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The Ukraine Effect: The impact of Russia’s invasion of Ukraine on the UK–EU relationship Contents

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Chapter 3: The UK-EU defence relationship

107.Russia’s invasion of Ukraine has reignited discussions about the UK-EU defence relationship, an area which is not covered by the Trade and Cooperation Agreement. This chapter builds on recommendations contained in our report, The future UK-EU relationship, published in April 2023 (see Box 3). It provides a more detailed analysis of developments relevant to the UK-EU defence relationship since the Russian invasion on 24 February 2022, taking into account, at the time of the publication of this report, over 23 months of war.

Box 3: The future UK-EU relationship report. Recommendations on UK-EU defence cooperation

We welcome the Government’s decision to join the Permanent Structured Cooperation (PESCO, see Box 5) Military Mobility project, which represents a change from its previous position on PESCO and is an example of a more pragmatic approach towards cooperation with the EU. We agree with the Minister for Europe that the Government should continue to consider seeking third-country participation in other PESCO projects on a case-by-case basis, where this is in the UK’s interests. (Paragraph 138) We believe that it is important for the UK to be actively involved in what one of our witnesses called a “European defence industrial ecosystem” and to ensure that UK interests are protected. The Government should therefore closely monitor the development of the European Defence Fund. We ask the Government to provide its current assessment of the implications of the EDF for the UK in its response to this report. (Paragraph 139) We call on the Government to seek to put in place an administrative agreement with the European Defence Agency, similar to those agreed with other third countries, including the US, Norway, Switzerland, Serbia and Ukraine. (Paragraph 140) We welcome the 2023 EU-NATO Joint Declaration and agree with its assessment that the European Union can play a complementary role in a NATO-led European security environment. In its response to this report we ask the Government to set out how it envisages giving practical effect to the statement, in paragraph 13 of the Joint Declaration, that “we encourage the fullest possible involvement of the NATO Allies that are not members of the EU in its initiatives”. (Paragraph 141)

Source: European Affairs Committee, The future UK-EU relationship (4th Report, Session 2022–23, HL Paper 184)

Scale of military support to Ukraine

Overall EU support

108.According to European Commission data published in November 2023, the overall scale of EU (and Member State) support to Ukraine amounted to over €67 billion in military, financial, humanitarian and emergency assistance (€84 billion when adding support provided to Ukrainian refugees),129 including around €21 billion of bilateral military support provided by EU Member States. 130 Additionally, the EU has proposed a €50 billion ‘Ukraine facility’ for 2023–27.131

European Peace Facility

109.We heard that the “real difference” in terms of the EU’s military support for Ukraine, compared to how the EU had responded to previous crises, was the packages of military support financed by the European Peace Facility (EPF).132 The EPF, dubbed by senior Polish politician Radosław Sikorski as the EU’s “wonderfully named defence budget”, is the funding mechanism allowing for specific military assistance including weapons (€5.6 billion to date). The use of this mechanism marked the first time that a country at war received lethal support from the EU collectively. It was established in March 2021 (see Box 4) and, according to Mr Sikorski, “would never have been created if Britain were still a member of the EU”.133

Box 4: European Peace Facility

The European Peace Facility (EPF) was established in March 2021 with the aim of providing finance “to Common Foreign and Security Policy actions with military and defence implications that will enhance the Union’s ability to prevent conflicts, build peace, and strengthen international security”. The overall budget of the EPF in the 2021–2007 EU biannual financial framework is currently set at €12 billion. The initial financial ceiling of €5.692 billion has progressively increased by €2.287 (on 12 December 2022), €7.979 billion (on 13 March 2023) and €4.061 billion (on 26 June 2023). The EPF consists of two pillars, military operations (cost of military CSDP missions and operations) and assistance measures (military aspects of Peace Support Operations). “The strategic orientation and political steer for operations and assistance measures to be funded under the EPF is provided by the Political and Security Committee (PSC) on the basis of the strategic priorities set by the European Council and the Council.”134

110.Professor Richard G. Whitman, Dr Joelle Grogan and Jannike Wachowiak, researchers associated with UK in a Changing Europe, suggested to us that the provision of lethal support would “not have been previously considered as feasible” by the EU.135 This was characterised by Professor Szyszczak (University of Sussex) as a “major change in policy”.136 Several other submissions referred to the EU as having “broken taboos” in this area.137

111.Disbursement of funds under the EPF requires the agreement of all Member States. While this has been achieved on seven occasions to date, the distribution of a proposed eighth support package has been delayed due to use of a veto by Hungary.138 This may be one reason why countries may wish to continue to provide military assistance on a bilateral or small-group level, rather than relying solely on EU mechanisms (see paragraph 119 on bilateral cooperation).139 Nevertheless, as noted by Professor Alexander Mattelaer, Associate Professor in International Security at the Brussels School of Governance, the EPF has helped EU Member States to address the “delicate balancing act” of the need to provide continued support for Ukraine with the need to rebuild their own force structures.140 Nathalie Loiseau MEP highlighted an important aspect of the EPF, especially from the perspective of the UK defence industry—the EPF mechanism does not include any geographical conditions on whether the military equipment sent using the EPF should be manufactured in the European Union.141

