Written Evidence

The Russian invasion of Ukraine increased the European Union’s (EU) ambitions in security in defence as well as member states’ appetite for EU-led solutions in this field. Specifically, the war unveiled the role of the European Commission as a policy entrepreneur which is enhancing its competences in security and defence through the usage of a “market-security nexus”. As defence cooperation gets increasingly framed by the EU in terms of economic efficiency and resilience, it might be difficult for London to ignore the gravitational pull of EU market and legislation in the long term. However, EU efforts in regulating the defence market are still nascent, and there are still both room and value for the UK to engage in this process. This submission is divided into three sections addressing the Terms of Reference (ToRs) 1, 3 and 5, respectively. Lastly, it concludes with a policy recommendations section suggesting specific avenues for defence cooperation within existing EU frameworks.

Section 1

1.1 To what extent does the EU’s response represent a departure from its previous approach to foreign and security policy? Is this likely to be a durable shift?

The Russian invasion of Ukraine seemed to have prompted a “whatever it takes” moment in EU defence, with novel initiatives particularly at the defence industrial level, a remit supranational institutions have historically struggled to regulate. The war urged the Commission to mobilise a new bureaucracy to advance proposals on how to utilise the EU’s defence industrial tools in the context of war. This effort culminated in:

• The provision of military assistance via the European Peace Facility (EPF) and consequent growth of this instrument from €5.7 billion in 2021 to €12 billion in June 2023. The funds have been employed to repay EU member states for their contributions of weaponry to Ukraine and to collectively procure one million rounds of ammunition for Ukraine.

• In June of 2023, the Council and the Parliament achieved an initial accord on the European Defence Industry Reinforcement through Common Procurement Act (EDIRPA), a €300 million initiative designed to encourage member states to collaboratively acquire urgently required military equipment.

• In July of 2023, the EU formally endorsed the Act in Support of Ammunition Production (ASAP), a €500 million program aimed at assisting companies in increasing their capacity for producing ammunition.

It is true that by advancing these initiatives the EU broke with past taboos and challenged the notion of Normative Power Europe (the oxymoronic use of the European Peace Facility as a weapons supply tool is a case in point). However, the pursuit of an enhanced role in the defence industrial field has been done consistently with what the EU does best: harnessing its regulatory and budgetary powers to increase Member States’ coordination in times of crisis. The European Commission is well-known for its policy activism and for framing issues towards its field of competencies. Thus, while it is certainly a novelty to observe this extent of EU action at the defence industrial level, the modalities through which increased supranational action was achieved in this remit are consistent with the EU’s modus operandi.

A market power by design, the EU’s value proposition for the European defence after the invasion of Ukraine has mostly been a financial one. However, albeit noteworthy, financial incentives might not be enough to get European member states to cooperate on a more regular and frictionless basis in a policy domain characterised by competition and protectionism. Even if states concede to financial incentives and decide to cooperate, international arms collaboration means that the problem is shared but not necessarily reduced: the pie may become bigger, but the problem of who gets the largest slice persists. A financial incentives-based approach should not be dismissed, but a parallel conversation is needed. One which discusses the governance structures that can best accommodate multinational endeavours in the inherently competitive European defence industrial base. This conversation should recognise that defence partnerships should be built on states’ core strengths, organised along two dimensions: industrial and technological expertise, and value for money. This mere focus on “financial carrots” might lead to a less durable shift than originally expected, and European ambitions on joint procurement of capabilities might soon reach a stalling point.

In terms of member states’ consensus on how to respond to future crises, it is important to note that the invasion of Ukraine was perceived as an existential matter for the EU. Consequently, one must be cautiously optimistic in expecting the same level of coherence in other foreign policy and security issues. Unequivocal US support and leadership as well as moral clarity about right and wrong in the Ukrainian context were also key enablers for a cohesive European response. However, not all foreign policy challenges present these characteristics. In fact, most of them don’t. See, for instance, the recent war in Gaza which left member-states deeply divided on how best to respond.

1.2 What implications, if any, does the EU’s response to the Russian invasion of Ukraine have for the UK-EU relationship in foreign, defence and security policy?

