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08 Dec 23. Norway Auditor Blasts Defense Ministry Over F-35 Costs and Manning, Will Miss 2025 FOC Deadline. The F-35 Fighter Jet: The Ministry of Defense Has Done Too Little, Too Late. The Ministry of Defense has done too little, too late when phasing in the new F-35 fighter jets. The goal of full operational capability in 2025 will not be reached and the budgets for the F-35 have been unrealistic. The National Audit Office is strongly critical of the ministry.
The National Audit Office has examined the phasing in of Norway’s new F-35 combat aircraft. We have carried out two surveys:
- Infrastructure and support functions for combat air force operational capability – a follow-up survey
- The Ministry of Defence’s compliance with lifetime cost requirements
The surveys are presented in a summary report, to give a comprehensive overview of the phasing in. (in Norwegian–Ed.)
Not reaching the goal of full operational capability in 2025
The new combat aircraft have a decisive role in the defense of Norway, and must be able to support all defense branches. According to the plan, the F-35 is to have full operational capability in 2025, but the National Audit Office’s assessment is that the Norwegian Armed Forces will not achieve this goal. The prerequisites are not present. This also has consequences for the Defence’s overall task solution.
In 2019, we pointed out significant challenges with the infrastructure and support functions for the combat air force’s operational capability. We have now investigated whether the Ministry of Defense has followed up on our findings and recommendations.
“It is highly objectionable that the Ministry of Defense has not done enough to ensure that the Storting’s goal for the combat air force is achieved in 2025,” says Auditor General Karl Eirik Schjøtt-Pedersen.
“We spoke clearly in 2019, but the ministry has not adequately addressed the challenges. They have done too little, too late. That is why our criticism is so strong,” he continues.
‘Strongly criticizable’ is the National Audit Office’s strongest level of criticism. We use it when we find serious weaknesses, errors and shortcomings. Often these can have very large consequences, in this case for the Defence’s overall task solution.
It is important to clarify that Norway has a modern combat air force with considerable capacity. We see that the Norwegian Armed Forces have carried out many important measures. But it takes a long time to implement several of the measures, they are delayed and have not had the expected effect.
In 2019, we uncovered significant challenges in recruiting, retaining and further developing personnel with the right skills, and pointed out that the personnel plan for the F-35 was too optimistic. We already said then that the personnel challenges could mean that the combat air force would not have full operational capability in 2025, and recommended that measures should be initiated to meet the challenges. The follow-up shows that problems with personnel and competence have still not been resolved.
There are also ongoing challenges with the stock of certain types of ammunition and access to spare parts for the aircraft. Air defense and base defense have also reduced their capacity to protect the combat aircraft. There are also persistent challenges with airspace surveillance, and the Air Force’s command and control systems pose a risk that the capacity is not fully utilised.
Too little has happened since the last survey. The National Audit Office is therefore following up on this matter.
Unrealistic budgets and underestimated lifetime costs
We have also looked at how the Ministry of Defense has planned the combat aircraft organization in its budgets for the period 2012 to 2022. The investigation shows that the Ministry of Defense has not budgeted for sufficient staffing. Other countries that have also acquired the F-35, such as the Netherlands and Great Britain, for example, have budgeted for twice as many technicians per aircraft as Norway.
“The Ministry of Defense’s budgeting has been unrealistic. It is one of several reasons why the goal of full operational capability in 2025 will not be reached. The National Audit Office believes it is worthy of criticism,” says Schjøtt-Pedersen.
The lifetime costs estimate how much the aircraft will cost the Norwegian state in total, from acquisition in 2014 to operation and disposal in 2054. The lifetime costs are now estimated at NOK 349 billion (approx. $32.1 billion—Ed.), but the National Audit Office’s investigation shows that important costs have been omitted from the calculations. (Emphasis added–Ed.)
The Ministry of Defense underestimates the need for fighter aircraft-related property, buildings and construction. In addition, they do not include indirect costs in the calculation of lifetime costs. The total cost of the investment in new combat aircraft will therefore be higher.
“The Ministry of Defense has not given the full picture of what the F-35 will cost. We are talking about a lot of money. The ministry must include all direct and indirect costs in its calculations. Only in this way will we get a comprehensive picture,” stresses Schjøtt-Pedersen.
From completely closed to a large degree of openness
The National Audit Office’s starting point is always that our investigations must be open. At the same time, we must comply with the Security Act.
“In 2019, we could not say anything about challenges in the combat air force, and the Storting dealt with the matter behind closed doors. Now the public is getting an insight into very important information, although we cannot go out with all the details. The F-35 is the largest investment in the public sector ever and one of the most important military capabilities the Norwegian Armed Forces have. Therefore, it is crucial that this comes to light,” concludes Schjøtt-Pedersen.
The complete summary report is security classified at the “RESTRICTED” level according to the rules in the Security Act. It was delivered to the Storting on 7 December, but is not public for reasons of national security. The security rating is linked to the issue of operational capability. The whole issue of lifetime costs is open.
We publish an unclassified version of the summary report. It has been prepared in cooperation with the Ministry of Defence, which is the owner of the information. Classified information has been removed and some information has been rewritten so that it can be made public.