112.We heard mixed views on whether the use of mechanisms such as the EPF by the EU was likely to be extended to other contexts. Dr Benjamin Martill (University of Edinburgh) predicted that there would be “further movement in this direction in the future, both in response to future geopolitical crises and as the policies enacted after February 2022 further crystallise and develop”.142 Similarly, Professor Mattelaer considered that “all the trend lines that we can detect from developments in recent years are new and can be extended far into the future”.143 However, Ian Bond and Dr Luigi Scazzieri of the Centre on European Reform suggested that the EU’s ability to respond as it did to the Ukraine crisis had relied on “the circumstantial alignments of member-states’ interests”.144 Isabella Antinozzi, Research Analyst at the Royal United Services Institute, similarly felt that “key enablers” of the EU response to the Russian invasion of Ukraine, namely “unequivocal” US support and “moral clarity about right and wrong”, may not present themselves in the same way in future.145

A spectrum of support for Ukraine among EU Member States

113.Speaking in November 2023, Professor Mattelaer told us that overall military support for Ukraine “has been incremental in its build-up and it originated unevenly across the European continent”. In his assessment, this was closely tied to different considerations of how the possible escalation of the conflict should be managed in individual Member States.146 The difference in the scale of support between EU countries was also dependent on the degree to which Member States perceived the situation in Ukraine as having direct consequences for their security. All countries also had to consider their domestic political constraints and strategic cultures, which differed (at least at the beginning of the war).147

114.An incremental change in the behaviour of EU Member States closely followed the increasing support for Ukraine. Professor Whitman noted the fast pace to changes of strategic cultures, “in particular, moving from a position of discomfort when it came to supplying arms, particularly arms of lethality—think of Sweden for example—through to Germany and Poland, which were in a very different place when it comes to ambitions for their own defence”.148 While noting a “small number of stand-outs in their response”, such as Hungary, even countries “more comfortable” with provision of non-lethal support (such as Austria, Cyprus and Ireland) “have moved quite a lot”.149

115.While some of the EU Member States were gradually changing their approach to how Ukraine should be supported, Professor Whitman mentioned others, including the signatories of the Tallinn Pledge,150 who wanted to increase the pace of support even further, suggesting that the EU “is not a big enough forum for them and that they want to do more with a state like the UK”.151

Support provided by the United Kingdom

116.As of 23 January 2024, the United Kingdom had committed a total of £7.1 billion in military assistance to Ukraine (£2.3 billion in 2021/22 and 2022/23, and £2.5 billion in 2023/24). The UK has additionally provided substantial economic and humanitarian assistance to Ukraine.152 The then Secretary of State for Defence, the Rt Hon Ben Wallace MP, noted in a statement to the House of Commons on 20 July 2023 that between April 2022 and March 2023, the UK was second only to the United States in terms of international support provided to Ukraine.153

117.The role of the UK, as noted by Dr Scazzieri, was also very important in “normalising the provision of certain weapons systems early on”, for example in convincing others of the need to provide Ukraine with tanks.154 Professor Whitman agreed with this assessment, adding that “the UK’s role has been to push out the boundaries of what is possible and to provide some leadership in allowing a debate to be had about particular weapons systems”.155

UK-EU coordination

118.Overall, our witnesses agreed that UK-EU coordination on the diplomatic level “has worked reasonably well”, serving “as a reminder of shared and common interests and as a rediscovery of muscle memory”.156 In particular, our witnesses mentioned UK-EU engagement within the framework of the G7 and in the US-led Ukraine Defense Contact Group (commonly referred to as the “Ramstein group”, following an international conference held at the Ramstein Air Base in Germany on 26 April 2022), which meets on a monthly basis.157

119.Yet witnesses indicated that most military assistance for Ukraine is discussed on a bilateral basis or through small ad hoc groups. Dr Scazzieri told us that countries had achieved the most effective coordination through coalitions such as those formed to deliver single weapons systems (for example, Leopard tanks) and the air defence partnership between the UK, the US, Denmark and the Netherlands.158 We heard that larger groups have “proven more unwieldy”, in part due to the requirement of consensus for disbursements from the EPF (see paragraphs 109–112).159

120.Professor Whitman told us that “frankly there is no direct UK-EU interface on defence”.160 Cooperation exists in terms of coordination between training missions for Ukrainian soldiers, the EU-led EU Military Assistance Mission161 and the UK-led Interflex162, but not in other areas where “there could have been a very good and useful partnership”, for example, on the EU-led Act in Support of Ammunition Production (ASAP), an attempt to reinforce the EU industrial defence capacities and to accelerate the delivery of ammunition to Ukraine.163 More broadly, Professor Whitman observed that the war came “a bit too early” for EU cooperation with third partners, as it had not had time to consider how to translate its ambitions in this area, set out in the Strategic Compass, into reality.164