As explained above, the Russian invasion of Ukraine increased the EU’s ambitions in security in defence as well as member states’ appetite for EU-led solutions in this field. Since the Lisbon Treaty, there has been a debate about the shift towards more national or less European-oriented foreign and security policies in Europe. Recent developments, however, suggest a potential new phase resembling a process where Brussels gains more influence in this policy domain. The Commission has taken on the role of a policy entrepreneur, aiming to boost its political aspirations and significance. Specifically, it has seized on the opportunity of advancing EU policy in the area of common defence procurement. Yet, it has only done so with the express consent and direct tasking of the European Council. This dynamic is essential to understand the new policy developments, which are guided by both the supranational and intergovernmental levels.

Thus, it is true that the supranational level gained unprecedented importance the security and defence field, but this relevance was granted and tasked by the member states. As a result, the supranational and intergovernmental levels will continue to operate in tandem, one serving the other when necessary. Consensus will remain difficult to achieve vis-à-vis challenges that are perceived as less existential, and member states will resort to more or less “usage of Europe” according to the scale and perceived importance of the security challenge. Therefore, it is likely for a “Europe of different speed” scenario to materialise, with the Commission building coalitions and cooperating with member states that share its integrative approach. This could translate into pan-European defence projects scaling down and leaving room for smaller groupings and “coalitions of the willing”. Selectivity and differentiation can be introduced into existing institutional structures or patterns of cooperation in order to overcome political hurdles, bring about greater efficiencies, or accommodate diversity. This would have positive implications for the UK, as it could potentially entail more agile frameworks of cooperation and a new approach to like-minded non-EU partners.

So far, the war did not substantially change how the EU approaches and categorises its third-country partners. The EU Strategic Compass has a promising rhetoric in its partnerships chapter. Yet, besides merely listing who the key partners are, the document falls short in operationalising each specific partnership and in detailing how each partner is instrumental to achieve the EU’s foreign policy objectives. Each partnership should involve a tailor-made component to ensure that each is best suited to achieving a specific goal. Yet, the EU has long been reluctant to tailor its partnership agreements. Instead, it has generally favoured deals that are scalable and applicable to sets of countries rather than to individual states. This is because of several reasons such as the risk of the creating of in- and out-groups and a resulting decline in intra-EU cohesion; lowest-common-denominator problems in integration as member states opt-out of specific policies; moral hazard as laggards fall further behind; vulnerability to the interests of non-EU members alongside legitimacy problems in third countries; and increased complexity within the EU system.

A prolonged conflict in Ukraine and new complex security challenges are likely to change this approach. The EU and its member states must establish mutually beneficial connections with nations upon which they rely strategically or wish to establish strategic interdependence. However, this time, reliance solely on market forces is insufficient: deliberate choices must be made regarding new and unavoidable dependencies, not simply accepting those imposed by market forces or competing entities. European leaders must tactically structure their partnerships to strengthen their ability to make decisions and foster stronger bonds among partners, both within and beyond their borders. This new process of partnering will see the UK as the most natural ally.

Section 2

2.1 Is there a need for greater coordination and cooperation between the EU and the UK on defence policy? If so, what sorts of cooperation should be prioritised?

British participation in European defence matters to the EU because of London’s historical security commitment to the region and its twin status as one of Europe’s two major military powers as well as its most advanced weapons manufacturer. Similarly, the EU’s increased regulation of the defence market as well as making more funding available at the supranational level (particularly for R&D, where the UK is lagging behind) should prompt an interest from the UK in being part of the conversation. Thus, increased cooperation is indeed desirable from both sides.

However, cooperation for the sake of cooperation has rarely proved successful and there are still a set of restrictions for non-EU countries wishing to join EU-led defence initiatives. The level of integration with the EU Single Market decides the viability of defence cooperation with the EU initiatives such as the European Defence Fund (EDF), ASAP and EDIRPA and most initiatives. Thus, the UK should prioritise cooperation under institutions and frameworks that are less underpinned by a “play as you pay” rationale. Namely:

• European Defence Agency (EDA): Conditions for third party involvement with the EDA are outlined in Article 23 of the Council Decision establishing the Agency. These rules allow for interaction, project partnerships, and voluntary personnel contributions, but they do not confer voting rights or automatic invitation to any meeting, in particular steering board meetings. Third country involvement with the EDA is also unlikely to automatically favour permanent access into the European defence ecosystem. When it comes to liaising with third parties, the primary role of the EDA is getting third states in line with what member states are doing. Driven by the principles of added value, mutual benefit and reciprocity, the EDA simply matches states’ capabilities there where possible and necessary. In this sense, the Administrative Arrangements signed with the EDA are to be understood as a license to unlock ad-hoc, project-based cooperation rather than an unrestricted entry ticket to the EU defence theme park. However, given the importance of the EDA as an information exchange platform, involvement with this agency can contribute to the strengthening of ties between participating actors.

