European Security
How can Europe prepare for the next land war on European soil?
What comes to your mind when you think of Europe? Perhaps the high quality of life, great food, lots of different cultures and languages, great welfare, lots of rich history and cultural traditions. All of that and much more makes Europe unique. Those things are also a result of decades of relative peace, collaboration, and steady growth. Those core pillars of our society are under attack and might soon destroy Europe the way we know it.
So what changed? Land war is back on European soil. Europe has experienced a relatively peaceful experience since the end of WWII. During the Cold War, Europe experienced uprisings in the Soviet block, but there was no active warfare. After the fall of the Soviet Union, we had a few more minor scale wars in the Balkans, but apart from that, things were relatively quiet until 2008, when Russia invaded Georgia. In April 2008, NATO promised to consider Georgia’s bid to join the alliance, and in August 2008, Russian forces invaded. The war was quickly over, but Georgia lost a small part of its territory, gave up its NATO bid, and Russia got away without any repercussions. Due to no reaction from the Western nations, it was the beginning of the undermining of the USA’s global hegemony.
Fast-forward to the end of 2013. Former Ukrainian President Viktor Yanukovych decided to drop the Ukrainian association agreement with the EU, which sparked the Euromaidan uprising. The former President fled the country in March 2014, and a few days later, Russian troops entered Crimea, declared a referendum for Crimea to join Russia, and by the end of the month, Russia had officially annexed Crimea. The result? Russia had once again occupied a piece of another nation’s territory without any consequences from the Western countries. It was clear by now that attacking independent nations and occupying pieces of their territory was tolerated by the Western nations since the cost of going to war was too high. An active warzone war was created in the Donbas region, but the oil kept on flowing from Russia to Europe, and nobody batted an eye.
In February 2022, Russia invaded Ukraine and started a full-scale modern land war on European soil between two major nations. No Western European nation believed Russia would attack and scoffed at Eastern European nations sending Ukraine military support well before the war broke out. In Jan-Feb 2022, Germany was accusing the Baltic countries of being naive and warmongering for sending Ukraine support. On February 24, those accusations stopped because the war broke out. Everyone expected Ukraine to lose the war quickly, but due to good luck and a strong will to fight the much bigger enemy, Ukraine managed to fight back and not lose its independence. This time, the response from Western nations was more substantial, and they decided to support Ukraine financially and with military equipment.
Since the start of the invasion, the Western nations have promised to support Ukraine with all kinds of weapons. Despite being much more powerful economically than Russia, Europe has not been able to provide Ukraine with the support it needs. EU’s GDP is more than ten times larger than Russia’s. Despite that, the combined military equipment output is often short of providing Ukraine with the same army equipment Russia can produce. To make matters even worse, also with US military support, Ukraine has roughly 3-5 times less military equipment than Russia can deploy on the field. Where do we go from here?
At the start of 2024, Ukraine is running out of ammunition and men to fight the war effectively, not considering taking back lost territory. The European economic support package was stalled behind the Hungarian veto, and US military support was blocked behind the Republican party veto. Once the EU’s 50B support package was approved, it amounted to 0.02% of the block’s yearly budget. That level of commitment does not seem to signal any urgency or importance. There is no reason to point fingers, but Ukraine will be forced to negotiate peace at less-than-ideal terms without EU and US support. The result of Russia winning a proxy war against the entire Western alliance will show the world that the power of balance is not as straightforward as it used to be at the end of the Cold War. The Western world can no longer play the world police, and it might make sense to reconsider your alliances. It will be a significant geopolitical win for Russia.
To make the situation worse for Europe, Russia now produces roughly three times more military equipment than at the start of the war. What happens after the current conflict ends? It is estimated that it would take Russia 4-5 years to rearm and refill their ammunition stockpiles completely. After having won a proxy war against the Western nations once, it’s pretty clear that its ambition will not be limited. The question of whether its next target could be Moldova, Finland, the Baltic nations, or Poland is anyone’s guess. It’s very unclear whether the US would uphold its NATO commitment, especially if there is a leadership change in the White House in January 2025. Where does that leave Europe going into the second half of the 2020s? Alone and vulnerable.
