingly likely. On 17 July, the leaders of the Forza Italia and Lega Nord parties, both members of the coalition government, stated that they can no longer support Draghi.
- Draghi submitted his resignation on 14 July after his proposed cost-of-living support package was not backed by the second-largest coalition party, Giuseppe Conte’s Five Star Movement. President Sergio Mattarella refused Draghi’s resignation request. The prime minister will now have to try to unite his national unity coalition.
- On 17 July, the leaders of Forza Italia and Lega Nord met to discuss their parties’ membership in the national unity coalition. They concluded that their parties can no longer support Draghi’s government, and demanded early elections. Given the recent increase in support for Italian right-wing parties, it is likely that Forza Italia and Lega Nord will lead the polls in the event of early elections. If a Eurosceptic government is elected to lead Italy, the risks to the country’s access to the EU Recovery Fund are likely to increase, elevating policy and business risks for companies.
- The latest Bloomberg reports indicate that Draghi is determined to step down as prime minister despite the president’s refusal. It is possible that he will do so on 20 July during his address to the parliament. If Draghi does not garner enough support for his current government, or if he fails to forge a new coalition, elections could be held as early as September, rather than 2023.
FORECAST
Following the Five Star Movement’s refusal to support the government’s cost-of-living support package, both Forza Italia and Lega Nord have withdrawn their support for Draghi’s government. They have demanded early elections, suggesting that it is increasingly unlikely Draghi will restore stability within the government. As such, it is likely that Draghi will resign as prime minister this week, triggering early elections this autumn.
Italy has performed better economically than several other EU member states, despite the energy crunch and the impact of the war in Ukraine. Nevertheless, the collapse of the government will almost certainly lead to an economic downturn. This will disrupt the adoption of the 2023 budget, exacerbating economic uncertainty and increasing the risks to Italy’s socio-economic health. (Source: Sibylline)
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