• European Peace Facility (EPF): This is an off-budget instrument that supports military and defence actions in the pursuit of CSDP objectives. For now, the EPF is outside the general budget, yet it functions in parallel to the EU’s multiannual financial framework (MFF 2021-2027). This allowed member states to establish a total budget for the EPF over a seven-year period, as well as agreeing on yearly spending limits. By tying the EPF to negotiations for the Multiannual Financial Framework (MFF), member states determined the financial allocations for the EPF within a larger discussion on how much they wanted to allocate to EU external actions overall. Previous experience with the Athena Mechanism (which served as a precursor to the EPF, along with the African Peace Facility) suggested that arrangements for participation from non-EU countries could be arranged. In fact, it would be unwise for the EU to prohibit contributions from like-minded countries, especially those with whom it has established agreements. Under the financial rules outlined in the Council Decision for Athena, non-EU countries (such as those in the EEA, Albania, North Macedonia, Montenegro, Chile, Mexico) were indeed permitted to participate in the mechanism, though without voting rights in its decision-making process. The European Peace Facility operates under similar principles but allows third countries to have a say in ensuring that their voluntary contributions are utilised according to agreed upon terms. Article 30 of the EPF Council Decision states that contributions from third parties require prior approval from the Council’s Political and Security Committee (PSC). The EPF’s own committee can then authorize the administrative handling of the financial contribution, which may be designated for specific actions or operations. The specific purpose of the voluntary contribution is outlined in the administrative arrangement with the respective third party. The administrator of the Facility Committee is responsible for ensuring that the management of voluntary contributions adheres to the relevant administrative arrangements. They are obligated to provide each contributor, either directly or through the applicable operation commander, with pertinent information regarding the handling of the voluntary contribution as outlined in the relevant administrative arrangement. This allows a third country to monitor how its financial contribution is utilised. This is key for the UK and presents a good mechanism for a more transactional, ad-hoc and supervised engagement.

• PESCO: In the field of security and defence, scholarship has singled out PESCO as a framework embodying high levels of differentiation in its very design. PESCO exhibits not only selectivity in membership but also project-based clustering and patterns of differentiated cooperation that result in external differentiation through the engagement of third countries, differentiation in the relationship with third countries, and a complex division of labour vis-à-vis non-EU institutions, including NATO, and the European Intervention Initiative (EI2). As a result, PESCO provides the best framework for the UK to cherry pick the level of integration of the project, the number of partners and the type of activities. When it comes to cooperation formats, history shows that the most successful cooperative-development programmes have few partners and a clear leader, thus the UK should look at PESCO projects that have these characteristics.

  Third party involvement with PESCO starts with a formal request initiated by the third country applicant. Importantly, the request should be initiated by a country’s government and not by its legal entity, or defence company, as is the case with EDF. The request should be submitted to the coordinator(s) of the PESCO project in question (i.e. to the member states, not to an EU institution). It needs to contain detailed information on the reasons for participating in the project and the scope and form of the proposed participation. Finally, the request must substantiate the fulfilment of a set of conditions, laid out in Article 3 of the Conclusions.

  They consist of four key requirements. Firstly, the third country must share the values on which the EU is founded as well as the overall objectives of the Union’s CFSP laid out in article 21(2) TEU. Secondly, it must provide substantial added value to the PESCO project in question. Here, substantial value is loosely defined by the EU, thereby providing significant room for manoeuvre for the applicants to make their case. As a rule of thumb, the applicant’s contribution to the project must be complementary to those offered by the rest of the participating member states, for example by providing technical expertise or additional capabilities including operational or financial support. The EU does not set any specific threshold or measurement for complementarity. Thirdly, it is important that the third state’s participation does not imply the creation of dependencies for the EU. This point is particularly contentious when it comes to allowing participation from powerful third countries such as the US, but it is advantageous for smaller states with niche capabilities. Lastly, the applicant state must have a Security of Information Agreement with the EU and an Administrative Arrangement with EDA. The third country’s application making these arguments will then be assessed by the project’s participating members who will unanimously decide on whether or not to include the third country. Once the participating members have approved the request, they will inform the High Representative and the European Council of its decision. Only following the Council’s green light, can an invitation to join the project be made to the third state. If the invitation is accepted, an Administrative Arrangement is negotiated outlining contributions and modes of engagement. A template for such an administrative arrangement between project members and third states can be found on the last page of the Council Decision establishing conditions for third-party involvement in PESCO.