The sad truth is that the European industry needs to be more capable of producing enough missiles to upkeep our promises to Ukraine. Right now, Ukraine is shooting 2k 155mm missiles a day, and Russia is shooting 10k in a single day (Ukraine used to shoot 6k rockets at the start of the war, with Russia sh. To match Russian firepower, Ukraine would need 300k missiles a month. Currently, the EU can produce 14k missiles monthly, and the US 28k missiles. Even with combined efforts, the Western nations are coming more than five times short of the number of rockets Russia can deploy. The massive demand for 155mm missiles has also pushed their price from $2100 at the start of the war to $8400. There’s a tremendous financial incentive to produce more, but nobody seems to pick up the slack. The US plans to increase its production to 80k missiles a month by 2025, but that’s still not close to enough to sustain another long-term land war. To rub salt into the European wound, while the EU managed to supply Ukraine with 300k missiles in 2023, North Korea supplied Russia with 1M missiles. With an economy 500 times smaller than the EU’s. The emperor clearly has no clothes, yet nobody dares say it out loud.
When it’s clear that Europe does not know how to produce enough war machinery to defend its borders, perhaps we can supplement our shortcomings in hardware with startups instead. Some progress was made in this space when the NATO Innovation Fund was announced to invest in early-stage defense startups in NATO countries (the US did not participate in the fund). While this is a step in a great direction, the fund has not made a single investment in a year, so death by stagnation seems to be the case at all levels of our national security. Unfortunately, European venture capital firms are often not allowed to invest in defense tech startups, making the funding environment even tricker. If financing was not tricky enough for startups, selling to different European countries should be easy, right? Not so fast. To sell your defense products to a government, you first need to go through field testing and get a green light from the soldiers about the efficacy of your product. It is only then possible to open a procurement process in which the startup can participate. You would expect that once you sell to one nation, the rest should be easy. That’s not how it works, though. With every country, the process starts from scratch, and you need to have someone open the battlefield testing door for each army separately. That means extremely long sales cycles that are not repeatable, and there’s a very fitting term in defense tech about the time between the first POC contract and getting deployed on the field: the Valley of Death. You can figure out why it’s called so yourself.
We have a looming war on our borders, and we don’t seem to be the least prepared for what’s coming for us. What can we do today to be ready to deter the threat looming over us? On a broader level, the nations should finally wake up and start practicing realpolitik again. I feel like some European countries are so blindfolded that they expect Russia not to continue their “military operations” because it’s immoral. I mean, what the actual fuck. When did we replace realpolitik with woke national security policies? A balance of powers built by Otto von Bismarck in Europe created one of the longest-lasting peace periods in Europe from 1871 to 1914. The only way to get back our national security is to create a new balance of power that would prevent any aggressive country from using tanks to exercise their foreign policy. How can Europe return to a balance of power in as short an amount of time as possible?
Europe must become united, innovative, and nimble to restore its national security guarantees. That combines becoming energy independent, creating more local production capabilities, a unified procurement system, and better funding sources for defense startups. Let’s start with energy independence. Instead of relying on cheap imported energy from the US and Russia, Europe needs to focus on affordable local energy sources. That will likely mean a combination of solar, wind, and nuclear energy in the short term. Those energy sources must be cheaper than the imported alternatives, so we must deregulate new production capabilities to reduce costs. The only reason why nuclear power is so expensive is regulatory costs. Despite ambiguous chances of success, Europe should try to lead the path in fission energy research. So far, most of the research has been funded by private and research money - there is no reason why Europe should not win the race to build the first fission power plant against the US. Making energy an order of magnitude cheaper in Europe will make it possible to become a competitive manufacturing powerhouse again. There are alternatives to relying on cheap Russian gas for our factories - we must push to invest and build cheaper energy sources of tomorrow.