(Unofficial translation by Defense-Aerospace.com) (Source: https://www.defense-aerospace.com/ Norwegian National Audit Office, Riksrevisjonen; issued Dec. 07, 2023)
07 Dec 23. The UK Ministry of Defence has been told to “get a grip” after blaming an “administrative error” for excluding thousands of drones from the annual update of its equipment inventory. The MoD only realised it had failed to account for almost all the unmanned aerial vehicles (UAVs) after the Financial Times pointed out that the official statistics detailing its weapon systems and other hardware suggested the British military had just 55 drones. The 2023 edition of the UK armed forces equipment and formations statistics only listed the two largest types of drones operated by the air force and army, respectively: 10 hunter-killer Reaper aircraft and 45 Watchkeeper surveillance systems. The document, published in September, states: “There were 55 Unmanned Aircraft Systems as at 1 April 2023, a decrease of 230 since 2022.” The accompanying spreadsheet has entries for two other types of drones previously operated by the army showing they had been taken out of service in recent years. The Black Hornet rotary nano-drone used for surveillance by troops in combat in Afghanistan was retired in 2016, while last year the army lost all 230 Desert Hawk III small, fixed-wing surveillance drones that it had operated since 2005. The MoD said its latest official statistics listing just 55 drones was “based on an administrative error” adding: “In fact, we have invested heavily in over 30 such programmes over the last several years and have thousands of cutting edge aerial vehicles that are designed to make our armed forces more lethal and effective.” The opposition Labour party said the omission epitomised the failures of the Conservative government since it came to power in 2010. “That the MoD can’t reliably report the number of drones it owns is symptomatic of 13 years of Conservative mismanagement in defence,” said John Healey, Labour’s shadow defence secretary. At a time of rising threats with a full-scale war in Ukraine, he urged the government to “get a grip on defence budgets and its weapons inventory”. Admiral Sir Tony Radakin: ‘There are tens of thousands of drones in Ukraine, and they’re really significant on the battlefield’ © Andy Rain/EPA/Shutterstock Drones have become an increasingly important feature of warfare. “We’ve talked about drones for years — they’re here. There are tens of thousands of drones in Ukraine, and they’re really significant on the battlefield,” Admiral Sir Tony Radakin, chief of the UK defence staff, said earlier this year. Francis Tusa, an analyst and editor of the Defence Analysis newsletter, said the initial error and the MoD’s failure to identify or correct it almost three months after publication cast doubt on the veracity of the other statistics published by the department. “If the data is not true for the UAVs, how convinced is anyone that the data for tanks or frigates is still accurate?” he said, adding that he had made a complaint to the Office for Statistics Regulation. The OSR told the FT it was looking into the matter. Sidharth Kaushal, a research fellow in military sciences at Rusi, said the Ukraine conflict had demonstrated that drones would be a “crucial feature of future warfare”. He said the UK had the same “ballpark capability” in drone warfare as other similarly sized European nations, but was far behind the large military powers of US, China and Russia in the size of fleet and types available. The UK has had mixed results with its drone programmes in recent years. The programme to replace its ageing Reaper fleet with 16 new large armed drones, dubbed Protector, has been hit by delays and the costs have jumped more than 40 per cent to £1.76bn. They were due to enter service towards the end of the last decade but the first is now not due to enter service until late next year. Last December, the MoD announced a £129mn replacement contract for the Desert Hawks, with a mix of more than 250 fixed-wing Stalker and Indago multi-rotor drones, mainly for the army, which are due to enter service in late 2024. In September, the Royal Navy announced a large UAV had landed autonomously on one of its two aircraft carriers for the first time. The UK is one of several countries working on sophisticated armed drones designed to operate alongside piloted aircraft. (Source: FT.com)
07 Dec 23. Lithuanian Defence Budget: To Strengthen Lithuanian Armed Forces Fighting Power and Further Modernization. Tuesday the Seimas of the Republic of Lithuania passed draft Government Budget 2024 with EUR 2.91bn, including 134.8m in Solidarity Contribution, earmarked for national defence. The Defence Budget will reach 2.75% of GDP and most of it will be dedicated for strengthening Lithuanian Armed Forces capabilities.
“The increasing defence spending enables a quality breakthrough in Armed Forces modernization: acquisition of the most advanced weaponry systems, enhancement of combat capacity, fire support and maneuver, airspace surveillance and defence. All of it is a critical response to the security situation in the region,” says Minister of National Defence Arvydas Anušauskas.
The Defence Budget 2024 earmarks EUR 467.7m for weaponry, military equipment and supplies. Other acquisitions get EUR 239.7m. The appropriations for modernizations in the 2024 Budget will finance contracts made this year or earlier almost in total, while next year funding for the slot will be increased even more.
According to Minister A. Anušauskas, approx. EUR 2.7m will be allotted to finance appropriations in 2024-2026 which makes it an annual 45% of the entire Defence Budget for modernization and strengthening combat power of the Lithuanian Armed Forces.
