Ukraine Monitor

economic and social impacts

Views/information on resilience or disruption of supply chains due to the Russian invasion in Ukraine and various sanctions

16 May 2022

Defence

The Russian aggression has changed many policies that were previously taken for granted. Germany, Norway and Sweden all have decided to send weapons to Ukraine, a significant break with their past policies not to allow weapon exports to active war zones.

Representatives of the European defence industry expect that the integration of the European market, and namely the plans to create European common defence capabilities, will accelerate and that defence budgets will rise.

Impact on supply of equipment or raw materials from RU/UA/BY

Although supply chains for the EU defence industries are still intact, and Russia supplies only a limited set of critical raw material to these industries, the main companies have started to reduces their (albeit limited) dependencies. This will lead to a rise in costs.

Russia is a main supplier of ruthenium, titanium and aluminium, which are mainly required for the aerospace industry. Titanium and aluminium can possibly be supplied by other countries as well.

Russia is one of the main suppliers of nickel, which is highly relevant to steel-producing companies. The manufacturers of land systems are not facing any difficulties yet, however.

Specific company examples

Airbus purchases 65% of its titanium from Russia.

Initiatives to fix the problems

Airbus is preparing to diversify its procurement. Other titanium suppliers could be Japan or China.

Additional impact worth mentioning

Defence budgets

The consequences of the war for the defence industries can be differentiated between mid-term and long-term consequences. The most immediate consequences are obvious: Most of the EU governments have decided to supply weapons and non-lethal equipment to Ukraine. Most of the supply comes directly from the armies, but governments have also decided to buy new equipment from the industry, as well as deliver refurbished equipment currently stockpiled at industry premises. Some governments have further decided to redeem decommissioned equipment from the industry and to deliver this to Ukraine.

The EU plans to introduce new investment instruments to fund the EU’s military spending.

The long-term consequences are yet to be seen. Many countries have decided to step up their defence budgets, although it is often not yet clear to what extent this will be the case, and in which fields the additional money will be spent.

Germany has pledged to invest, from now on, more than 2% of its GDP on defence. In addition to this, a special defence fund worth EUR 100bn will be established. Parliament will vote on this in June, and it is yet to be decided which investments will be covered by the special defence fund. In all likelihood, the purchase of the F-35 - the new transport helicopter - and ammunition will be covered by this, among others.

Belgium announced that it would raise its defence budget from 0.9% to 1.54% of GDP by 2030.

Denmark is expected to meet the NATO goal of spending 2% of GDP on defence by 2033.

Finland is expected to raise its defence budget soon.

The Italian Parliament has already voted to increase the defence budget from 1.41% of GDP to 2% of GDP, without stipulating a deadline.

The Dutch Defence Minister has announced that she will work on plans to increase the defence budget to 2% of GDP

Norway has announced that it would provide an additional NOK 3bn to its defence budget, specifically to reinforce its land and maritime borders with Russia.

Poland has announced that it would raise the defence budget from 2.1% to 3% of GDP in 2023.

Romania has announced that it would raise the defence budget from 2.02% to 2.5% of GDP.

Sweden has announced that it would raise the defence budget from 1.3% to 2% of GDP, without providing a deadline.

Arms deliveries to Ukraine

It is difficult to get an accurate overview of the amount of weaponry supplied to Ukraine so far. Many countries only give indicative numbers, or vague references to the concrete systems that they are supplying, mainly due to security reasons.