  Much of the detail on third country participation will be in an Administrative Agreement, thus leaving an important element of uncertainty. This also includes specific rules regarding the project’s intellectual property. As a general rule, the PESCO consortium retains full control of all the project’s intellectual property, but it seems plausible that specific rules could be formulated in the agreement. One last interesting aspect is that the Decision specifies a separate set of rules for countries (i.e., third-party states) and defence industry companies (i.e., third-party entities) in the modality of joining PESCO projects. For now, the main difference is that third-party states have been eligible to join since the conclusion of the agreement (November 2020), whereas companies must wait until 2026. Lastly, the entanglement between PESCO and the EDF needs to be addressed and, specifically, the controversies around the EDF’s PESCO bonus. EDF regulation maintains that an action developed in the context of a PESCO project can benefit from a funding increase of an additional 10%. This, however, is only valid for EU member states or associated countries. Under no circumstances can a third country succeed in using PESCO participation as a shortcut to access EDF money.

• Bilateral and minilateral cooperation outside EU structures: Conscious of the challenges of collaborative projects, European states have continued to collaborate along bilateral and minilateral lines. The proliferation of such arrangements has often been seen as one of the underlying causes behind the fragmentation and duplication of European defence efforts. However, there is limited appreciation of the conductive power of these modes of engagement, and of how the existence of lower-level, smaller-format collaborations can then spill over to the multilateral level. For instance, when the EU established PESCO in 2017, much of the project-based clustering was based on existing bilateral and minilateral defence initiatives between states outside the supranational umbrella, which were then incorporated into the EU’s defence and security architecture. As such, these more ad-hoc types of cooperation should not necessarily be seen as antagonising to multilateral efforts happening at the EU or NATO levels.

2.2 The communiqué issued following the NATO Heads of State and Government summit in July 2023 stated that for “the strategic partnership between NATO and the EU, non-EU Allies’ fullest involvement in EU defence efforts is essential” and looked forward to “mutual steps, representing tangible progress, in this area to support a strengthened strategic partnership”. As a non-EU Member of NATO what steps, if any, should the UK take to give effect to this?

The UK should recognise that EU defence initiatives are designed to contribute to transatlantic burden- sharing and that they are not envisaged as competing with NATO. The UK should continue to engage in those EU projects that are particularly important to the Alliance. It has already done so, though to a limited extent. Joining PESCO’s Military Mobility project is a glaring example. Improving military mobility in Europe has long been one of the flagship areas for EU–NATO cooperation. Indeed, it represents one of those spaces in which the EU and NATO complement each other. Namely, while NATO is able to plan and calculate the military’s needs for transport across Europe, the EU has the legal and regulatory weight to streamline processes as well as available funds and programmes on cross-border mobility. PESCO’s military mobility project epitomises a case where EU action supports NATO efforts and, as such, London’s decision to join was perfectly aligned with UK government policy. As a NATO but non-EU member the UK should continue to prioritise initiatives that are in support of the Alliance. Participation in such projects should be easier to sell domestically, can serve as an initial steppingstone to normalise the relationship, and might have a conductive power towards further engagement.

Section 3

3.1 Some experts have identified a more “geopolitical” EU that is more assertive in its role as a foreign policy and security actor following the Russian invasion of Ukraine. Do you agree with this assessment? If so, what implications does it have for the UK?

The EU suffers from the legacy of separating the exclusive competence for the EU to act in the sphere of trade from the more limited competence to develop a foreign policy. This stark separation has been slowly eroding since the EU Global Strategy of 2016, and the war in Ukraine has accelerated this process. Specifically, the war (and the pandemic before it) sped up the emergence of the Commission as a geopolitical actor and the securitisation of those areas that fall under EU competencies to a greater extent than defence such as, for instance, energy, economic security and supply chain resilience.