121.Several witnesses considered that there is room for more coordination between the UK and the EU. The question, as noted by Dr Scazzieri, is to what extent the coordination in response to the invasion of Ukraine is a consequence of an alignment of interests in this specific case, and to what extent it is reflective of a “broader and deeper kind of coordination”.165

122.Professor Mattelear told us that there are lessons to be learned from cooperation within the Ramstein group, showing that European countries may be willing to provide military support, but that help is also contingent on what the US is doing; therefore, he added, “we can only speculate on what the coordination challenge would look like were there to be a change in US policy”. But in his assessment, the coordination between the UK and the EU, in particular on financial support for Ukraine, “is arguably more important than the military support coordination challenge”.166

The challenge of sustainability of support

123.Witnesses highlighted that the sustainability of resourcing for Ukraine will be one of the major challenges in the future. One expert told us, “we have not yet got the machinery in place to ensure that Ukraine has clarity as to what sort of resources will flow over the next few years”.167 Professor Mattelaer was concerned that Ukraine’s allies “may be lagging behind Russia’s ongoing efforts to prepare and provide for the long war that is probably ahead of us”.168

124.Witnesses also expressed concerns about the possible impact of the US presidential election in 2024 on the scale of support for Ukraine. Professor Mattelaer said that should the election lead to a “dramatic change of US policy”, there will be an urgent challenge of coordinating and providing support to Ukraine. In his view, it is “wise for European states to think of contingency plans to help to address such a prospect”.169 This is discussed further in Chapter 5.

125.We welcome the leadership shown by the United Kingdom as the second largest supplier of military support for Ukraine, after the United States, and the encouragement this has provided to other European countries to supply. The Government should continue to work with its European partners and allies in providing military aid to Ukraine for as long as it takes to reverse Russian aggression.

126.Cooperation between the UK, the EU, the US and other international partners, including European members of NATO, on military support for Ukraine has been more effective than previous experience would have suggested. We are however concerned about the challenges of sustaining current levels of support in the medium and longer term, given its ad hoc nature so far. It is of utmost importance that the Government works with its allies to ensure continued supply of sufficient military support for Ukraine. Close UK-EU cooperation would be of particular importance in the case of a change of policy by a future US administration.

The EU defence industrial ecosystem

127.The EU has re-evaluated its defence policy and approach to resilience over the past two years. The Strategic Compass published in March 2022 (see Box 8, Chapter 5) said that the EU “urgently need[s] to take more responsibility for its own security”.170 Specific proposals intended to support this ambition included the establishment of an EU Rapid Deployment Capacity to be able to deploy up to 5,000 troops in response to crises, a substantial increase in overall defence expenditure and an ambition to “maximise coherence” between various existing EU defence initiatives (see Box 5), such as Permanent Structured Cooperation (PESCO), the European Defence Fund and the European Defence Agency.

128.Witnesses noted the pace of change in the EU’s thinking about its defence industry base. The “skyrocketing” demand for defence procurement and emergence of financial incentives to cooperate through the European Defence Fund (EDF) have led the European defence industrial landscape into a period of major change. It has also led to tension between the need to address current capability gaps, and long-term ambitions to strengthen European defence capability, including its technological and industrial bases.171

129.Since the outbreak of the war, the European Commission has adopted a particular focus on seeking to increase EU defence industrial production capacity and cooperation between Member States. The Member States have agreed two major Regulations to that end: the Regulation establishing the European Defence Industrial Reinforcement through Common Procurement Act (EDIRPA) in 2022,172 and the Regulation establishing the Act in Support of Ammunition Production (ASAP) in 2023 (see Box 5).173 These new mechanisms were designed to supplement the existing EU defence ecosystem, encompassing the European Defence Agency, the European Defence Fund and PESCO.

