Is Romania ready to be relevant within the European Defence Fund?

The context of the EDF development

“Getting strategic autonomy” seems to be the fundamental reference point of Brussels’ actual security vision, in a world wherein, apparently, traditional alliances have lost the values on which they were built. As long as the financial reasons tend to dominate the Euro-Atlantic’s common security logic, European Union will aim to build its own global security identity, maybe for the first time in a real and efficient manner. This is why, 2018 was more than ever the year for regrouping and advancing the initiatives and instruments from European defence area and for a thorough rethinking of the defence capabilities investments and developments landmark.

The new trajectory of defence integration is generated by the critical lack of cooperation between the EU member states, “with more than 80% of defence procurement and more than 90% of military research run on a national basis”, according to the EDF assessment documents issued by Brussels. The effects of this “fragmentation” are to be found in the huge diversity of complex armament systems of the EU member states, “with 178 different weapon systems in service compared to 30 in the US”. More than acquisition’s costs, the inferences of such big diversification are multiplying through supplementary maintenance, training, operating and interoperability costs.

Starting with these premises, EU defence planning mechanisms will get reoriented towards “systematic identification of priorities” in order to develop new military capabilities. The EU’s Capabilities Development Plan managed by the European Defence Agency is placed in the centre of this process. The concrete means to be used in reaching the new strategic objectives are Permanent Structured Cooperation (PESCO) for the cooperation mechanisms, Coordinated Annual Review on Defence (CARD) for identifying investment’s shortcomings’ in common defence and EDF to motivate the common capabilities development, from research to development and acquisition of complex competitive military equipment and technologies.

EDF is an “ambitious” project which will support Member States' more efficient spending in joint defence capabilities, strengthen European citizens' security and foster a competitive and innovative defence industry in Europe. The expectations towards the EDF are huge, because it will have to demonstrate that commonly spending of a part of the defence budgets will generate increased benefits for the member states by developing military equipment and technologies that they will never be able to realize independently. Improving collaboration in this area will lead to “greater efficiency in national defence spending, maximise innovation by achieving greater scale, reduce the risk of duplication, foster interoperability between armed forces and encourage greater standardisation of equipment”, with important financial benefits and tangible economic and social effects for the European tax-payers.

How does EDF work?

For those who are familiar with defence integrated planning strand, EDF works like the component dedicated to the military capability development and acquisition, across the national cycle of multiannual planification. For the industry, EDF’s functioning might be seen through industrial cycle dynamic logic or system engineering process phases. Regardless of the perspective, the need for the future European military capabilities comes from EU’s strategic defence and security planning documents, adopted at a political level and operationalized by the EUMS in the form of the “EU level of ambition” and by the Commission in the “EU strategic priorities”. The EU’s Military Committee and the Political and Security Council play an important role in the whole process.

The new EU capability development priorities were approved by the member states at the end of June 2018, based on the EDA’s proposal, in the form of CDP’s revisited version. This document represents the fundament reference and the main guidance for the future actions dedicated to the development of EU defence capabilities. These priorities must be taken into consideration in the conception and planning of member states’ cooperation actions, including those under PESCO’s aegis and for EDF’s co-financing.

To that end, there were agreed 11 priorities areas for the future development of the defence capabilities: Enabling capabilities for Cyber Responsive operations, Space-based Information and Communication services, Information superiority, Ground Combat Capabilities, Enhanced logistic and medical supporting capabilities, Underwater Control contributing to resilience at sea, Air Superiority, Air Mobility, Integration of military Air capabilities in a changing aviation sector and Cross-domain capabilities contributing to achieve EU’s Level of Ambition

Funds’ allocation mechanisms will be managed by the Coordination Committee which will supervise all the processes from EDF’s two windows, “research” and “capabilities”. The Coordination Committee will consist of representatives of the Commission, High Representative for External Affairs and Security Policy, member states, EDA, as well as of the defence industry, where necessary. Each window will be coordinated by program or window’s committee, with the consultation of the member states for the framework Program and with EDA’s participation as observer. We must mention that for capabilities window, the European External Action Service will play an observer role. The Commission is the decisional factor over the projects which are about to get financed within both windows, based on programs committees’ proposals and, especially, with the consultation of independent experts.

