British arms companies such as BAe could be eligible for a slice of a new £126bn European Union-wide defence fund as the bloc laid the ground work for a defence pact with the UK to challenge the threat from Vladimir Putin.
The European Commission released details of its planned €150 bn (£126 bn) fund for governments as part of its massive rearmament schemes, but it would only be open to defence companies within the 27-nation EU and from those from countries that have signed defence agreements with the EU.
While on the face of it this would exclude the UK and other non-EU countries such as Turkey from being able to join the defence procurement scheme, a separate report also published on Wednesday raised hopes of a speedy defence pact.
In what would be a major boost to Keir Starmer’s Brexit reset the Commission’s separate white paper on defence readiness, describes the UK as “an essential European ally with which cooperation on security and defence should be enhanced in mutual interest, starting with a potential Security and Defence partnership”.
It adds that, “bilateral security and defence cooperation can expand, ranging from external crisis management to defence industrial policies.”
Keir Starmer has made resetting relations with the EU a key priority and a defence pact is believed to be the first step towards that – something given added urgency by US President Trump’s disengagement from Nato and the war in Ukraine.
The first EU-UK summit on the reset will take place in May.
The EU’s defence plans are designed to build the EU’s military-industrial complex as the bloc aims to counter Russian aggression, while also reducing dependence on US arms and equipment.
“The era of the peace dividend is long gone. The security architecture that we relied on can no longer be taken for granted,” European Commission President Ursula von der Leyen said. “We must invest in defence, strengthen our capabilities, and take a proactive approach to security.”
The new Security Action for Europe (SAFE) plan allows EU countries to secure loans from the EU budget to spend on weapons, but the Buy European clause, championed by France, says that 65 per cent of the cost of weapons must be spent in either the EU, Ukraine, or EFTA’s Norway, Switzerland, Iceland and Liechtenstein.
It also says it would be available to “acceding countries, candidate countries and potential candidates, as well as third countries with whom the EU has entered into a Security and Defence Partnership.” This latter would potentially be the UK.
The measure still needs to be approved by a majority of EU member states, and French calls for strict Buy European clauses – seen by some as an effort to privilege French arms dealers – will face resistance from other countries like Germany, the Netherlands, and the Baltic and Nordic states.
EU foreign policy chief Kaja Kallas all but accepted that the clause was pushed by Paris when she said it was “related to member states.”
Defence pact hopes
However, Kallas – who met Foreign Secretary David Lammy and Defence Secretary John Healey in London this week – indicated that it could be overcome if and when British clinches its long-awaited security pact with the bloc.
“We are working on having this defence and security partnership with the UK,” she said, suggesting that the upcoming EU-UK summit in May could be the moment to secure the planned deal.
She was echoed by UK officials who said they still hoped British firms like BAE Systems would be included in the plans after EU governments scrutinise it, reflecting the leading role taken by Prime Minister Sir Keir Starmer to rally European countries in support of Ukraine in recent weeks.
“The UK is the leading European defence partner alongside France, and the Prime Minister has been crucial in bringing together the coalition of the willing for Ukraine,” said one British official. “It stands to reason that the EU will want to ensure the UK remains close when it comes to defence procurement.”
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Read MoreAhead of the meeting foreign secretary David Lammy said: “A strong and secure Britain is a foundation of our Plan for Change. This cannot be achieved without strengthening our shared European security and coming together with our partners to ensure a just and lasting peace in Ukraine.”
The Commission’s SAFE scheme also says the EU should rule out any purchase that allows third country ‘design authority’ restrictions on its construction or use, reflecting concerns that US arms include kill switches that could prevent their use.
While the existence of such kill switches is debated, there are clauses in many arms contacts that restrict their use – for example, the US Patriot missile defence platform limits on where they can be used. Kallas said the war in Ukraine showed that allies needed to provide defensive weapons without any restrictive conditions. “In a crisis, your military really needs to have free hands,” she said.
The moves come as military chiefs from 30 nations are due to meet in the UK on Thursday as members of the Coalition of the Willing to discuss the logistics of peace keeping in Ukraine if a peace deal with Russia can be reached.
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