Box 5: EU defence initiatives

Permanent Structured Cooperation The EU’s Permanent Structured Cooperation (PESCO) was established under the Common Security and Defence Policy (CSDP) in 2017. This builds on previous EU defence integration initiatives. PESCO is envisaged as “a framework and a structured process to gradually deepen defence cooperation to deliver the required capabilities to … undertake the most demanding missions and thereby provide an improved security to EU citizens”. 26 of the 27 Member States of the EU participate (Malta is the exception). There are currently 60 PESCO projects being developed, covering areas such as training, land, maritime, air and cyber. Third countries can be invited to participate in PESCO projects if they meet conditions such as sharing “the values on which the EU is founded”, having a political dialogue with the EU that covers defence and security aspects, and providing “substantial added value to a project, for example technical expertise or additional capabilities”. There is a multi-stage process for third-party acceptance into a PESCO project, beginning with a request to participate andultimately concluding with a Decision of the Council of the EU as to whether participation meets all necessary conditions. The Political Declaration published alongside the Withdrawal Agreement in 2019 stated that the UK would “consider” participation in PESCO projects “where invited to participate on an exceptional basis by the Council of the European Union”. In our report on the future UK-EU relationship, we recommended that the Government should “continue to consider seeking third-country participation in other PESCO projects on a case-by-case basis, where this is in the UK’s interests”. In its response, the Government said that it “continues to monitor and evaluate PESCO projects”. European Defence Fund The European Defence Fund (EDF) was established in 2017.174 According to the European Commission, this “financially support[s] consortia of companies from different member states undertaking cooperative defence research and development of defence products and technologies”.175 €8 billion has been allocated to this fund in the 2021–2027 budget cycle.176 Nevertheless, as of 2020, joint procurement represented only 11% of the total defence armament acquisition of EU Member States.177 Full third-party involvement in the European Defence Fund is open only to members of the European Economic Area (EEA). Entities in other third countries can participate in collaborative projects but cannot be funded through the scheme. The Political Declaration published alongside the Withdrawal Agreement in 2019 stated that the UK and the EU would “consider” participation of UK entities in collaborative projects supported by the European Defence Fund, to “the extent possible under the conditions of Union law”.178 There are not currently any examples of this sort of arrangement. European Defence Agency The European Defence Agency was established in 2004 and now supports all EU Member States in developing their military resources.179 It promotes collaboration, launches new initiatives and works to improve defence capabilities. It also “helps Member States that are willing to do so to develop joint defence capabilities” and “is a key facilitator in developing the capabilities that underpin the EU’s Common Security and Defence Policy (CSDP)”.180 The EDA has concluded bilateral “administrative arrangements” with selected third country organisations and five third country partners—Norway, Serbia, Switzerland, Ukraine and the United States. The EDA’s website describes this as a “prerequisite to for third parties to take part in EDF projects and programmes”.181 The arrangement with the United States was signed on 26 April 2023. The purpose of this arrangement is described as being to “provide a framework for the Participants to exchange information and explore collaborative activities falling within the scope of the EDA’s mission, with a view to obtaining mutually beneficial output and results”.182 It does not include any specific commitments to participate in or contribute to EU defence industrial projects. EDIRPA and ASAP The Regulation establishing the European Defence Industry Reinforcement Through Common Procurement Act (EDIRPA), voted into law on 12 September 2023, aims to incentivise EU Member States to jointly produce weapons, with the goals of interoperability and economies of scale for the defence industry in the EU. Although it may be “far too early to evaluate [its] effectiveness”, it has received broad political support in the European Parliament (530 votes in favour; 66 votes against).183 The Regulation establishing the Act in Support of Ammunition Production (ASAP), approved by the European Parliament on 1 June 2023, is a Regulation that aims at stimulating the development of EU Member States’ arms industries, in particular to restock their arsenals and to ramp up the production of ammunition, missiles and their components. ASAP provides reimbursement of “up to 35% of the eligible costs of an eligible action related to the production capacities of relevant defence products, and up to 40% of the eligible costs of an eligible action related to the production capacities of components and raw materials insofar as they are intended or used wholly for the production of relevant defence products”. The total budget was set at €500 million.184 In November 2023, the German Minister for Defence indicated, that the goal of providing Ukraine with one million shells by March 2024 will not be met. Around 300,000 shells were sent by mid-November 2023.185 While European governments tended to blame the defence industry for the delays, the European munition manufacturers stated that not enough time was given to fulfil orders for Ukraine, and their work was further impacted by replenishing ammunition stocks of its domestic customers.186

130.While it may be too early to be able to properly assess many of the EU’s initiatives, in Dr Scazzieri’s assessment the EU now has in place an “ecosystem for defence research development and procurement”.187 While the outcomes of this “ecosystem” may currently be somewhat underwhelming and some of the plans proved to be too ambitions (e.g., inability to provide one million shells to Ukraine by 2024—see Box 5)—the procurement side is still “under development” and ASAP and EDIRPA are relatively small in scale—”they are in place and established precedents that will be followed”.188

131.Despite these new initiatives, and although the outbreak of the war in the assessment of our witnesses had a significant impact on the EU defence policy, we heard that overall the “the broader landscape of EU defence policy is a bit of a mixed picture”.189 Witnesses identified the tension between the long timescales needed to develop new and cutting-edge military capabilities through investment in defence research and development and the “the urgency of the present situation”.190

132.Mr Sikorski expressed frustration that “40-something programmes that were supposed to create defence capabilities and are financed by the European Defence Agency have not produced anything of value yet”.191 Dr Stefan Meister (German Council on Foreign Relations) told the Committee that despite these initiatives EU Member States have “not ordered a lot of weapons and ammunition and production has not really started”.192 Ms Wright similarly suggested that “we are very far from the EU improving its defence industrial posture”,193 while Professor Whitman noted the lack of progress with initiatives such as the Crisis Response Operation Core (CROC).194