“In the area of armament, we are further pursuing such projects as acquisition of multiple launch missile systems, armored personnel carriers, self-propelled howitzers, anti-tank systems, artillery radars, combat drones, unmanned aerial vehicles, mid-range air defence systems. Repayment for utility helicopters, MCM and SAREX vessel, logistical, medical and other purpose vehicles, countermobility means is continued. Almost one fourth of the appropriations portion is earmarked for military stockpiles, most of it for acquiring standard battle ammunition,” lists Minister A. Anušauskas.
The Ministry of National Defence will centre on military infrastructure development further: EUR 230.80m, including the EUR 127.8m Solidarity Contribution, will be allotted in 2024 for training area and training infrastructure, ammunition warehouses and other infrastructure. Major part of the funds will be used to develop host Nation Support infrastructure, infrastructure for maintenance and storage of newly acquired equipment and ammunition, and improvement of military service conditions.
Approx. one third of the 2024 Defence Budget or EUR 761m, is taken up by personnel expenditure. The slot must not exceed 50% of the total of defence budget according to NATO requirements. As Lithuania puts especially significant effort into capability development, personnel spending amounts to 36% of the defence budget.
Maintenance and other activity expenditure make up EUR 392.5m, including EUR 7m Solidarity Contribution.
The Defence Budget in 2024 is twice the 2020 defence spending plus (from EUR 1030.1m to EUR 2091.7m).
(Source: https://www.defense-aerospace.com/ Lithuania Ministry of Defence)
06 Dec 23. Austin Welcomes Strengthened Defense Ties With Sweden. Secretary of Defense Lloyd J. Austin III welcomed new steps to build upon the U.S.-Sweden defense relationship after meeting with Swedish Defense Minister Pal Jonson yesterday at the Pentagon.
During their meeting, the two leaders signed a defense cooperation agreement that Austin said “will embody our shared commitment to the defense relationship between our two proud democracies.”
“We look forward to learning from each other as we continue to build our defense capabilities together and to strengthen our interoperability,” Austin said.
The defense cooperation agreement establishes conditions for U.S. forces to operate in Sweden, access to deployment areas, and pre-positioning of military equipment, among other items.
Jonson said the agreement “sends a strong signal that we remain committed to addressing security challenges together.
“Being interoperable and being prepared is crucial part of this commitment,” he said, adding that the agreement will stand as a cornerstone of the countries’ defense cooperation.
The two leaders met as NATO member states near their final approval of Sweden’s bid to join the alliance.
During his meeting with Jonson, Austin offered strong support for Sweden’s accession.
“As I’ve seen firsthand, Sweden is already one of our strongest and most capable partners,” he said. “The only thing better than Sweden as a friend is Sweden as an ally. So, I look forward to welcoming Sweden soon as a fellow member of the NATO alliance.”
He noted Sweden’s strengths in maritime operations and distributed air defense.
“When we add the capabilities of the Swedish armed forces to NATO, which is the greatest defensive alliance in history, we will get even stronger,” Austin said.
The secretary also commended Sweden for its leadership in supporting Ukraine.
“Sweden has shown outstanding leadership in supporting Ukraine as it fights Russian aggression, including providing $2.7 bn in security and humanitarian assistance,” Austin said. “Your support and donations have made a huge difference in Ukraine’s battle to defend itself from Russia’s cruel war of choice.
“We will continue to work shoulder to shoulder with Swedish forces in many areas,” he said. (Source: U.S. DoD)
06 Dec 23. US and Sweden sign Defence Cooperation Agreement. The United States and Sweden on Tuesday signed a Defence Cooperation Agreement, the U.S. Department of State said, as the Nordic country strengthens military alliances while waiting for approval to join NATO.
“Sweden is a strong, capable defense partner that champions NATO’s values, and will further strengthen the Alliance once its NATO accession is completed,” the State Department said in a written statement. “Sweden’s membership will strengthen our collective defense and enhance our ability to respond to security challenges in the Euro-Atlantic area.”
Swedish Defense Minister Pal Jonson said he was hopeful that accession would happen “as soon as possible”, but would not give any estimate when Turkey and Hungary – the only two NATO members not to give Sweden the green light yet – would add their support. (Source: Reuters)
05 Dec 23. Nato has three years to prepare for Russian attack, warns Poland. Nato has just three years to prepare for an attack by Russia, Poland’s national security agency has said.
Jacek Siewiera, head of the National Security Bureau, said a German think tank’s estimate that Russia could directly attack the West in “as little as six to 10 years” was incorrect.
“If we want to avoid war, Nato countries on the eastern flank should adopt a shorter, three-year time period to prepare for confrontation,” he told the Nasz Dziennik newspaper.
The German Council on Foreign Relations warned in a report last month that Russia could invade a Nato country in six years’ time and that Germany’s armed forces needed a “quantum leap” to be ready for it.
Mr Siewiera added that Poland needs to increase the size of its army in preparation for a potential attack. (Source: Daily Telegraph)
04 Dec 23. Austin Praises U.S.-Romania Defense Ties.
Secretary of Defense Lloyd J. Austin III underscored the importance of the U.S.-Romania defense relationship today as he met with Romanian Prime Minister Marcel Ciolacu and Defense Minister Angel Tilvar.