The Single Market experience continues to permeate every aspect of EU policymaking and, since the beginning of the Common Foreign and Security Policy (CFSP), the Commission has tried to enhance its competences within the traditional intergovernmental policy domain of security and defence through the usage of a “market-security nexus”. The sustained war in Ukraine exposed a European industrial resilience problem, and joint defence procurement became to be understood as crucial in making a decisive impact on the future competitiveness of Community industries in the internal market. By framing a traditional intergovernmental problem through a market resilience lens, the Commission managed to get members states to seek supranational solutions and to accept innovative proposals. For instance, the Commission’s shift in approach and understanding of Article 41.2 of the Treaty on European Union (TEU) can be considered quite ground-breaking. Until recently, the idea of using the Union budget for defence procurement was unimaginable. The Commission is therefore using crises to act as a policy entrepreneur to further enhance its political ambitions and to suggest innovative solutions.

This dynamic has important implications for the UK. As defence cooperation gets increasingly perceived through the lenses of economic efficiency and resilience, it might be difficult for London to ignore the gravitational pull of EU market and legislation. The enhanced role of the Commission in security and defence is likely to increase the EU’s capacity to shape behaviour externally through “milieu shaping”. As a result, it is important for the UK to be involved in the restructuring of the European defence market. In fact, for nations or companies that didn’t participate in this process from the beginning, joining later would pose significant difficulties.

Section 4: Recommendations

The UK and the EU are natural partners and, as highlighted throughout this contribution, there is mutual benefit in further cooperation. As EU member states delegate more authority to the supranational level in the field of security and defence, it might get increasingly difficult for the UK to ignore the gravitational pull of the EU in the process of the restructuring of the European defence market. However, this process has only just started and there is value for the UK to engage in it relatively early on. When it comes to the modalities for such engagement, the ball is largely in the UK’s court. British policymakers should recognise that closer post-Brexit cooperation with EU institutions is an iterative process, and therefore subject to change as lessons are being learnt and as the context evolves. Ultimately, scalability and proportionality infuse the EU’s approach to partnerships. As such, EU eagerness to effectively explore and legally spell out advanced forms of security cooperation with the UK will much depend on the latter’s willingness to commit itself to cooperation in the first place. Opportunities exist:

• The first step for bringing more coherence to UK-EU cooperation would be signing an Administrative Arrangement with the EDA. As studies have shown, the latter scenario could facilitate increased interaction between representatives from the UK and the EU, potentially creating opportunities for greater involvement of Britain in EU initiatives where the EDA plays a part. There is no “one size fits all” Administrative Arrangement for third countries, and each one is negotiated separately and on an ad hoc basis. Specifically, the agreement will stipulate rights and responsibilities for the UK as well as introducing a review mechanism to periodically assess whether the UK is meeting those obligations. It is important to demystify it, however. Signing an Administrative Arrangement with the EU is not a political step towards strengthening relationships with the bloc. It should be understood as a licence to unlock ad hoc, project-based cooperation that is intended to fully respect the signatory’s national sovereignty.

• The UK should explore further involvement in PESCO beyond the Military Mobility project, which does not entail research and development activities. Participating in a PESCO capability development project could serve as a means for the UK to explore the extent to which third countries can engage in EU capability development initiatives, and to observe how the existing regulations regarding intellectual property and export controls are applied in practice. If the EU demonstrated a willingness to interpret its regulations in a flexible manner, it would open the door for greater UK involvement in both PESCO and, potentially, the EDF. As previous studies suggested, participating in a PESCO capability development project presents an opportunity for the UK to explore the limits of third-party engagement in EU capability development mechanisms. It allows the UK to assess the practical interpretation of existing regulations concerning intellectual property and export controls. If the EU demonstrates flexibility in its rule interpretation, it could open doors for the UK to engage more closely in both PESCO and the EDF. Cooperating under the PESCO umbrella has changed the way member states communicate with each other in addition to providing access to key documents and information and facilitating the creation of personal links among the member states’ representatives. As such, PESCO might represent a valuable socialisation forum as well as being a trust-building exercise.

• Lastly, bilateral cooperation with European states remains vital as, for instance, the Lancaster House treaties with France have already demonstrated. The UK will need to address European partners individually as much as collectively.

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Isabella Antinozzi is a Research Analyst in the Defence, Industries and Society Research Group at RUSI.