133.Professor Mattelaer offered a more optimistic overview. He suggested that if you “zoom out and take a slightly longer time horizon into account” there had been a “dramatic increase in research technology and research and development budgets, both at the EU level through the EDF and at the national level”. He described this as “the biggest shift that we have seen”, with the caveat that it “stretches long-term into the future, so it is only early days”.195

134.Some of the experts that we heard from proposed that the UK should consider participation in additional EU defence industrial projects. Mr Bond and Dr Scazzieri suggested that this would minimise the risk of “exclusion” from European initiatives, which they considered to be a possibility since the money that has been made available is a “significant inducement for European firms to work more with each other in research, development and procurement, excluding outsiders”.196

135.Ms Antinozzi argued that cooperation “for [the] sake of cooperation” has rarely been successful but that there were opportunities to cooperate further, in particular within those institutions and frameworks that are less underpinned by a “pay as you play” rationale.197 She identified possibilities for UK engagement with the European Defence Agency (EDA), EPF and additional PESCO projects. Addressing concerns raised by Ministers, she argued that the UK should recognise that EU defence initiatives are “designed to contribute to transatlantic burden-sharing” and not envisaged as competing with NATO.

Permanent Structured Cooperation (PESCO)

136.The Permanent Structured Cooperation (PESCO) initiative (see Box 5) has been slow to get up and running. Professor Whitman noted that only two out of 62 projects under the PESCO umbrella have been delivered fully, with a caveat that some of those projects are long-term, “so I might be being unfair”.198

137.In November 2022 the UK reached an agreement with the EU to participate in the ‘Military Mobility’ project under PESCO, which “aims to enable the unhindered movement of military personnel and assets within the borders of the EU” by “avoiding long bureaucratic procedures to move through or over EU member states, be it via rail, road, air or sea”.199 However, this agreement is not yet in force. Professor Whitman, Dr Grogan and Ms Wachowiak suggested to us that this may be due to an objection from Spain.200 The Minister for Europe confirmed this in his evidence for this inquiry. He added that the Government is negotiating the administrative arrangement “that would govern our membership of the mobility project” and remains open to finding a resolution.201

138.Ms Antinozzi argued that, of all of the EU’s defence industrial initiatives, PESCO “provides the best framework for the UK to cherry pick the level of integration of the project, the number of partners and the type of activities”. She recommended that the UK might explore involvement in capability development projects, in part as a way to “test the boundaries of third country involvement” and see how rules are interpreted in practice.202

139.However, Professor Whitman, Dr Grogan and Ms Wachowiak were more sceptical about the UK joining additional PESCO projects. They suggested that the low involvement of third countries (non-EU states) at present means that the UK may wish to consider a “more general coordinated arrangement of the EU’s partner third countries”, by teaming up, for example, with other countries participating in PESCO projects on a “project specific administrative arrangement”, such as Norway, or Canada.203 Regardless of the Government’s decision on future engagement with PESCO, Professor Whitman told us that while the UK’s proposed association to the ‘Military Mobility’ project does not require an administrative arrangement with the EDA, such an arrangement might become necessary should the Government decide to be involved in other PESCO projects.204

140.We are concerned at the delay of over a year to the UK’s proposed participation in the PESCO Military Mobility project, which we previously identified as representative of a more pragmatic approach towards defence cooperation with the EU. We ask the Government, in its response to this report, to provide an explanation for the delay and the steps being taken to overcome it.

141.In line with previous conclusions by this Committee, we recommend that the UK should consider seeking third-country participation in additional PESCO projects, including capability development projects, where this would be in the UK’s interests. Russia’s invasion of Ukraine has inevitably increased the EU’s ambitions for PESCO which, in turn, will have had an impact on the factors that the Government weighs when considering UK participation. We therefore ask the Government to provide us with its latest evaluation of the many PESCO projects currently envisaged by the EU and whether it considers participation in any of them to be in the UK’s interests.

European Defence Fund

142.The European Defence Fund’s budget (€8 billion over a seven-year period) provides incentives for companies to participate in collaborative projects, as noted by Dr Scazzieri, “because ultimately it is free money for them to secure”, which in the longer term may have “its intended structuring effect on the European defence industry” because collaboration started on one project may lead to a spill-over to other initiatives, encouraging companies to continue (successful) cooperation.205

Third-country participation

143.In its response to the Committee’s report on the future UK-EU relationship, the Government welcomed the efforts of the EU and Member States to strengthen their defence industrial base. However, it expressed concern that EU defence capability development and joint procurement initiatives “do not allow for meaningful participation by non-EU NATO Allies” and called for Member States to instigate a review of third-country participation terms.206 In its written submission to this inquiry, the FCDO restated its concerns about these rules, which it described as “typically more restrictive than rules for comparable collaborative projects through NATO and other multilateral bodies”. In the Government’s view, these rules “inevitably curtail the opportunity for the UK to work with European partners on some European collaborative programmes to our greater general benefit”.207