• Belgium has sent FN FNC assault rifles, machine guns, anti-tank weapons and personal military protective equipment; the Belgian government plans to buy additional anti-tank weapons and heavy guns from the industry and to deliver them to Ukraine

• Croatia has sent infantry weapons, Zastava M70 assault rifles and protective equipment

• The Czech Republik has sent T-72 battle tanks, rocket launchers, howitzers, assault rifles, pistols, submachine guns, machine guns, sniper rifles, anti-air launchers and infantry vehicles

• Denmark has sent bulletproof vests, 2,700 anti-tank weapons, 25 Sky-Watch tactical drones, 50 modernised M113 armoured personnel carriers, 25 armoured fighting vehicles and anti-tank mines

• Estonia has delivered 9 D-30 howitzers, FGM-148 Javelin anti-tank missiles, anti-tank mines and small arms

• Finland has delivered assault rifles, anti-tank weapons, bulletproof vests and helmets

• France has delivered MILAN and Javelin anti-tank missile systems, Mistral Manpads, CAESAR self-propelled howitzers and shells

• Germany has sent heavy weapons, such as the Panzerhaubitze 2000 armoured howitzer and 50 Gepard air-defence tanks. They have additionally sent 500 Stinger anti-tank missiles. 2,700 Strela-2m anti-aircraft missiles, 5,100 Matador anti-tank weapons, machine guns, armoured cars, reconnaissance drones, anti-tank mines and hand grenades

• Greece has delivered 20,000 AK-47 assault rifles and RPG-18 anti-tank rocket launchers

• Italy has delivered mortars, Stinger missiles, Milan anti-tank systems, self-propelled howitzers, Panzerhaubitze 2000 howitzers, personnel carriers and armoured cars

• Latvia has sent Stinger anti-aircraft missiles, 90 unmanned aerial vehicles and individual equipment

• Lithuania has sent FIM-92 Stinger anti-aircraft missiles, 120 mm heavy mortars, anti-tank weapons, grenades, machine guns and submachine guns

• Luxembourg has delivered 100 NLAW anti-tank weapons and jeeps

• Montenegro has delivered non-lethal equipment

• The Netherlands has sent 50 Stinger missile launchers, 50 Panzerfaust 3 launchers, Panzerhaubitze 2000 howitzers, combat helmets, flack jackets, mine detectors, Firefinder radars, Thales Squire radars and sniper rifles

• Poland has sent 230 tanks, RPG-76 Komar, RGP-40 grenade launchers, 100 LMP-2017 mortars, Piorun air-defence systems, drones, artillery, missiles and 100 air-to-air missiles for MiG-29/Su-27 fighter planes, totalling a USD 1.6bn worth of weapons

• Portugal has sent 70 tons of military equipment, 4 Iveco M 40.12 WM/P armoured infantry mobility vehicles, mortars, 5 howitzers and light weaponry

• Romania has delivered non-lethal military equipment, including combat helmets and bulletproof vests

• Slovakia has delivered petrol, kerosene jet fuel, ammunition, S-300 air defence systems, air defence launchers and anti-tank missiles

• Slovenia has delivered M-84 tanks

• Spain has delivered 1,370 anti-tank grenade launchers, light machine guns, ammunition and one RG-31 Nyala mine-resistant ambulance

• Sweden has also changed its well-established approach not to send weapons to conflict zones and has decided to send helmets, 10,000 anti-tank launchers and body armour

• The EU has budgeted EUR 200bn for arms delivered to the Ukraine

• Norway has sent 4,000 M72 LAW anti-tank weapons, helmets, bullet-proof vests, gas masks, 100 Mistral anti-air missiles

• Turkey has sold Bayraktar TB2 drones to Ukraine in the past and 20-50 Bayraktar are believed to be in Ukraine

• The UK has sent Javelin anti-tank weapons, Starstreak anti-aircraft weapons; Mastiff armoured patrol vehicles; long-range artillery, anti-ship missiles, non-lethal personal equipment; and plans to send cargo drones, electronic warfare equipment and 13 bulletproof Babcock Toyota Landcruisers.

• The US has delivered a package of 100 Switchblade drones, 800 Stinger anti-aircraft systems, 5,500 Javelin anti-tank missile systems, 6,000 AT4 portable anti-tank weapons, C-4, howitzers, Mi-17 helicopters, armoured Humvees, and M18A1 Claymore anti-personnel mines

• The US has announced a USD 33bn support package for Ukraine, USD 20bn of which is military aid. The value of the weapons sent to Ukraine by the US since the beginning of the war amounts to USD 3.4bn.