Joint defense financing and procurement are under study by the United Kingdom, Finland and the Netherlands.
The three countries are considering the possibility of collaborating to jointly finance and purchase weapons, ammunition and military equipment, given the increasing level of global threat, with the war in Ukraine and in the Middle East.
In particular, London, The Hague and Helsinki have stated that, together with other unspecified partners, they are exploring the possibility of establishing a new mechanism by 2027 that would accelerate investments and stimulate demand for defense equipment, according to a statement released today by the British government, reported by Reuters.
The initiative comes on the eve of the meeting between British Prime Minister Keir Starmer and Ukrainian President Volodymyr Zelensky in London, which is also expected to be attended by NATO Secretary General Mark Rutte.
According to Reuters, the mechanism under consideration by the three countries would complement existing NATO and EU initiatives.
All the details.
THE DEFENSE MECHANISM UNDER STUDY BY THE UNITED KINGDOM, THE NETHERLANDS AND FINLAND
The United Kingdom, the Netherlands and Finland aim to finance joint defense contracts through a new multilateral mechanism.
The mechanism “would strengthen collective deterrence, expand the defense industrial capacity and increase defense capabilities through joint purchases,” the three countries said in a statement.
According to what was revealed by the Financial Times, it would function as an international financial institution, with a mix of guarantees and capital contributed by the participating countries, which could attract private investments through bond issuance.
THE GOAL
The goal is to reduce procurement costs in the defense sector and leverage economies of scale arising from pooling orders of tanks, ammunition and missiles, rather than competing for the limited supply from industry companies, which drives prices up, explains the British financial daily.
THE STRATEGY
While the agreement is currently trilateral, the aim is actually to expand membership to other NATO members and “partners with similar objectives,” according to a source familiar with the discussion quoted by the FT. Admission of new members would be subject to unanimous decision by the core group of countries, the official added. “We are still in the exploratory phase,” another official said, adding that next steps will include drafting a treaty to support the new structure.
THE POSITIONS OF THE THREE COUNTRIES
“By joining forces, we achieve greater security with the same resources and also strengthen our alliances,” said Dutch Finance Minister Eelco Heinen in the statement.
British Finance Minister Rachel Reeves said the country needs to deepen cooperation with its allies and strengthen its defense industry. “Now more than ever, we must step up cooperation with our allies. It is in our long-term interest to strengthen our defense industries, facilitate collaboration among our armed forces and ensure taxpayers get good value for money.”
For the Finnish Ministry of Defense, the launch of the mechanism was “stimulated by significant changes in the security context,” particularly the Russian invasion of Ukraine.
THE EXPERT’S COMMENT
Guntram Wolff, senior fellow at the Bruegel think tank and author of a paper published last year outlining a similar multilateral mechanism, explained that by pooling demand unit costs could be cut in half.
“Closer defense cooperation among European countries is essential to ease the burden on taxpayers and ensure that technology development and control remain in Europe,” Wolff told the Financial Times, emphasizing that “This new initiative represents a step in the right direction and I hope other countries will join it in the future.”
