As Russian President Vladimir Putin attempts to take over territory that once was part of the Soviet Union, Baltic states’ defence and acquisition budgets are growing. As Russian soldiers trespass in eastern Ukraine, the Baltic states prepare.
All three Baltic countries, Lithuania, Estonia, and Latvia, have a history of conflict and occupation by the Soviet Union, leaving their governments increasingly wary of a belligerent and expansionist Russian Federation. Subsequently, the three countries cooperate closely on economic, political, and military matters.
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By GlobalDataThe Baltic states have a range of agreements with each nation and the nations surrounding them in support and unity against Russia. The cooperation with Latvia and Estonia is critical to Lithuania’s military strategy as the three countries have similar security issues and strategies, according to GlobalData’s ‘Lithuania defence market 2022-2027‘ report.
Baltic cooperation is formalised through the Baltic Council, and collaboration centres around maintaining NATO cooperation on deterrence.
Baltic countries have unique positions regarding Russia, as it threatens their independence and sovereignty. They understand that they must invest significantly to shore up their domestic defence capabilities and pursue bilateral procurement initiatives with allies to stand any chance of competing in an armed conflict with the Russian Federation.
This purpose drives all Baltic states’ defence expenditures. The Baltic states have brought themselves into the Western sphere to combat the threat and cut off previous Soviet ties by joining the European Union and NATO. However, having a NATO presence so close by is seen as a threat by Russia.
Estonia’s defence budget is forecast to grow to $1.3bn in 2027, a significant increase from $0.9bn in 2022, according to a GlobalData Estonia defence market report. Over the same period, GlobalData’s armed forces equipment inventory for Lithuania reports that the Baltic state’s defence budget is forecast to grow to $2.2bn in 2027 from $1.6bn in 2022, demonstrating historical growth.
Tristan Sauer, land analyst at GlobalData, said in his analysis of the modernization of the Estonian defence forces: “Despite announcing a €103m ($114m) increase to their annual defence budget in February 2022, the annual defence budget for FY2021 only amounted to €645m ($715m), which is dwarfed by Russia’s $62bn expenditure for that same year.
“Consequently, the Estonian [Ministry of Defence] has engaged in several joint ventures with allied states and organisations, leveraging domestic expertise in IoT and unmanned systems technologies to enhance military capabilities and opportunities for the defence industry.”
Madeline Wild, defence analyst at GlobalData, adds: “In the wake of the invasion of Ukraine, many European states announced historic and unprecedented increases in defence spending. GlobalData figures forecast Poland to spend 3.9% of GDP on defence by 2028, for example.
The Baltic states are no exception to this, with Estonia, Latvia and Lithuania announcing they would work towards spending 3%.
Madi Wild, defence analyst at GlobalData
Considering the Baltic countries, Tristan Sauer claims: “Their 3% of GDP target for future defence spending is a reflection of the reality that should any of the Baltic states become engaged in a war with Russia, they would need to spend significantly more than NATO’s 2% of GDP standard to sustain their forces in a high-intensity conflict.”
Ukraine and the Baltic states share similarities in geopolitical ties to the Soviet Union, sharing a border, cultures, and traditions through the deeply steeped history of the Soviet Union. All Baltic states have taken a hard line against the invasion of Ukraine, with all the nations in the region donating large amounts of military hardware to help Ukraine defend itself.
Sauer continues: “The Baltic states have donated more equipment per capita than anyone else (Estonia surpassed 1% of GDP) due to their view that a Russian victory constitutes an existential threat to their statehood. Thus any significant increase in defence spending on either acquisitions or other modernization efforts is much easier to justify financially, strategically and ethically.”
GlobalData’s “Latvia Defense Market 2022-2027” report claims that the invasion of Georgia in 2008, the annexation of Crimea in 2014, and the full-scale invasion of Ukraine in 2022 have worsened this situation driving an increase in defence spending in Latvia.
The report also mentions procurements that aim to improve the army’s capability, including the acquisition of new 6×6 armoured fighting vehicles based on Finland’s Patria model. Latvia has also ordered four UH-60M Black Hawk helicopters to replace its current fleet of Soviet-era models and is acquiring small UAVs for reconnaissance; it has expressed interest in armed drones such as Baykar’s TB.2, although this is not in its immediate funded plans.
In Latvia’s armed forces inventory, a large amount of their ground and air-based acquisitions are around a year away from any Russian Federation invasions into the territory of a sovereign country. Generally, Scandinavian states, such as Norway and Finland, provide a large proportion of their acquisitions. For example, the addition of the Patria 6×6 from Finland in 2021, the purchase of 150 P93 from Scania AB in Norway in 2013, and another 34 P93s in the year after the annexation of Crimea.
This illustrates that the Baltic states will respond after Russia has made threatening or invasive moves across eastern Europe. The most significant acquisitions in their history will likely come from the Baltic nations following the Ukraine war, with special consideration for replacing donated inventory to Ukraine.
The Baltic states have close ties with the Scandinavian countries. The recent acquisition for Lithuania of Saab’s Carl-Gustaf Ammunition, awarded as part of the existing framework agreement signed between Saab and the Swedish Defence Materiel Administration (FMV), allows Latvia and Estonia to also place the orders for the Carl-Gustaf M4 weapons and ammunition, which both Latvia and Estonia ordered from the contractor in May 2020.
GlobalData’s “Estonia Defense Market Data 2022-2032” states that the acquisition budget is expected to grow at a similar CAGR over the forecast period, at 6.6%, as Estonia is making a number of acquisitions, including K9 howitzers. The acquisition budget is forecast to climb to $480m by the end of the forecast period, up from $360m in 2022.
Lithuania’s acquisition budget also shows similar rises, forecast to grow over the next five years, with a predicted compound annual growth rate of 8.8%, increasing from $330m to $570m by 2027, providing the country with increased acquisition capabilities, GlobalData research reports on Lithuania.