144.In its evidence to this inquiry, the FCDO suggested that the implications for UK defence procurement would be “limited in the short term” since EU Member States continue, for the time being, to undertake most defence procurement outside of EU structures. Nevertheless, it anticipated that Member States might pursue solutions through EU structures to a greater extent in the future.208

145.Professor Whitman noted that “the broader question for the UK is whether the EU wants the UK to engage”.209 Professor Anand Menon (UK in a Changing Europe) shared similar observations, telling us that he found it “very striking” that although the EU is happy to talk about cooperation with the UK, “it is adamant about excluding third countries” from the EDF.210

146.The set-up of the EDF in particular is, in Professor Whitman’s assessment, “very hostile to third-country participation”.211 He told us that Article 5 of the EDF Regulation, dealing with non-EU states’ participation in the fund, in practice “only really allows” for Norway’s participation due to its membership of the European Economic Area.212

147.Professor Whitman explained that EDF restrictions include the requirement to have the executive management structure in the EU, not being subject to control by a non-associated third country (or an entity from such country), and limitations on intellectual property transfer rights (not possible outside the EU at the moment).213

148.The issue of the EU’s third-country participation terms was picked up by several other witnesses. Mr Bond and Dr Scazzieri indicated that the EU’s approach is premised on the notion that “EU taxpayer funding should benefit EU firms”.214 Professor Whitman, Dr Grogan and Ms Wachowiak suggested that this had been “driven by French arguments concerning the need for autonomy and to privilege the development of EU capacities”.215 Similarly, Dr Martill highlighted that there is “politics” associated with third-country involvement, since individual Member States may seek to promote their own defence interests and therefore “hedge against” demands from third countries.216

149.Professor Whitman argued that the terms are “too restrictive as currently configured, if the intention is to build out rather than build in” and currently framed in a way that would “make it very difficult for the UK to participate”.217

150.However, Professor Mattelaer noted that “derogations from the general rule are possible on a case-by-case basis if certain conditions are met, pertaining to security of supply, security of information and the protection of intellectual property rights”.218 Such cases would have to be assessed by the European Commission, and approved by Member States, “but, at least theoretically, it is possible to make exceptions to the rules”.219

151.Ms Antinozzi noted that the viability of engagement with many EU defence initiatives is determined by the level of integration with the Single Market. Nevertheless, in her assessment “the ball is largely in the UK’s court” when it comes to exploring the precise “modalities” of UK-EU engagement, since the EU’s willingness to explore this will depend on the UK’s willingness “to commit itself to cooperation in the first place”. She saw potential for some flexibility to be exercised by the EU once it had a more established defence relationship with the UK.220

152.Several of the evidence submissions that we considered argued that the EU would benefit from greater UK involvement in its new initiatives. Dr Martill said that any European defence effort would be “lessened without UK participation and engagement”.221 Meanwhile, Ms Antinozzi suggested that UK participation “matters to the EU” because of its historical security commitment to the region and status as one of Europe’s “two major military powers”, along with France.222

153.Sir Julian King, a former European Commissioner for the Security Union, argued that the UK should seek to persuade the EU that it is not a “normal third country” on defence issues, noting that the UK’s continued importance in European defence has become clearer since the Russian invasion of Ukraine.223

154.James Rogers, Director of Research at the Council on Geostrategy, told us that some of the third-party participation rules were envisaged when the UK was still a member of the EU, “in no small extent, to protect our own defence industrial base, or at least to protect those countries that we were going to be potentially working with”.224 He argued that this “perhaps needs to be reinvestigated for large, potent military powers such as the UK, and arguably the US, Canada and others beside”. Dr Meister said that for him the current arrangements make “no sense” as if “you are all together in NATO and NATO is the main security actor in Europe, you need to cooperate with the countries that are in NATO”.225 Professor Whitman similarly felt that “having a structure that allows Norway to participate but not other European states is probably not the right set-up”.226

155.Ms Loiseau suggested that the UK and the EU should be “more creative in the way we work together on defence”, while also indicating that greater UK involvement in EU programmes would require British money to be “brought into the programme”.227

156.When looking at the potential disadvantages of the UK’s limited engagement with the EDF, Dr Scazzieri told us of potential risks of a commercial (less business cooperation in Europe) and military (less European defence collaboration) nature. Although the UK increasingly looks towards other global partners (such as Australia, Japan or the US), “co-operation with European countries remains very important, partly because it takes place among equals—unlike, say, co-operation with the US—so it is much easier to go about things like technology sharing”.228

157.Professor Menon offered a somewhat different view. Urging a broader perspective, he stressed that the EDF is a relatively small fund, which “pales into insignificance compared to US defence spending”.229 Assuming that it “grows into something serious” and the UK finds it difficult to get involved, it may then become problematic for the UK. For now, he considered the challenge to be in the somewhat “protectionist interpretation of the notion of strategic autonomy by some Member States”.230

