Europe needs to be careful not to become “too protectionist” as it seeks to build up its defence industrial base in the wake of the war in Ukraine, one of the region’s biggest arms makers has warned.
Micael Johansson, chief executive of Sweden’s Saab and vice-president of ASD, the European industry trade body, said it was important to allow companies from third countries to play a role on certain conditions.
“We can’t become too protectionist — it can’t become ‘everything has to be done by European-owned and controlled companies’,” he told the Financial Times in Brussels.
“We must be able to look at foreign-owned companies as local and . . . they must be able to be involved in the defence capabilities development of Europe,” he said.
Johansson’s comments come as EU member states debate proposals from Brussels for the bloc’s first-ever defence industrial strategy.
The initiative encourages everything from joint procurements to prioritising EU-based defence companies over non-EU suppliers. It has set a target for at least 50 per cent of its procurement by budget to come from European defence suppliers by 2030.
Policymakers are keen to reverse the long-standing practice of countries purchasing US-made equipment. Many have pointed to the fact that over the past two years, just as spending has surged in the wake of Russia’s full-scale invasion of Ukraine, 78 per cent of defence equipment acquired by EU member states was sourced outside of the bloc.
The initiative, however, has sparked concerns among some EU capitals and industry executives that it could become too restrictive and risk excluding important defence capabilities. Executives said the focus right now should be on expanding the industry’s capacity to produce as well as on investing.
Countries, including Sweden — which has deep and long-standing ties to the UK defence industry — Germany and Poland, are lobbying the European Commission not to hew too closely to the position advocated by France and others that the strategy should seek to promote only EU companies.
“The debate is about whether it is restrictive regarding non-EU states like the UK, US and Turkey . . . or actively encourages them to take part under certain conditions,” said one official involved in the negotiations.
Johansson said the strategy should not just consider the ownership of a technology but also “what kind of controls do we have over the content, the capabilities”.
Policymakers, he added, should look at whether the so-called design authority — the company or organisation able to modify and evolve the design of a product and its capabilities — is in the region.
“You nurture the capability in Europe even though maybe the mother company also benefits from that . . . on the other side of the Atlantic,” he said. “That doesn’t bother me that much.”
His comments echo those of Eric Beranger, chief executive of Europe’s missile defence champion MBDA, who recently told the FT the UK in particular should be considered part of “geographical Europe”.
Industry executives said there was some concern among UK companies they might be excluded after Brexit.
Recommended
Kevin Craven, chief executive of ADS, the UK industry trade body, told a conference in Brussels last week that Britain was still “geographically and culturally part of Europe”.
Europe, he added, “is stronger with the industrial capability of the UK”.
But Timo Pesonen, director-general for the defence industry at the European Commission, stressed that British companies would be treated like others from third countries.
Initiatives such as the European defence fund, he told the conference, were open for non-EU companies under certain conditions as long as they “operate on European soil”.
Blinken to warn China over weapons-related exports to Russia
By Demetri Sevastopulo in Washington and Lucy Fisher in London
US secretary of state Antony Blinken will warn China that the US will take punitive steps unless it stops sending weapons-related technology to Russia, as Washington considers putting sanctions on Chinese financial institutions.
During a visit to China next week, Blinken will tell his counterparts that the US and its allies are becoming increasingly impatient with Beijing’s refusal to stop providing Moscow with everything from chips to cruise missile engines to help rebuild its industrial base.
Blinken does not plan to reveal what measures the US will take, but several people familiar with the situation said it is considering sanctions on Chinese financial institutions and other entities.
One person said his message would be the clearest warning yet that the US had delivered in person to Chinese officials.
The US has in recent weeks stepped up its warnings about the situation, including in meetings with European and G7 allies.
In an interview, deputy secretary of state Kurt Campbell said China was undermining European security by supplying Russia with dual-use technologies at the same time as trying to develop closer economic and political ties with Europe.
“What we’ve tried to underscore with European and Chinese interlocutors is that these dual objectives are inconsistent, and that we want China to think very carefully about the way forward,” he said.
Campbell said the US was being “very direct” about its concerns and would “hold China accountable” for its actions.
Blinken will visit China from April 24 to 26 and hold meetings in Shanghai and Beijing. Campbell said Blinken would raise the issue with Chinese foreign minister Wang Yi.
One US official said that other G7 members had told Washington that they had, or would, raise the issue with China after a meeting of G7 foreign ministers in Capri this week where Blinken discussed the matter.
One person said China had become increasingly concerned about the possibility of sanctions on its banks. President Joe Biden issued an executive order in December warning foreign financial institutions that they “risk losing access to the US financial system if they facilitate significant transactions relating to Russia’s military industrial base”.