The research projects approved by the Commission get in the implementation phase under the coordination of projects’ teams, meanwhile the capabilities projects validated by the Commission are forwarded to “Capabilities” program Committee which, after consulting with member states, establishes cooperation methods for its implementation. In the next phase, the projects for which the development industrial consortiums were established are to be validated by the Commission and, finally, enter into the implementation phase. In this phase, the project manager, coordinator of industrial consortium, can be from the EDA, from a member state, as “lead nation” for that specific project, respectively from the OCCAR. In all three situations, the project manager performs in the name of the consortium he leads, not the state, institution or organization to which he belongs.

The European Commission supports the development of the European defence capabilities on three directions. Since 2017, under “research” window, it has been financing grants for research collaborative projects, dedicated to innovative products and technologies for defence,. Such projects are funded entirely and directly from EU budget. Starting with 2019, the Fund will co-finance from the EU budget the cooperative development of common prototypes, in order to motivate and complement national financing of these projects across the “capabilities” window.

Also under the aegis of this last component, the Commission will give member states concrete support if they decide upon the common acquisition of military capabilities. Commission’s involvement will actually be about “offering help to implement the most suitable and cost-saving financial arrangements for the joint acquisition of defence capabilities and on demand instruments, like the framework structures for conditions and agreements or consultation to create common property’s structure”, as mentioned in the Communication for European Parliament, the Council and different commissions on the EDF’s launch.

Conditions to access EDF funds

Form the beginning, we must mention that all companies, no matter the size and location across the European Union, can benefit of funds under EDF’s aegis. The Commission will consider the creation of some special facilities for small and middle-sized enterprises, seen from Brussels as “essential for European innovation” and “critical for procurement chains” specific to the defence industry.

EDF’s most important condition is the exclusive eligibility of the projects developed in collaboration, with the participation of at least three entities from at least three member states, no matter if these projects are research projects or from the capability development domain. Furthermore, EU will co-finance only the prototypes development of the products wherefore member states already expressed their firm commitments on the acquisition of the end product.

Another specific aspect which should be carefully analyzed by the interested industrial actors is that the projects which will be developed under the aegis of PESCO will benefit of a 10% bonus at the co-financing rate, which could lead up to 30% from the total budget but participating at PESCO is not an eliminatory criterion for the member states interested to apply for EDF funds.

Given the subject’s special sensitivity and the fact that EDF’s central objective is to increase defence’s industry competitiveness and efficiency within the EU, intense negotiations were needed to agree the conditions under which third states companies can access funds. It is mostly about big American corporations and their branches from EU member states and English companies, after Brexit. The agreed solution was one wherein this is possible only in exceptional conditions, by accomplishing “relevant and strict conditions relating to the security and defence interests of the Union and its Member States […] including those related to the consolidation of the industrial and technological base of European defence”.

EDF’s current state and perspectives

The “research” window was opened in April 2017 being for the first time in history when EU’s common budget funds research projects in the defence domain. The concrete way has been the Preparatory Action on Defence Research (PADR), with a total expected budget of EUR 90 million over three years (2017 - 2019). The uppermost areas for research are related with the major technological development objectives for the expected growth of EU’s competitiveness in military domain. In 2017 there were allocated he first funds for funding some research “clusters” of autonomous platforms, strategic technology forecast and individual fighters’ protection systems.

In present, EDA is officially financing 5 projects across the “research” window and had announced the end of applying phase for 2018, as well as the financing objectives for 2019. At the end of this pilot phase of EDF’s research component it will be elaborated an impact analysis with a special focus on its efficiency. EU member states, European Parliament and the EU Council, with EDA’s participation and defence industry’s consultation, research centres and other interested actors consider valorising these results for the next European Multiannual Financial Framework 2021-2027. For that period the actual PADR will be transformed into the European Defence Research Programme (EDRP).

Although there is no direct correlation between research investments and future military capabilities acquisition, on can expect the “capabilities” window to valorize technological developments and research results achieved by European research clusters. The big challenge of EDF’s “capabilities” window will be its capacity to boost the synchronization of all national and common research, planning and budgetary defence mechanisms. For that end, the development and production component of future’s systems should be placed in the center of the entire common defence capabilities system that EU’s strategic autonomy depends on.