158.The Minister for Europe told us that the Government has made the point to the EU that “hypothetical barriers should not be put up to the hypothetical participation of the UK or any other third country in EU defence programmes or projects”. Nevertheless, he considered that bilateral cooperation is “the most meaningful form” of defence industrial cooperation between the individual EU Member States and the UK.231 In this context he referred to the Global Combat Air Programme (GCAP) project led by the United Kingdom, Italy and Japan, which he described as a “very good example of collaboration with one EU member state and a non-EU member state, both nations with a tremendously potent track record of aviation and military aircraft production”.232

159.Given that the EU’s intention seems to be to expand the use of the European Defence Fund for defence procurement, it is a matter of regret that the current rules are a major obstacle to third-country participation, even when UK-EU strategic objectives are so closely aligned. Protectionism is not the way to build an efficient defence industry.

160.While we welcome bilateral and minilateral defence initiatives involving the UK and European partners, such as the Global Combat Air Programme, in our view the Government should also reinforce its efforts to engage with procurement projects linked to the European Defence Fund. We urge the Government to press the case with the EU for changes to third-party rules that would facilitate greater UK engagement. We ask the Government to provide us with an update on the steps that it has taken to address this issue in its response to this report.

European Defence Agency

161.Baroness Ashton of Upholland told us that when she was the head of the European Defence Agency (EDA) (created in 2004 to foster Member State collaboration on defence—see Box 5), her view was that so much could have been done in terms of collaboration between countries without “taking away” their sovereignty over decisions related to the defence dimension. Over the years there had been gradual change, led by the European Commission and then picked up by the defence industry.233

162.One of the priorities for Baroness Ashton was to ensure that all of the defence work done under the umbrella of the EDA, such as on improvised explosive devices, research and development, or on helicopter training, was “relevant and recognised to be of benefit to NATO as well”. However, at the time the UK as an EU Member State did not want to see an increased budget for the EDA, to ensure that “there was no accidental or deliberate way in which Europe started to be a competitor to NATO”.234

163.Still, Dr Scazzieri reflected that “perhaps the EDA in some ways has, until recently, disappointed in not fulfilling its original function as an EU procurement agency”. This perception, however, started to change over the last two years, for example through the development of the joint ammunition procurement programme through the EPF.235

164.In April 2023 this Committee recommended that the Government should reach an administrative arrangement with the EDA, similar to existing arrangements that the EDA has with other third countries, including the United States of America and Norway.236 However, the Government said that it was “not currently pursuing” this in its response to our report.237

165.In written evidence Professor Whitman, Dr Grogan and Ms Wachowiak argued that an agreement with the EDA had become a “precondition” for association with some EU defence industrial initiatives and that the UK was out of line with other third countries such as the US, Norway and Ukraine in not having this.238

166.In his oral evidence Professor Whitman added that he “did not think there are any costs” to an agreement with the EDA, which he saw as an “important signalling device” that “does not bind or compel any third country to join any agency undertakings except by mutual agreement”.239 Professor Mattelaer noted that the US Department of Defense’s administrative arrangement with the EDA enables consultation on issues such as defence standardisation and supply chain management.240 Professor Whitman and his colleagues felt that a similar arrangement may have “benefits for the UK in entering a consultative relationship that would facilitate dialogue with an increasingly important organisational component of EU defence policy”.241

167.Professor Mattelaer argued that an agreement with the EDA would mean that “the UK would be more in the loop on EU defence-related issues, while EU member states that are keen to collaborate with the UK would be able to channel those conversations into that forum”.242 Mr Bond and Dr Scazzieri described such an arrangement as “relatively low-hanging fruit” that could “build trust and pave the way for involvements in EU initiatives in which the EDA is involved”. Both nevertheless noted that a financial contribution would be required if UK companies are to benefit from EU initiatives.243 Meanwhile, Ms Antinozzi characterised an administrative arrangement with the EDA as a “licence to unlock ad-hoc, project-based cooperation” but caveated this by saying that it would not be an “unrestricted entry ticket to the EU defence theme park”.244

168.Professor Mattelaer considered that an administrative arrangement with the EDA is “not a panacea”—defence R&D initiatives and programmes are primarily driven by the European Commission, in close consultation with Member States in the EDA Programme Committee. The UK would not be able to join that Committee, so the only way to engage would be through bilateral frameworks.245 However, the R&D defence budgets are gradually increasing. Professor Mattelaer suggested that the UK may wish to pursue collaboration in bilateral or minilateral formats with EU Member States.246

169.The EU Ambassador to the UK told us that an administrative arrangement would “signal intent of and interest in greater engagement in the defence industry with the European Union”. However, he stressed that it was “up to the UK Government to decide whether they consider this to be in their interests or not”.247

170.The Foreign Secretary indicated that the Government remained reluctant to consider a closer relationship with the EDA. He told us that the UK was “not particularly keen on it when we were in the EU, and so I am not fully inclined to fall in love with it after we have left”.248 He suggested that “as a third country, if you work with it, there are all sorts of, as I understand it, IP and other restrictions that you would be disadvantaged by”. Pressed on why the US had wanted an administrative arrangement with the EDA if it imposed such constraints, he said that he was “not sure that, if you asked them whether it is the best bit of their defence co-operation, they would argue that it is”.