The two countries’ strategic partnership has continued to strengthen amid Russia’s unprovoked invasion of Ukraine, Austin said, adding that Romania has been a key ally among the international coalition united in defense of its neighbor.
“After 26 years, that partnership that has never been stronger or mattered more, especially in the wake of Russia’s cruel and unprovoked invasion of Ukraine,” the secretary said.
“Romania has been a strong defender of Ukraine, including robust donations of military aid and their vital participation in the Ukrainian defense contract,” he said. “We’re especially grateful to the Romanian people for welcoming more than 5 m Ukrainian refugees and providing critical humanitarian assistance.”
Austin also highlighted Romania’s role in hosting the European F-16 Fighting Falcon training center, which he said will enhance critical capabilities among NATA allies.
“We’re also grateful to you for hosting an increased U.S. and allied presence,” he said. “That’s bolstering deterrence along NATO’s eastern flank.”
Romania hosts more than 3,000 U.S. and allied forces.
Additionally, he said Romania’s leadership in the Black Sea has been crucial in the face of repeated Russian drone attacks against Ukrainian grain infrastructure.
As the three leaders met in the Pentagon, Austin previewed further discussions on Russia’s war in Ukraine, security in the Black Sea and the broader region, and Romania’s investments in its defense modernization.
Austin praised Romania for its continued commitment to spending 2% of its gross domestic product on defense and its investments in NATO interoperable military equipment, according to a summary of the discussion.
The meeting comes on the heels of last month’s meeting of the Ukraine Defense Contact Group, where Austin underscored the group’s unwavering commitment to assisting Ukraine.
Collectively, the more than 50 countries that comprise the group have committed more than $80 bn in security assistance to Ukraine since Russia launched its unprovoked invasion. Convening the latest meeting, Austin said the group will remain steadfast in its support.
Ahead of today’s meeting, Ciolacu pledged that Romania would continue to stand in support of its neighbor for “as long as it takes until Ukraine achieves victory.” (Source: U.S. DoD)
04 Dec 23. Poland: Tensions between incoming government, institutions may undermine policy agenda. On 4 December, reports emerged that the National Bank of Poland (NBP) is appealing to the European Central Bank (ECB) for support against a move by the incoming government to remove its president. The highly likely next pro-EU coalition government has pledged to remove the bank’s governor, Adam Glapiski – a close ally of the ruling Law and Justice (PiS) party’s leader Jarosaw Kaczyski – from his post. Glapi?ski is accused of being a political appointee. The NBP has said it would challenge any suspension of Glapiski at the European Court of Justice (ECJ). This case is indicative of a wider challenge the incoming government faces in setting its agenda while various institutions remain allies of PiS and Kaczyski. While this poses minimal risks for foreign businesses, it will possibly slow the incoming government’s policy agenda and result in personnel changes at state-owned enterprises. (Source: Sibylline)
04 Dec 23. Bulgarian Cabinet Approves Defense Investment Program to 2032.
The Council of Ministers Approved Defense Investment Program to 2032. The Council of Ministers adopted a decision to approve the Defense Investment Program until 2032 in a closed session today, November 29, and will present it for adoption by the National Assembly.
It was developed in implementation of the Management Program of the Government, approved by the supporting majority, as well as in implementation of the decision of the National Assembly of January 31, 2023, with which the Government is tasked to prepare a comprehensive and financially justified program for investments in defense by 2032.
During its development, the process of defense planning in NATO and the development of the military capabilities of the European Union were taken into account. Preliminary lessons from the war in Ukraine are also reported.
With the adoption of the Program by the National Assembly, a complete integrated framework of capital expenditures and the main long-term investment directions will be set to achieve the set goals related to the urgent rearmament of the Bulgarian Army, as well as order, predictability and transparency in the spending of capital funds.
The appendix to the Program presents the main directions for investments until 2032 with an estimated value of over BGN 100 m, arranged by funding priority.
These are the already announced projects for the acquisition of:
–basic combat equipment for the construction of battalion combat groups from the mechanized formations of the Ground Forces;
–new 3D radars;
–coastal anti-ship missile systems;
–anti-aircraft missile complexes with a medium/long range of action;
–rocket system for salvo fire with increased mobility and 155mm howitzers.
Also included are projects for the acquisition of:
— combat helicopters;
— anti-mine ships;
— missile boats,
— communication and information support (KIP) for a multinational divisional HQ;
— construction of a mechanized brigade air defense system;
— reconnaissance and surveillance of land and sea targets, using medium and high-class unmanned aerial systems with strike capabilities;
— development of abilities to overcome dry and water obstacles.
The first five investment directions and three infrastructure projects are of the highest priority and should be launched and implemented as soon as possible.
The indicative financial framework for the implementation of the Program has been prepared in accordance with the forecast data for real GDP growth and is consistent with the deadlines for achieving the national Capability Objectives within the Defense Planning Process in NATO, with the main source of funding being the defense budget and defense expenditure from the central budget. (Source: https://www.defense-aerospace.com/ Bulgarian Ministry of Defence)
04 Dec 23. Sweden Signs Defense Cooperation Agreement with United States.
Defense Cooperation Agreement with the United States (DCA). During 2023, representatives from Sweden and the United States negotiated an agreement that deepens the defense cooperation between our countries. The negotiations concern a so-called defense cooperation agreement (DCA), which will constitute a framework for continued defense cooperation by regulating the conditions for the presence of American forces in Sweden. A DCA opens up an even closer cooperation with the USA both bilaterally and within the framework of NATO.