Capability development component will be launched next year, initially for 2019-2020, through EDIDP. Although the financing mechanisms will favour the cooperation between SMEs, as well as projects which are directly connected to PESCO, projects that will accomplish new capabilities development needs and other initiatives of regional cooperation which respond to EU’s security and defence interests will also be able to benefit of budgetary allocations.

At this moment, the program committee and the advisory group are to be set-up with the direct participation of representatives from the defence industry and other experts from this domain. The implementation framework of EDF’s capability component will be made through the EDIDP, with the first projects to be financed in 2019. Therefore, important consultations with the member states are taking place with the objective to select the first projects under EDIDP aegis and implicitly to become part of the EDF’s portfolio. On this basis, the future EDF framework for the MFF 2021-2027 is going to be developed.

In the logic of the multiannual planning cycles, the final result of both research investment and new defence capabilities development will be the common acquisition of the resulted capabilities. In the absence of this desideratum, the foreseen technological advance will not lead, efficiently, to reaching European sovereignty and autonomy. The Commission support for member states, through EDF, aims to assimilate necessary instruments and practices to reduce military acquisition costs, to avoid duplication and to increase the interoperability of the European armed forces. For this EDF’s component, the Commission intends to set-up an ad-hoc Committee, made of member states and other interested actors’ representatives to create a first set of standardized instruments designed for the above mentioned objectives.

What is to be done?

European Defence Fund is a moment of historical premieres for European common defence. We are not talking only about the unprecedented financial opportunities for the EU defence research and industry, but also about creating the common denominator of all policies, strategies and initiatives which aim to develop the Union’s credible defence profile.

The way in which Romania is going to promote its defence interests through EDF will significantly depend on our country’s capacity to project its strategic aspirations at the regional and European levels. Many times, in Bucharest it has been said that our country could not be a “game changer” of different European policies because we had to adapt to important EU vision concepts adopted before Romania’s accession to the Union. This time things are different. Romania still can place itself on a core position in the enhancing EDF architecture with the condition of a creative and cohesive action of the main actors from the defence area, regardless if it is about governmental, industrial, research and academic space, professional associations and consultancy and lobbyist groups.

To that end, we want to pay a close attention to a set of public policy recommendations, which could lead to an efficient capitalization of Romania’s opportunities generated by the EDF.

1. Setting-up of a national framework for initiative and action within EDF, under Government’s coordination, to ensure the integrated platform for information, debate and promoting of Romanian entities’ positions and proposals across EDF different components.
2. Initiating a public diplomacy action program, with the participation of the main actors from national governmental area (defence, foreign affairs, European Affairs, economy) and European institutions and bodies involved in the process (Commission, EDA, EEAS, Parliament) to promote EDF and to increase its attractivity and efficacity in Romania.
3. Active participation in EDF governance entities as a Member State, as well as acting to obtain other relevant positions in program committees and different expert groups for national experts and representatives of the defence industry and the military research community.
4. Initiating concrete actions at the level of economic and research agencies, as well as of patronal associations from defence industry, for quick identification of connections and potential collaborations with European companies and associations, as part of the clusters which are currently developed on the Fund’s two dimensions.
5. Identify, negotiate and include in the Work Programs of the different EDF formats relevant Romanian initiatives and objectives, both in the field of research and in the development of prototypes where Romania has expertise and has already achieved conclusive results.
6. Integration of the EDF into the national defence integrated planning procedures and creating a permanent, cost-benefit evaluation mechanism of the national contribution to the Fund.
7. Rapid adaptation of national legislation to create the possibility for flexible and operative access to funds, especially in terms of compliance with eligibility conditions. A special attention should be paid to the requirement for national strong agreement on the subsequent (mandatory and non-competitive) acquisition of products whose development is financed through the EDF.
8. Identification and promotion of industrial development projects of military products that meet the strategic defence and security requirements of our country through regional initiatives such as I3M. It is important that such projects to be promoted as far as possible under the aegis of PESCO, if they correspond to the priorities identified by the CDP.

In the absence of such actions for the mobilization of the Romanian existing potential on the Fund’s main implementation strands, there is an increasing risk to miss some important EDF-generated opportunities. This might generate medium and long-term negative consequences on the capacity of our country to get a relevant position in the future architecture of the European defence.