171.Following a series of questions about the Government’s position on a potential administrative arrangement with the EDA, the Minister for Europe told us that:

“Whether or not the European Defence Agency is the answer to all those manifold cultural and military questions, I know not, but, as I said, we are philosophically open to a discussion about it, while noting that, historically, the most effective procurement and delivery of military effect tends to be done by smaller groups of nations rather than large ones”.249

172.We welcome the UK’s ongoing collaboration on defence matters with EU Member States, individually and severally. Based on the evidence that we have considered we believe that, on balance, there would be benefits to the UK seeking to complement existing collaboration through an administrative arrangement with the European Defence Agency, similar to those reached between the EDA and other third countries such as Norway and the United State of America. Such an agreement would not impede existing cooperation, and would impose few obligations on the UK. But it could be a useful step towards wider cooperation with the EU on defence, based on the principle of reciprocity.

The UK and EU-NATO cooperation

173.Professor Mattelaer argued that there had been a substantial shift in EU defence policy and capability, including clarifying divisions between NATO and the EU on defence,

“with the former providing the deterrence foundation and the framework for operationalising common defence and the latter enabling the rebirth of the defence industrial base in Europe as well as the pooling of financial firepower that is necessary to support Ukraine over the long haul”.250

174.The joint EU-NATO communiqué issued following the NATO Heads of State and Government Summit in July 2023 in Vilnius stated that “for the strategic partnership between NATO and the EU, non-EU Allies’ fullest involvement in EU defence efforts is essential” and called for “mutual steps, representing tangible progress, in this area to support a strengthened strategic partnership”.251

175.The language regarding the “fullest involvement” of non-EU allies in EU defence initiatives was described as “aspirational” by Mr Bond and Dr Scazzieri. They considered that, at present, the UK can do little to change third-party participation rules and thereby give effect to this commitment.252 In oral evidence, Dr Scazzieri explained that the “discussion on the current instruments has been settled rather painfully and after a lot of negotiation between member states, with some positive results, as far as the involvement of third countries can go compared to the original proposals”.253

176.Nevertheless, Professor Whitman, Dr Grogan and Ms Wachowiak suggested that the UK had a strong interest in the terms of the NATO-EU Strategic Partnership being “more clearly defined and based on non-detriment to the non-EU members of the Alliance”. They identified a dilemma for the UK in reconciling its “long-standing interest in enhanced defence capabilities for European states as the basis for strengthening NATO” with what they saw as the “prospective increasing role for the EU in securing the necessary defence industrial policy for their facilitation”. They also noted that increasing EU defence industrial capacity would become particularly relevant in the event that the US were to decrease its commitment to NATO.254

177.Some witnesses suggested that enhanced UK-EU cooperation on defence, including some of the possible areas of cooperation discussed elsewhere in this chapter, could help with translating the aspiration language of the NATO-EU declaration to reality, especially given the UK’s prominent role in NATO.255 Dr Scazzieri told us that the “EU would probably say that it has done what it can and that the next steps are on the UK”.256 We heard that more efficient use of bilateral and minilateral agreements with selected EU Member States may also be beneficial to NATO-EU cooperation.257

178.Professor Whitman suggested greater use could be made of existing mechanisms, such as joint meetings of the North Atlantic Council and the Political and Security Committee, which “have not been able to meet for some time”, due to differences between Greece and Turkey on Cyprus. He added that this “is a space in which the UK is a bit of an honest broker”, with an interest in all parties working together.258

179.The FCDO welcomed the EU’s commitment to cooperate with NATO, suggesting that this will be particularly important when “supporting resilience, reform and reconstruction in Ukraine”.259

180.It reported that the Government has discussed with the EU “how we can enhance NATO-EU cooperation and strengthen Europe’s defence industrial base for our mutual benefit”. It expressed the Government’s view that it is crucial that EU defence initiatives “do not create barriers to defence cooperation between European allies”, adding that competing initiatives “risk higher prices and less capable solutions that ultimately weakens European defence”. It indicated that it was particularly concerned about “possible supply chain competition between European allies, particularly on munitions, due to increased demand for finite sub-components and capabilities”.

181.NATO remains the leading organisation for defending Europe and setting standards to facilitate military interoperability between European allies. The UK should take advantage of its prominent role in NATO to take the lead on a plan to give operational effect to the call in the EU-NATO Joint Declaration for the “fullest involvement of non-EU NATO allies in the strategic partnership between the EU and NATO”. This plan could potentially include proposing revisions to the terms on which NATO members participate in EU-based defence initiatives.

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