The deteriorating security situation in Europe is a consequence of Russia’s full-scale invasion of Ukraine. Therefore, the conditions for Swedish security policy have fundamentally changed. The deteriorating security situation means that Sweden quickly needs to be able to act on a complex security development – individually and together with others. Sweden’s application for membership in NATO as well as a DCA with the USA must be seen in this context.
The USA is one of Sweden’s most important security and defense policy partners, bilaterally and within NATO. In May 2016, Sweden and the USA signed a joint declaration of intent on deepened bilateral defense cooperation. In 2018, Sweden entered into a trilateral declaration of intent together with Finland and the USA.
A DCA is a natural development of Sweden’s and the USA’s long-standing cooperation in the field of security and defence. The agreement enables more continuous cooperation by regulating the conditions for American forces to operate in another country. These include, among other things, questions about the legal status of US military personnel, access to base areas, pre-storage of material and rules about tax and customs. A DCA also creates conditions for American military support if the security situation so requires and is thus an agreement of great importance for Sweden’s security. The agreement negotiations are a clear signal of continued American commitment to security in Europe and in our immediate area. The US has previously entered into DCA with several European countries, including Norway, and negotiations on DCA are ongoing with both Denmark and Finland.
The DCA agreement stipulates that all activities must take place with full respect for Swedish sovereignty, Swedish laws and Sweden’s international obligations, but also that the closer security cooperation established through the DCA agreement takes place in accordance with international law and is based on Swedish consent.
The DCA becomes public when the agreement is signed. The hope is that the agreement can be signed before the turn of the year; what remains are certain administrative procedures on both the Swedish and American side. For the agreement to enter into force, the Riksdag must approve the agreement and decide on the constitutional amendments needed to implement it. An entry into force should be possible during the end of 2024.
(Source: https://www.defense-aerospace.com/ Swedish Government)
04 Dec 23. Bulgaria to Join European Sky Shield Initiative. Bulgaria’s Cabinet has approved a Memorandum of Understanding between Bulgaria and 11 other countries in Europe for the joint purchase of ground-based air defence systems within the framework of the European Sky Shield initiative, Bulgarian National Television reported on November 29 quoting the government information service.
A year ago, the caretaker Minister of Defense, Dimitar Stoyanov, signed a Letter of Intent to include Bulgaria in Germany’s European Sky Shield Initiative (ESSI) defence capability initiative.
With the approval of the memorandum of understanding, an opportunity will be provided for Bulgaria to join programmes for the joint purchase, maintenance and use of weapon systems for ground-based air defence (GBAD).
The ground-based air defence weapon systems will be able to be integrated into the architecture of the NATO Integrated Air and Missile Defence and will be part of the unified defence and air defence system in Europe.
Bulgaria has several old Soviet C-300 anti-aircraft missile systems that are not compatible with NATO standards. Currently, these systems are not in service, but Bulgaria refused to provide them to Ukraine at the beginning of the war.
The Bulgarian army does not have modern military radars and relies on civil aviation systems, which do not have full coverage over the country’s territory.
In addition to Bulgaria, Belgium, the Czech Republic, Denmark, Estonia, Germany, Hungary, Latvia, Lithuania, the Netherlands, Norway and Slovenia have confirmed their participation in the initiative.
Additional spending of more than 28 bn leva (approx. $15.6 bn—Ed.) has been approved in the Defence Ministry budget for the acquisition, modernisation, maintenance and repair of armaments, missiles, torpedoes and equipment, and for the repair and construction of infrastructure. (Source: https://www.defense-aerospace.com/)
04 Dec 23. French Arms Exports Set Record €27bn in 2022. France in 2022 won arms export orders worth an “exceptional” €26.97bn ($28.79bn), more than double the €11.72 bn booked in the previous year, the government’s annual report to parliament said.
“Our orders for armaments in 2022 reached an historic level close to €27 bn,” Armed Forces Minister Sébastien Lecornu said in the introduction to the report.
That record amount reflected an appreciation by client nations for French-built weapons which went beyond the Rafale fighter jet, extending to missiles, frigates, submarines, artillery, helicopters, radar, and spy satellites, he said in the report.
There was also a note of caution further into the report, pointing up the figures for a single year should not be taken as representative, as the trend in arms exports was set over time.
The long-term basis for orders was set on a steady flow of contracts worth less than €200m, based on service support, training, or upgrades on large contracts signed in the previous decade, with the value lying in the long term, the report said.
Exports also depended on orders for less glamorous equipment in a particularly competitive market, namely “low cost” equipment sold by emerging markets, the report said.
Industry fears lower access to bank loans
Meanwhile, some French companies have expressed concern the war in Ukraine has only temporarily paused the lobbying in Brussels to dissuade commercial banks from lending to arms manufacturers, a consequence of the European Commission’s promoting corporate and environmental social responsibility.
