Germany. The Leopard Affair and the Impact on the Arms Industry
The lack of consent of the government in Berlin for the re-export of Leopard 2 tanks to Ukraine undermines confidence in the German defense sector, the Financial Times writes on Tuesday, citing the opinions of industry experts. “The risk is that there will be a thought: if Germany is involved, we don’t know if we can fully trust them,” says one EU official.
As the newspaper notes, war in Ukraine proved to be a boon for German armaments manufacturers. Since its explosion, Duesseldorf-based Rheinmetall, which produces guns and electronics for the Leopard 2 tank as well as a range of other vehicles and ammunition, has seen its share price more than double. Chancellor Olaf Scholz’s promise to reform Germany’s armed forces and increase defense spending has also raised market expectations for an avalanche of orders from German arms makers.
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Germany has long been considered one of the world’s top tank manufacturers. Many countries incl USArequires customers to agree to restrictions on re-exports, but these restrictions usually do not apply to partner countries FOR THISsuch as Ukraine – indicates “FT”. Meanwhile, the German chancellor still refuses to allow other countries to transfer their Leopards to Ukraine. Several defense industry representatives told the daily that German arms makers fear the Leopard row would undermine the sector’s potential.
“Put simply, this is great news for all of Germany’s defense competitors,” said one defense industry official.
Concerns about Germany’s conduct
Last May, the EU responded to concerns over its defense capabilities by creating a new body tasked with examining “future joint procurement projects”. However, EU officials said the experience with the Leopards could whet the appetite for future cooperation with Berlin. “The risk is that there will be a thought: if Germany is involved, we don’t know if we can fully trust them,” says one EU official involved in talks on closer defense cooperation.
Sash Tusa, an aerospace industry analyst at London-based Agency Partners, believes the dispute could hurt Germany’s plan for pan-European defense industrial cooperation on projects such as a joint fighter developed by France, Germany and Spain. Paris and Berlin also unveiled plans for a joint tank to replace both the Leopard and the French-built Leclerc. – The French are clearly very concerned that the Germans will not be credible. And what we’re seeing now doesn’t help with that impression,” he said.
Sven Weier, an analyst at the Swiss bank UBS, pointed out that there is already evidence of a loss of market share by German contractors, because Poland bought tanks from the US and South Korea, not from Germany, and the Czech Republic and Slovakia bought British armored vehicles. “Some decisions could have been in favor of Rheinmetall, but they weren’t,” he pointed out.
Main photo source: Dariusz Majgier/Shutterstock
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