Europe and the US Begin Rebuilding Ukraine and Undermining Putin’s Influence in Europe
Yes.
On January 14th, 2024, the Institute for the Study of War (ISW) released a report that made me go, “Whatttt?”
According to the ISW,
Ukraine is dramatically expanding its defense industrial capacity to develop the ability over time to satisfy its military requirements with significantly reduced foreign military assistance.
Ukraine is pursuing three primary lines of effort to achieve this goal: increasing its domestic defense industrial base (DIB), building bilateral and multilateral partnerships with European states, and pursuing industrial joint ventures with the United States and other international enterprises to co-produce defense materials in Ukraine and elsewhere.
Ukraine and its Western partners are executing a realistic plan to create a sustainable basis for Ukraine to be able to defend itself over the long term with dramatically reduced foreign military assistance.
Ukraine signed numerous treaties with Western partners and discussed joint weapon manufacturing. However, there was much talk and little action on the ground, making me skeptical due to the lack of concrete efforts.
In April, Ukraine’s strategic industries minister, Oleksandr Kamyshin, stated that Ukraine’s military-industrial complex has a production capacity of $18–20 billion, but Ukraine could only fund a third of that amount. This further strengthened my skepticism about Western assistance in rebuilding Ukraine from the inside.
But ISW was correct. The allies, at some point, likely late last year, decided to drive Ukraine towards self-sufficiency. It took a long time to begin using the frozen Russian assets in the Western world to pay for the damage inflicted on Ukraine. We are still not fully there, but little by little, we are making progress.
Yesterday, the European Union released 1.4 billion euros to Ukraine from the interest payments collected from frozen Russian assets. An estimated 210 billion euros worth of Russian assets have been frozen by the Western world, with interest payments on these assets estimated at around 2.5 to 3 billion euros per year. After much deliberation, the allies agreed to use the interest payments collected on the frozen Russian assets. They have now approved the delivery of 1.4 billion euros to Ukraine, which will be given in July.
The good news is that Ukraine can use 90% of the funds for its military, while the remaining 10% will be used for rehabilitation, recovery, and reconstruction. However, reaching this point was not easy. The European Union, for whatever reason, always seeks unanimous consent for any action. Hungarian President Viktor Orban, who enjoys a close relationship with Russian President Vladimir Putin, had the power to veto the bill and delay or stop the funds from reaching Ukraine.
During the first two years of the war, the whole of Europe had to rally around Orban to get him to relax his position, a process that took months and a significant amount of effort. Sometimes, Orban would use the veto to extract concessions for his government. This obstruction was turning into a huge hurdle, slowing down the already sluggish European response to help Ukraine. It was almost as if Europe tried and Orban disposed. Putin was obviously pleased with the delays.
Eventually, Europe realized the best way to move forward was to leave the baggage behind.
They left Viktor Orban behind.
EU High Commissioner Josep Borrell stated that the EU approved this tranche of assistance from frozen Russian assets through a “legal loophole,” bypassing Hungary’s veto. Since Hungary abstained from voting on an earlier agreement regarding the proceeds from Russia’s frozen assets, they “should not be part of the decision to use this money.”
This move means that the EU has created a loophole to help Ukraine and has successfully countered Putin’s supporters within its ranks. This sends a strong message to anyone who might try to sabotage the EU’s future efforts to aid Ukraine.
Now, Ukraine will have 1.2 billion euros in July to spend on weapons. If I were Ukraine, I would use this money to place orders with domestic manufacturers rather than buying weapons from abroad. This seems to be Ukraine’s likely strategy. If Europe were thinking about paying themselves to ship weapons to Ukraine, they wouldn’t have announced the release of 1.4 billion euros to Ukraine, with 90% designated for military purposes. The decision has likely already been made.
This decision follows the Biden administration’s decision in April to place $1.6 billion worth of orders with Ukraine’s domestic weapons manufacturers. The fund to support Ukraine’s growing domestic manufacturing industry now stands at more than $3 billion in three months, which could be the beginning of substantial financial support for Ukraine’s defense industry.