Institutional pressure to limit lending to arms companies is expected to resume at a later date. However, on Nov. 15, European Defence Agency ministers called for strengthening the defence sector’s access to finance, possibly reversing the trend.
Rafale leads the way
The record amount in weapons exports stemmed from the entry into effect of contracts for the Rafale, the report said, with the aeronautics sector accounting for 65 percent of 2022 orders, while deals for missiles and unspecified equipment made up 14 percent.
The Middle East accounted for 64 percent of orders, the report said, with 23 percent coming from Europe, and Asia accounting for eight percent.
The “historic and exceptional” order for 80 Rafale from the United Arab Emirates made up the bulk of the overall figure, the report said, but it was not the only one, as there were also contracts which entered effect for the fighter jet with Greece (six) and Indonesia (six), three frigates for defense and intervention (FDI) for the Greek navy, and two spy satellites for Poland, as well as the related missiles for the fighters and warships.
The UAE signed that Rafale contract, worth close to €14bn, in December 2021 and it came into force in April 2022, when Abu Dhabi made the crucial down payment. Orders for Mica NG missiles and AASM powered smart bombs accounted for a further €2bn.
The Gulf state will receive its first F4 standard Rafale in 2026, the same version as delivered to the French air force, the report said, underpinning increased interoperability and military cooperation.
The operational and commercial importance of exports could be seen, with French media reporting Qatar’s order for the Rafale included a helmet mounted display (HMD), which led to fitting the Targo II visor display from Elbit Systems, an Israeli company.
That Israeli-built display was fitted rather than the Gerfault visor pitched by Safran, as the French helmet display had failed to meet specifications, specialist website Opex 360 reported.
Qatar’s request for the HMD pointed up the importance of exports, the report said, as the aircraft maker learnt how to fit the system, cutting technical and financial risk when installing the kit on the F4 standard Rafale for the French air force.
The French air force will also receive an advanced helmet mounted display for its Rafale F4, the Scorpion from Thales, the French electronics company. The government report referred to a switch in the HMD supplier for the French service, but did not refer to the company by name.
Those export deals were also important as they provided work and maintained know-how for design offices and production lines between French orders, which required lengthy waits, the report said.
Ukraine war shows lack of capacity
Meanwhile, the return to war last year “at the gates of Europe” raised questions on the capacity for the French and European defense industrial and technology base to increase and speed up production, the report said. Exports were a key element, as they influenced greatly the industry’s economic model.
The new context of the “war economy” meant France should ensure that exports contribute to “an ambition to build up the means of production,” the report said.
The Russian invasion into Ukraine last year led France to seek to faster production of 155mm artillery shells, Caesar truck-mounted artillery, Aster surface-to-air and Mistral man-portable missiles.
The report pointed up the importance of export potential in the upstream development of arms programs, with the competitiveness in foreign markets assessed. That approach meant companies part-funded development, allowing the government to cut its share of the budget.
“This approach, which was used at the start of the Rafale program, was also more recently used in missile programs such the MMP (medium-range missile) and Mica NG (Mica new generation),” the report said.
The competitiveness in export markets pushed companies to greater innovation and keeping prices low, the report said.
Agreements in place on exports
The report also pointed up the importance of exports in cooperation with European partners. “We must define with our partners the terms of export for equipment stemming from cooperative programs, as well as those which have benefited directly or indirectly from European funding, while respecting the sovereignty of each state,” the report said.
It was important that “our export policy be shared,” as much for the benefit of strategic partnerships and industrial sovereignty as respecting human rights and the fight against arms trafficking, which pointed up the importance of transparency, the report said.
The report pointed up the significance of an arms export agreement between France, Germany (2019) and Spain (2021), which sought to speed up government authorization for foreign sales of weapons built under cross-border cooperation.
A key part of that was an exemption for approval from the partner state if its share was less than 20 percent of the arms program. Some French industry executives see threshold as too low, allowing Berlin to hold up prospective foreign sales of some French weapons.
The agreement was open to other allied nations, particularly those with strong arms industries, on condition their arms export rules were strict, the report said. Other nations joining that export agreement would require consensus among all three partner nations.
France, Germany, and Spain are partners in the project for a European future combat air system (FCAS), with the key part in the new generation fighter (NGF), the eventual replacement for the Eurofighter Typhoon and Rafale after 2040, when the system is due to enter service.
The three partner nations have accepted Belgium as an observer on that FCAS project, after Brussels asked to join as a full partner.
Market to replace Russian weapons
In the world arms market, sales prospects have risen as countries which previously looked to the Soviet Union, and then latterly to Russia, have switched to buying western weapons, the report said.
That was due to sanctions against Moscow in response to the invasion of Ukraine, U.S. pressure not to buy from Russia, and difficulty in servicing Russian-built weapons. The trend is also favored by the dire performance of many Russian weapons in Ukraine.
Indonesia previously ordered Russian fighters, but switched to the Rafale last year, joining Croatia in the ranks of first-time client nation for the French fighter.