“China has been worried for some time that the US might increase sanctions on China, particularly in the banking arena, because of its support to Russia during the war,” said Dennis Wilder, a former CIA China analyst now at Georgetown University.
Four top Chinese lenders selectively stopped accepting payments from Russia last month, according to Russian media reports, particularly in relation to transactions for critical electronic components.
The US state department declined to comment.
Treasury secretary Janet Yellen raised the issue during a visit to China this month, but Blinken intends to press the matter in stronger terms. Biden voiced concern to Chinese President Xi Jinping when the leaders spoke by telephone three weeks ago.
Campbell said it was “too early to say whether China is re-evaluating its stance and its position with respect to Russia and the war in Ukraine” following the spate of warnings from Washington.
While the US hopes the threat of punitive measures will persuade China to change course, it is also urging European countries to take action. The US believes European pressure is critical since China is worried about the impact on its economic relations with Europe as its own economy slows.
One person familiar with the deliberations said Europe had imposed sanctions on only three Chinese groups since the start of the Russian invasion two years ago, in comparison with 100 such actions against Chinese entities by Washington.
Senior US officials last week released a list of technologies that they said China was sending to Russia.
In 2023, they said, 90 per cent of the chips that Russia imported came from China and were being used to produce missiles, tanks and aircraft. They said 70 per cent of Russian machine tools imports in the final quarter of last year were from China and were “likely used” to produce ballistic missiles.
Comments have not been enabled for this article.
Singapore gives top-level briefings to reassure foreign banks on stability
By Mercedes Ruehl in Singapore 6
Listen to this article
4 min listen
Singapore has given international banks an unusual series of top-level briefings on geopolitics as it seeks to reassure them that the financial hub can remain stable and neutral at a time of rising tension between China and the west.
In meetings organised by Prime Minister Lee Hsien Loong’s office, officials discussed US-China rivalry, the Middle East conflict, the Ukraine war and the $2.2bn money-laundering scandal that rocked the city-state in August, according to four people with knowledge of the talks.
The meetings have been held over the past six months with US and European financial institutions including Citigroup and Standard Chartered as well as some local banks, they said.
Co-ordinating minister for national security Teo Chee Hean, a top public official, led many of the discussions. Foreign minister Vivian Balakrishnan, trade and industry minister Gan Kim Yong and minister for home affairs R Shanmugam, were also involved in some of the briefings, the people said.
The city-state has plotted a careful path as a neutral financial centre at a time of rising tensions between Beijing and Washington and the briefings show Singapore’s determination to reinforce its neutrality after large inflows of people and capital from mainland China.
One attendee said the US-China tensions “featured heavily” in the talks and officials sought to correct a “misperception” that Singapore is tilting towards China. “They were trying to explain that Singapore is not neutral but is friendly with both and chooses according to its own interests depending on the situation,” they said.
Another person who attended a briefing said that the government sought to reassure those present that financial institutions were not going to face unnecessary regulation in the wake of a $2.2bn money laundering investigation, the largest in the city-state’s history.
Ten foreigners linked to China have been charged with money laundering and the financial regulator is probing whether lenders and other institutions took necessary steps to mitigate risks as part of the probe.
Banks have since significantly tightened up scrutiny of clients, with approvals for setting up private banking accounts and new family offices in the city-state now stretching into months and in some cases more than one year.
Ministers overall sought to emphasise Singapore’s safety, reliability and trustworthiness amid geopolitical uncertainty.
“While Singapore regularly holds meetings with business groups, briefings by such senior ministers are not routine. The government [being] proactive, especially after the money laundering episode and the current global political and economic uncertainty,” one person familiar with the briefings said. “Singapore’s global stock as a financial hub is rising and the risks of being misunderstood and bad actors operating here have become greater.”
The prime minister’s office said public officials have been engaging with various groups, including banks and finance institutions, for decades. “We engage on a variety of issues — not only on international developments but also economic and social issues . . . Participants appreciate the opportunity to engage with ministers and public officials,” Lee’s office said.
A US bank executive said the meetings had been well received by local employees, though senior leadership were surprised that the prime minister’s office was contacting the business on geopolitical matters. The inclusion of ministers such as Hean, a former two-star rear-admiral who has been serving as co-ordinating minister for national security since 2015, “raised eyebrows”, they said.
“The ministers attending are among the top in Singapore, it is not something you say no to but it was surprising,” the person said. “The overall message we got was they want to make clearer that Singapore is still the safest, most reliable financial hub in the region.”
Standard Chartered and Citigroup declined to comment.
