Since the outbreak of the first high-intensity conflict on the European subcontinent since WWII, one of the key strategic takeaways has been the fundamental failure of the global defence industry to meet the requisite level of production for munitions of all types. High-intensity warfare often dictates that the industrial capabilities of warring states must be re-purposed to support the war effort in order to offset surging demand for replacement equipment or munitions, a challenge which both Russia and Ukraine have struggled to overcome for the past year.
Recent estimates indicate that Russian forces are firing in excess of 20,000 artillery shells per day, with the Ukrainian armed forces firing around one-third of that at 6,000-7,000 per day in late February 2023. For Ukraine’s military allies in the West, the continued provision of munitions and other military aid to offset Ukraine’s material disadvantage has only highlighted the glaring flaws in their own defence industrial complexes. Smaller nations are having to increase defence budgets to restore pre-war stockpiles, while even the US defence industry is having to re-assess its capacity to sustain wartime levels of production across an expansive range of weapons systems and platforms.
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Historical divergence in procurement priorities and defence spending has produced different challenges and limitations for the various nations currently involved in this conflict, with Russian forces facing a recurring lack of precision-guided munitions (PGM) throughout the conflict while Ukraine’s post-war defence industry has had extreme difficulty sustaining nearly all of the Ukrainian military’s material needs once Cold-War stockpiles were expended.
For the Russians, this issue stemmed from the lack of investment in both domestic infrastructure and industrial expertise, with Russian firms relying heavily on foreign suppliers in the West and beyond to acquire critical subcomponents such as semiconductors, INS/GNSS navigation modules and other microelectronics. Mimicking US strategy during the Gulf Wars, Russian forces expended a significant portion of their PGM stockpiles in attempted ‘decapitation’ strikes in February 2022, but once the main offensive had stalled and Western nations began implementing trade sanctions, the domestic defence industry was rendered almost entirely incapable of producing PGMs, let alone sustaining high wartime production rates. Attempts to offset this issue by re-purposing other weapons systems (i.e. employing anti-ship missiles for ground-attack roles) and by relying on significant Cold-War stockpiles of conventional munitions have also proven inadequate, as the lack of consistent maintenance, repair and overhaul (MRO) compounded by rampant corruption has rendered large proportions of those munitions unsafe or unfit for purpose.
Russian failures in Ukraine highlight the significant strategic and financial risks incurred by nations who fail to develop industry expertise and capacity, with the Russian Government now forced to source munitions and all other manners of defence equipment from allied states such as Iran, North Korea and possibly even China.
In Europe, many nations have consistently invested in domestic technical expertise over the past several decades while the lack of consistent procurement compared to the US or Russia has incentivised greater bi-lateral collaboration as European firms are forced to pool their manufacturing resources to meet large orders, which are often few and far between.
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By GlobalDataThis approach has produced its own challenges, as though European defence firms have the requisite expertise to produce munitions and material domestically, they face greater difficulty in producing equipment at scale, with the slower tempo of European defence procurement having severely undermined the industry’s ability to ramp-up production to meet wartime needs. Though several major European governments, including France, Germany, Poland, Sweden and the UK have recognised this pitfall and are now financing the expansion of their defence manufacturing capabilities, certain European nations have already opted to source large quantities of materiel from abroad, with orders for US and South Korean defence products in Europe rising dramatically over the past year.
This issue of capacity is further exacerbated by several unique regulatory pitfalls in Europe, which effectively negate the inherent benefits of European industrial rapprochement, most notably restrictions on exports and re-exports of defence products. For example, a large number of European states were unable to donate munitions and equipment from their own stockpiles due to strict re-exportation licences, primarily on products sourced from the German and Swiss defence industries. In Switzerland, the SWISS ASD federation of defence firms has raised concerns that enforcement of these licenses has undermined the reliability of Swiss defence products and resulted in the cancellation of anticipated orders.
Meanwhile, regulatory disagreements regarding the export of defence equipment were one of several factors informing the Polish Government’s decision to source material from South Korean firm Hanwha Defense instead of expanding on its existing relationship with German firm Rheinmetall. It could be argued that overregulation within the European defence industry is undermining its long-term economic viability, which, if left unaddressed, could result in market monopolisation and overreliance on foreign allies like the US as the ultimate guarantor of European security. Though European states do retain equipment and munitions stockpiles, which are subject to sustainment activities which ensure their long-term reliability, the Ukrainian military’s wartime attrition rates have only highlighted how small these stockpiles are in comparison with Russian reserves, further reinforcing the need for sustainable production capacity in the European defence sphere.
As for the nation with the largest and most reliably funded defence industry, which has maintained significant manufacturing capacity and technical expertise through exorbitant levels of investment, the US is still having to address supply chain issues which could hamper its ability to sustain its forces in a high-intensity conflict with a peer-level adversary. Unlike Europe, the US invests in the acquisition of extremely large equipment stockpiles to ensure sustainment of offensive capabilities, and unlike Russia has expended large sums on MRO for stockpiled equipment to guarantee reliability over the long term. As the largest exporter of defence equipment, the US defence industry has benefitted from a consistent revenue stream from both domestic and foreign clientele, allowing it to continue modernising infrastructure and growing expertise despite US military forces having been engaged in several conflicts since 2001. However, the issue with the US defence industry is that the majority of R&D and manufacturing capabilities had been tailored to supply equipment for low-intensity warfare and counterinsurgency operations throughout the Global War on Terror.
Analysts had long predicted this singular focus undermined innovation in high-intensity warfare-related capabilities, with successive US administrations having attempted a strategic geopolitical pivot to the Asia-Pacific and the growing threat of a peer-level conflict erupting in that region. Consequently, the re-adaptation of US defence manufacturing capabilities has faced several hurdles, with firms such as Lockheed Martin and Raytheon Technologies facing delays in restarting production of legacy munitions and systems such as the Stinger AA and Javelin ATGM missiles due to their supply chains having been inoperative for nearly three decades.
Nevertheless, US firms have remained confident in their ability to rapidly scale up production to meet the Pentagon’s demands due to their significant technical expertise, with Raytheon arguing that production will return to optimal levels once they have redesigned components which are no longer commercially available. Consequently, despite the undeniable need for additional investment to affect this macro-strategic refocus on a high-intensity warfare portfolio and capacity, the US defence industry has proven to be the most adaptive and resilient in the face of evolving global geopolitics and is set to reap the benefits of this industrial flexibility over the coming decade.
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