These funds will significantly boost Ukraine’s growing domestic weapons manufacturing industry. Here are some key developments:
Armored Vehicles:
Senator Armored Vehicles, manufactured by the Canadian company Roshel, are widely used by Ukraine, with over 1,000 vehicles supplied. A Ukrainian military blogger suggests the number is now 1,500 units. Roshel is slowly ramping up operations in Ukraine.
Roshel CEO Roman Shimonov stated, “We already have several workshops across Ukraine that provide repair and maintenance for our vehicles. We are in the final stages of planning to localize some of our production in Ukraine. Roshel employs over 200 refugees from Ukraine in Canada, many of whom are eager to return to Ukraine and continue production, contributing to the local economy and strengthening our operational presence there.”
In December last year, Germany’s largest defense manufacturing company, Rheinmetall, announced it would start producing Fuchs armored personnel carriers in Ukraine by late summer 2024 and Lynx vehicles by late 2024.
155 mm Artillery Shells:
In February, Rheinmetall and Ukraine agreed to create a joint venture, 51% owned by Rheinmetall and 49% by a Ukrainian company. The company is expected to produce six-digit numbers of artillery shells annually.
Armin Papperger, chairman of the executive board of Rheinmetall AG, declared, “Demand for ammunition in many countries is enormous — first and foremost in Ukraine. Our intention of establishing another joint venture underscores our support for Ukraine. This joint venture will make a vital contribution to the country’s ability to defend itself — and thus to the security of all Europe.”
Artillery Guns:
British defense company BAE Systems, among the first Western producers to establish a local presence in Ukraine, signed an agreement in April 2024 with the UK’s Defence Ministry to perform maintenance, repair, and overhaul of light guns in Ukraine.
Approximately 30 British companies have initiated discussions with Ukraine, following the security framework agreed upon by Britain and Ukraine in April, to create joint ventures with Ukrainian manufacturers.
KNDS, the French-German defense company that manufactures Ceaser howitzers and Leopard tanks, announced last week that they “will work with local firms to set up equipment maintenance, manufacture spare parts using 3D printing, and produce 155mm artillery shells.” They plan to create a subsidiary in Ukraine.
These are just a few of the significant details collected. There are many deals that Ukraine has signed with international partners. My biggest worry has always been the time lapse between signing agreements and beginning construction. When there is both money and will, things start immediately. When one is lacking, progress slows down.
Ukraine has the will but lacked the funds to jump-start projects. The 3 billion euros from Europe and the United States will significantly assist Ukraine’s defense manufacturing industry. A gives to B, and B gives to C, and so on. It will take time, but one thing will lead to another, allowing Ukraine to keep adding to its production capacity.
We won’t see immediate results from these efforts, but we will see them in Ukraine’s long-term deterrence capabilities. Ukraine should get all the assistance it can now and return the favor to all Eastern European nations in the future.
I hope the West, instead of continuing its piecemeal approach, creates a $50 billion loan backed by interest payments from Russian assets and gives Ukraine the freedom to spend it as they see fit. Of course, there should be oversight to ensure the money is spent as intended, but it should not hinder Ukraine’s efforts.
This approach to boost Ukraine’s defense manufacturing capacity is vital because Ukraine cannot keep relying on outside assistance and protection in the future. Together with other Eastern European nations — Sweden, Finland, Estonia, Latvia, Lithuania, Poland, Romania, and Bulgaria — Ukraine should aim to achieve a strong and self-sufficient defense position.
The key to achieving this strength could be Ukraine’s fast-growing defense manufacturing industry. Hopefully, Ukraine will become a strong defense export hub, supplying its neighbors at cost. Given the assistance Ukraine is receiving from the West to build its manufacturing industry, it would be fair to expect them to support all nations bordering Putin’s state.
Note: I am going to keep adding to the midsection of this story. As more manufacturers make announcements, I will include them here.
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