Next, moving on to ammunition production. Unlike the US, Europe relies more on private companies to produce most of its weaponry. That is currently the task of four large manufacturing companies in Europe: Germany’s Rheinmetall, Britain’s Bae Systems, France’s government-owned Nexter, and Nammo, owned partly by the Norwegian and Finnish governments. These producers are unwilling to increase production as quickly as needed because they first want governments to commit to decades-long munition orders. Completely understandable. Which is why we need an alternative to these behemoths. Ammunition requirements change often, and production needs to be elastic. Europe should focus on building independent blocks of munition factories that are easy to duplicate and refocus. The best analogy here is Tesla Gigafactories. Instead of a monolith, the Gigafactories consist of many identical smaller manufacturing lines that can be quickly scaled up and down or switched to a different model. Ammunition production should work the same - as a collection of smaller factories distributed across Europe that can be quickly repurposed and scaled up and down. Both to bring down costs and make the production more elastic.
Next up is defense procurement. Right now, most members do their procurement independently for their armies. NATO also has procurement capabilities, but they are being used on a smaller scale. The way procurement works in defense is that suppliers need to find a way to do a field test with the responsible military unit, which tests and writes a report about the battle efficacy of the product. A government procurement project is created to buy the product if it fits their purpose. That process needs to be replicated by each member country separately. That slows down the commercialization process of defense companies, and it’s the main reason US defense tech does not bother selling to Europe - the contract sizes compared to the effort is a rounding error compared to selling to the Pentagon. To fix that, European nations need a unified procurement alliance where international units test new products, and the procurement system works the same way across the countries. Once an army unit tests a new product on the field, each country can create an order for the product if they find it useful for their militaries. This way, the defense companies only need to go through field testing once and can sell to each country participating in the system afterward. Since the European Union is a non-military alliance, such a procurement alliance will likely need to live independently next to NATO. It’s improbable that the US wants anything to do with such initiatives, and thus, creating something stand-alone will likely increase the iteration speed and adoption rate of countries. Making Europe the fastest adopter of new defense tech solutions will help us attract the best founders to focus on the European market first. It’s important to note here that an organization called Defence Innovation Accelerator for the North Atlantic (DIANA) was created to mentor Defense tech startups, but judging from their performance in the first few years of operating, it seems to be a classical government organization mostly wasting startup time and not providing them with the most critical asset - revenue.
Finally, we get to defense startup funding. Next to increasing the production of standard ammunition, we need our defense startups in Europe to build the latest defense systems specialized for the European theater of war. Defense tech has historically been a taboo topic in Europe. Due to their LP commitments, most venture capital firms cannot invest in dual-use or military-only companies. We need more funding sources and founders building Europe’s latest wave of defense tech. The NATO members (apart from the US) created a 1B NATO Innovation Fund to finance European defense tech startups, but it does not serve its purpose well. It feels like another government initiative with zero urgency and no real motive to provide excellent returns to governmental LPs. Governments channeling capital to startups is significant only when distributed through hungry venture capitalists motivated to pick the best startups to increase their carry. Thus, Europe needs a much larger capital vehicle as a fund of funds to scout new money managers who want to focus on investing in defense. We need many orders of magnitude more defense funds investing in the next wave of European defense founders. This fund of funds will likely need to be 10B+ in size and keep on backing the best money managers who reliably invest in the best founders in Europe. Since defense tech is still a rapidly evolving topic, Europe still has the chance to play a globally significant role here. The US funds focusing on national security investments (such as the American dynamism fund by a16z) are looking at deals in the US. By creating a new class of great defense investors in Europe, we could make both the best funding and commercialization environment in the world for startups focused on national security.
Europe, the historical birthplace of most of Western culture, is now in danger of being destroyed by another major war. The Russo-Ukrainian War did not wake many European nations to the looming threat. Donald Trump threatening to encourage Russia to attack weaker NATO members does not seem to matter. The world is changing, but many still do not get it. Europe needs to get its act together. Truthfully, the European Eastern flank is actively preparing for the next war, but the rest of Europe must also step up. Funding another GDPR-compliant ESG-reporting startup will not help us when a tank rolls across our border. Let’s focus on defending everything beautiful that Europe stands for to ensure the European continent remains the best place to retire for the next generations. There’s a lot to be done, but I am confident we have the people and resources to make Europe feel safe again. We lack only urgency and willpower. I stand with Europe.