EU demands payment from the UK to participate in its defense fund, according to Brussels.
The UK will need to pony up some cash if they want their weapons manufacturers to tap into a whopping €150 billion EU weapons fund. That's according to plans brewing in Brussels, where diplomats are currently hashing out the details.
The EU and the UK are on the verge of signing a broad defense and security agreement at a May 19 summit. But that's just the tip of the iceberg. A more intricate agreement will be necessary before heavy hitters like BAE Systems can snag contracts backed by the Security Action For Europe (Safe) fund, these diplomats claim.
"This pact is a non-binding instrument. The real challenge is going to be this bilateral agreement that would include a financial contribution," a Brussels insider explained.
Safe, the brainchild of the European Commission to bolster EU defense spending in response to Russia's invasion of Ukraine, aims to issue low-cost loans to EU governments, which they can collectively spend on weapons.
The €150 billion war chest can be used to buy armaments from non-EU companies that have a security pact with the bloc. But those nations must negotiate additional agreements specifically related to Safe before their defense industries can get in on the action, the draft terms dictate.
Thomas Regnier, the commission's defense spokesperson, hinted that third countries must "negotiate specific, mutually beneficial agreements on the participation of their respective industries in procurements."
So, what does it take for British companies to grab a piece of the pie? Well, it ain't going to be a walk in the park. They'll need a second deal, and it's likely to hinge on market access for particular weapons systems, a second EU diplomat hinted.
And let's not forget—the French are bound to try to give the Brits a hard time, the insider added. But a financial contribution would probably be part of the package, they suggested.
Another EU diplomat emphasized that a specific arrangement, including discussions on contributions, would be necessary. But they didn't offer many details about the nature of these contributions.
It's unclear whether the UK will have to fork over a hefty sum or just a small administrative fee. But one thing's for sure: British companies won't be able to access the fund without the right partnerships and compliance with origin rules.
Equipment procured with Safe funds must have at least 65% EU content, and joint procurement projects must involve collaboration between at least two partners. Eligible partnerships include EU Member States, EU countries receiving Safe financial assistance and either Ukraine or an EFTA/EEA country, or countries with which the EU has a Security and Defence Partnership.
The regulation also includes a European preference clause, requiring that infrastructure, facilities, assets, and resources of contractors or subcontractors involved in the procurement must be located in the EU or associated countries. This could pose a challenge for UK-based companies unless their operations or supply chains are sufficiently integrated with EU-based facilities or they partner with EU entities.
Other countries that already have defense pacts with the EU, such as South Korea and Japan, will need to follow similar guidelines for their companies to be eligible. Arms companies from Ukraine, plus the European Free Trade Association and European Economic Area, including Norway and Switzerland, get automatic access.
EU officials expect Safe negotiations between member states to be wrapped up next month, pending approval by the European parliament. It's uncertain whether the entire €150 billion will be utilized, but countries must band together and apply for funding for a concrete project within six months of the fund's launch, and each application must be approved by Brussels.
Ursula von der Leyen, the commission president, hinted to Prime Minister Sir Keir Starmer during a meeting earlier this week that the defense and security pact "might then pave the way to a joint procurement and UK participation in our Safe program." But it's clear that the pact alone isn't enough—the UK will need to play ball on the financial and partnership fronts if they want a piece of the action.
- The UK needs to ensure a financial contribution to establish a bilateral agreement, as suggested by the Brussels insider, to access the €150 billion EU weapons fund.
- British companies will likely need to negotiate specific, mutually beneficial agreements on the participation of their respective industries in procurements, according to Thomas Regnier, the commission's defense spokesperson.
- Without the right partnerships and compliance with origin rules, British companies will not be able to access the EU's Security Action For Europe (Safe) fund, as emphasized by another EU diplomat.