New entrants provide competition
China, South Korea, and Turkey are particularly dynamic as new entrants in the arms export market, the report said, with the former benefiting from a modernization drive of the People’s Liberation Army and a large defense budget.
One of the key points last year was France and the U.S. launching their Defense Trade Strategic Dialogue, a bilateral agreement aimed at smoothing out defense market access and export controls, addressing the U.S. International Traffic in Arms Regulations (ITAR), Export Administration Regulations (EAR), and French export regulations.
French delivery of the Scalp cruise missile to Egypt and Qatar was delayed due to ITAR restrictions on U.S. components used in the long-range weapon.
Egypt was the first export client for the Rafale, with an initial order for 24 units in 2015. Cairo opted for the French fighter following then-U.S. President Barack Obama’s putting a hold on the delivery of four F-16 in 2013, in response to the Egyptian armed forces removing then President Mohamed Mursi from power.
That Egyptian order ended a drought of export sales for the French fighter, which had lasted for at least a decade. (Source: https://www.defense-aerospace.com/)
04 Dec 23. NAO Report – MoD Equipment Plan for 2023–2033 Is Unaffordable. The Ministry of Defence’s (MOD) Equipment Plan (the Plan) for the next decade is unaffordable and it is facing the largest budget deficit since the Plan was first published in 2012, according to a new report by the National Audit Office (NAO).
The report – The Equipment Plan 2023–2033 – reveals that forecast costs exceed the current budget by £16.9bn. At the end of March this year the estimated costs were £305.5bn compared to a budget of £288.6bn. This contrasts with the previous year’s Plan, for 2022 to 2032, in which the forecast costs were £2.6bn less than the available budget.
The Plan is unaffordable because forecast costs have risen by £65.7bn (27%) compared with the previous Plan, outstripping a budget increase of £46.3bn (19%).
The largest cost increases are in nuclear and naval programmes, whose combined costs have risen by £54.6bn. The NAO found that the MOD’s decision to prioritise delivering the replacement nuclear deterrent on schedule has led to cost increases at the Defence Nuclear Organisation (DNO) of £38.2bn, a rise of 62% compared with last year’s Plan.1
Forecast costs for the Navy, which delivers parts of the nuclear capability, have risen by £16.4bn, 41% up on the previous Plan. This follows the Navy reconsidering its previous policy of only including forecast costs it can afford. Its new policy is to include the full predicted costs for the capabilities the MoD expects it to deliver. As a result it is reporting a deficit of £15.3bn in this year’s Plan, compared with a surplus of £0.7bn in 2022.
Inflation has contributed to the Plan’s increased costs, but the MoD has not received additional funding for inflationary pressures so the Top Level Budgets (TLBs)2 must manage the effects of it within their existing budgets. In August 2023 the MOD estimated that inflation would account for £10.9 bn of the Plan’s cost increases.
The MOD is not planning to cancel programmes in the short-term and told the NAO that doing so would limit the choices available to decision-makers at the next Spending Review. It is currently considering using an extra £1.95bn provided in the 2023 Spring Budget for improving resilience and readiness to offset its funding shortfall in 2023-24 and 2024-25.
The MOD has reduced total forecast costs by £35.9 bn, based on cost reductions that it expects the TLBs to make and on the TLBs’ expectations about whether they will be able to deliver their projects as planned. It estimates that the Plan’s funding gap could range between £7.6bn and £29.8bn, depending on whether risks or opportunities materialise.
However, the Equipment Plan does not reflect all the cost pressures to develop new and support existing capabilities that were set out in the 2021 Integrated Review, which was refreshed in 2023, and the accompanying Defence Command Papers. TLBs have taken different approaches to preparing their forecasts in the Plan: some include full predicted costs for the capabilities that the government expects the MoD to provide, while others only include those they can afford. This means the Plan does not disclose the full funding gap between government objectives and the budget available, and therefore underestimates the cost pressure that the MOD faces.3 The MOD does not know what the forecast costs would be if the Plan included all capabilities outlined in the Integrated Review and Defence Command Paper.
None of the six TLBs has an affordable equipment plan, and their overall forecast costs, including workforce and estates as well as equipment, also exceed their budgets.4 Every TLB has a deficit in its individual plan, ranging from £1.1bn at the UK Strategic Command to £36.7bn at the DNO, although the DNO deficit does not take account of centrally held funding for the new Defence Nuclear Enterprise.5
Skills gaps, shortages of key components, and increased demand for defence equipment in other countries in response to the war in Ukraine, are having an impact on the supply chain. The MOD expects these delays will add to its cost pressure in the future.
The NAO recommends that the MOD assess the effect of delaying major decisions on each TLB and ensure that Parliament and decision-makers understand the financial and capability impacts of this delay. It also calls for greater consistency in each TLB’s equipment plan, including MOD providing clear guidance on whether TLBs should include the full predicted costs of the capabilities they are being asked to provide to fulfil defence commitments, regardless of the available budget.
“The MOD acknowledges that its Equipment Plan for 2023–2033 is unaffordable, with forecast costs exceeding its current budget by almost £17bn. This is a marked deterioration in the financial position since the previous Plan.
