Episode Notes:

The European Union has allocated funding to send Ukraine 1 million 155-millimeter artillery shells within 12 months. The 27-member bloc also agreed to provide funding to fast-track new weapons orders and to support the expansion of production lines in Europe. To discuss this development, Franz-Stefan Gady, a senior fellow at IISS, joined the WarCast.

[:33] The agreement

[3:35] The good news

[5:42] The bad news

[8:51] Political will for more support

Episode Transcript

Aaron Stein: My name is Aaron Stein, and I am the Chief Content Officer at War on the Rocks. You are listening to the Warcast, the members-only podcast for what you need to know — now. Hello, and welcome to the Warcast. Today I'm talking to Franz-Stefan Gady about recent news in the European Union about setting aside a billion euros to increase artillery munition production to supply to Ukraine. Franz, it's good to have you on the Warcast. 

Franz-Stefan Gady: Thank you for the invitation, Aaron. 

Aaron Stein: Let’s just start right with the news. It's about a week old now, but what is it that European Union members agreed to do, and what do you think it means? 

Franz-Stefan Gady: As most of your listeners will know, Ukraine has been burning through its 152-millimeter and 122-millimeter heavy artillery shell stockpile used by their Soviet-era artillery fairly quickly. And one of the main needs of the Ukrainian armed forces is heavy artillery ammunition. Last week, the European Union foreign and defense ministers approved a 2 billion euro plan to boost ammunition deliveries to Ukraine. Notably, this includes now a plan to procure munitions through joint purchases, which is really a first for the European Union. Now, this is the good news. The bad news is that the European defense industry is simply not in good shape for large-scale conventional war production. Just to give you some numbers here: Europe, for example, has produced around 300,000 155-millimeter shells last year. So in 2022, if we assume that Ukraine spends around 5,000 to 6,000 shells a day, which is one estimate at least, this would only last for around two months of war. So the European defense industry really needs to scale up production capacity, and this is really easier said than done for a number of reasons. For example, a bottleneck’s real industrial capacity within Europe's defense industry, special machinery that is needed for producing shell casings, needs to be built. New production lines need to be set up. And this, of course, takes some time. But there are also other issues. For example, there are major interoperability issues that need to be taken into account when it comes to quickly delivering additional heavy artillery shells to Ukraine. I know we keep on talking about NATO’s standardized 155-millimeter artillery shells, but the fact is that not every single shell can be used by every single Western artillery system that ostensibly can fire 155-millimeter shells. For example, Western artillery systems such as the Panzerhaubitze 2000, which is a German-made self-propelled howitzer and the U.S.-made M777 require different propellant charges. That is, the artillery shells that are fired require different propellant charges. This is, of course, a problem when it comes to scaling up production capacity in Europe because you need to be very clear what you produce and what the Ukrainian need here really is. And just to keep in mind that there are around 17 different artillery types that Ukraine is currently using. 

Aaron Stein: You mentioned as part of the good news is that countries would buy together. I think that what the E.U. wants is three countries per buy. Why is that good news? 

Franz-Stefan Gady: Well, it's good news because I think for the first time, the European Union is really serious about procuring munitions together. And I think this is just another step in bringing a European defense union maybe perhaps closer, although there are, of course, a lot of bureaucratic hurdles, red tape to get through, and also, of course, political will that might be waning as this war continues. But overall, I think it's a step in the right direction. It might be, perhaps, too late for Ukraine or at least, in the near to medium term, just because the major downside to what I've just said the good news are is that European countries, including now also the European institutions, have not really signed a lot of multi-year contracts with European defense contractors, and this is a major issue. There are certain companies, for example, the CEO of Germany's Rheinmetall — which is one of the biggest artillery shells producers in Europe — keeps on pointing out that his company could produce, for example, 450,000 155-millimeter shells per year, if I remember the numbers correctly. So that would be a step up from the 70,000 that they produced last year. But the major issue is that European policymakers apparently require defense firms such as Rheinmetall to pre-finance their expansion of production capacity, and this is, of course, sort of a no-go for companies such as Rheinmettal. So they're still waiting for policymakers, politicians to actually sit down and sign those contracts. And every single day of delay is obviously not good news for Ukraine. So I think it is a step in the right direction. My major question is what is going to be the actual outcome in a few months from now? 

Aaron Stein: I think the question listeners will have is: How did it get this way? Because we're having similar issues in the U.S., but for this Warcast we're talking about Europe. What happened to where the however many members there are of the European Union can't keep up with artillery demand in Ukraine?

Franz-Stefan Gady: Well, there are a number of issues. First of all, you have around 15 companies across 11 member states of the European Union that can produce both Soviet- and Western-style ammunition, which is a fairly substantial number of companies. The major issue here, though, among all the issues that I've pointed out here, is a single 155 heavy artillery shell, for example, can consist of over a dozen different components, and one major issue that is arising when it comes to scaling up production is the sourcing of these individual components needed to produce a single shell because there are actually raw material bottlenecks in this supply chain. For example, there are scarce supplies of gunpowder, TNT, and plastic explosives because there are only a small number of such factories in Europe. For example, there's a big one in Bosnia that [is] really producing these raw materials that I was just talking about. And this is also driving up prices, so costs for gunpowder and TNT are doubling and tripling. So you have these bottlenecks. So even if there's political will and these defense companies such as Rheinmetall are increasing their production capacity, they can't really source all these raw materials needed to scale up production. And this is a major issue. So there are these limitations, of course. And this has been something that has not been addressed in many, many years. And this has always been sort of pointed out as a weakness of the European defense industry when it comes to getting ready for another high-intensity conflict. And I think there's also a certain dependency still on the United States, or at least this idea that the United States can scale up production quite quickly as it did during the Second World War and that Europe could benefit from that. And I think that also produces a lack of political will to address these issues. I think a last point is that simply speaking, when you look at defense budgets — and this is not the case just in Europe but also in the United States — you usually focus on platforms and other shiny objects over stockpiling munitions, right? Because procuring different types of munition is probably not as sexy or probably will not really get you, essentially, the public attention as a defense minister or a defense secretary than like recurring new military platforms that you can display during parades and during your annual Memorial Day and so forth — Remembrance Day, as it is called in Europe. So I think there are multiple issues why this is the case in Europe, and it's fairly similar in the United States, I would say. 

Aaron Stein: Yeah. So I guess the final question is — you know, I think this was a billion euros. I think it's not enough. Correct me if I'm wrong. Do you still see a political will to continue this moving forward if expansion is needed? 

Franz-Stefan Gady: Yes, I do see the political will, and I think as I said, it is a good step. It is a step in the right direction, and so far, the support for Ukraine is not wavering. I think it's going to continue and I do think we are going to see an increase in European production capacity when it comes to heavy artillery shells and also, frankly, additional investments in the European defense industry besides artillery shells. But yes, I think, inflation, problems with sourcing raw materials is going to drive up prices. So I think, 1 or 2 billion might not be enough to actually get the most bang for the buck and also to help Ukraine as quickly as possible in this Russian war of aggression in Ukraine.

Aaron Stein: Franz, thanks for joining the Warcast.  

Franz-Stefan Gady: Thank you.