“Deferring choices on spending priorities until after the Spending Review, while understandable given the government’s ambitions expressed in the updated Integrated Review, risks poor value for money if programmes continue which are later cancelled, scaled down or deferred because they are unaffordable.
“The MOD should consider how future Plans can achieve their core purpose: providing a reliable assessment of the affordability of its equipment programme and demonstrating to Parliament how it will manage its funding to deliver equipment projects.” Gareth Davies, head of the NAO.
1. The creation of a ringfence around nuclear funding helps protect the MOD’s highest defence priority but puts greater pressure on programmes not included in it.
2. Managing equipment programmes is the responsibility of the Front-Line Commands (the Royal Navy, the Army, the Royal Air Force, the UK Strategic Command, the Defence Nuclear Organisation and the Strategic Programmes Directorate. These organisations are known as Top Level Budgets.
3. Omitted projects include the operational extension of Warrior and Challenger 2 armoured vehicles, and the programme to deliver long-range ‘land precision strike’ weapons. Other project costs are included in the plan but are not fully funded. For example, new entries into the shipbuilding pipeline – including Multi-Role Ocean Surveillance ships, Type 32 Frigates, Multi-Role Support Ships, Type 83 destroyers, and Future Air Dominance System – are unaffordable by £5.9bn against currently allocated budgets, and Commando Force is not currently funded to operate from the sea in a high-threat maritime environment.
4. Financial pressures have also affected costs in other areas. The MOD forecasts that during the 10 years to 2032-33, total defence spending will exceed the total defence budget by £42.5bn, compared with a £4bn deficit last year. All six TLBs have total forecast costs over the 10-year period which exceed their total budgets, ranging from a deficit of £3.0 bn at the UK Strategic Command to £38.9bn at the DNO. The TLBs are focusing on remaining within their budgets in the 2023-24 and 2024-25 financial years.
5. At 31 March 2023, following the Spring Budget 2023, the MoD had retained an additional £34.5bn funding for the Defence Nuclear Enterprise (DNE) as centrally managed expenditure, rather than delegating it to the TLBs included in the DNE: the DNO, the Navy and the UK Strategic Command.
Full Report can be found here: https://www.nao.org.uk/reports/equipment-plan-2023-to-2033/
04 Dec 23. The equipment plan for Britain’s armed forces is “unaffordable” and faces its largest budget black hole for more than a decade, according to a damning report by parliament’s spending watchdog. The National Audit Office said the Ministry of Defence estimates a shortfall in its budget for new weapons and equipment over the next 10 years of £16.9bn — the largest deficit in the department’s annual 10-year forecasts since they were first published in 2012. In a worst-case scenario, it could reach £29.8bn. At the end of March this year, estimated costs were £305.5bn compared with a budget of £288.6bn. The watchdog said one of the main causes of the shortfall were increased costs in nuclear and naval programmes, which combined had risen by £54.6bn. The report added that the UK’s soaring inflation had contributed to the equipment plan’s increased costs, with the MoD not receiving additional funding to cover it, forcing the different services to “manage the effects within their own budgets”. The department estimated in August that inflation would account for £10.9bn of the increased costs. Professor Malcolm Chalmers, deputy director-general at defence think-tank the Royal United Services Institute, said the report was “the most damning I have seen” on the MoD’s equipment plan. “It reads like a situation where the government has lost budgetary control,” he added. The report highlighted that individual services had taken different approaches to preparing their forecasts in the plan. While the Royal Air Force and the Navy had included full predicted costs for the capabilities the government expects the MoD to provide, the Army had only included those it could afford. The watchdog also found that the equipment plan did not reflect “all the cost pressures to develop new and support existing capabilities” that were set out in the government’s 2021 integrated review of foreign and defence policy, which was updated earlier this year. Some notable projects omitted include the extension of the life of the Warrior and Challenger 2 armoured vehicles. Other projects were included but not fully funded. As a result, the plan “does not disclose the full funding gap between government objectives and the budget available, and therefore underestimates the cost pressure that the MoD faces,” said the NAO. It added that the department had decided to defer decisions on spending priorities until the next government-wide spending review, expected in 2024, and that the MoD was considering using an extra £1.95bn allocated for boosting ammunition stockpiles in this year’s spring Budget to offset its funding shortfall in 2023-24 and 2024-2025. Gareth Davies, head of the NAO, said that while deferring choices was “understandable given the government’s ambitions expressed in the updated integrated review, [it] risks poor value for money if programmes continue which are later cancelled, scaled down or deferred because they are unaffordable”. John Healey, Labour’s shadow defence secretary, said ministers had “lost control of the defence budget, given up on good government, failed to fix the ‘broken’ defence procurement system, sent inflation soaring and wasted bns of public money”. The MoD said that while the report recognised “the significant impact global headwinds and high inflation has had on UK defence, it does not and could not accurately reflect the current or future state of the Armed Forces Equipment Plan” and was “a dated snapshot from April 2023”. The department added that the government had “significantly increased” spending on defence equipment to £288.6bn over the next decade and remained committed to increasing defence spending to 2.5 per cent of GDP “as soon as economic and fiscal conditions allow”. (Source: FT.com)
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