Ladies and gentlemen,
Nearly 35 years ago, on a Thursday in November, the Berlin Wall fell. A wind of change blew across Europe. Two years later, Estonia got its freedom and independence back after half a century in the Soviet prison. My generation is a lucky generation because we did not have any freedom growing up and then we got it all back. My grandparents’ generation was exactly the opposite - they had freedom and then lost everything.
I also recall another Thursday over two years ago — an early February morning when Russia launched a full-scale war against Ukraine. It starkly reminded us that freedom is not a given – you have to fight for it. It is our duty as leaders to make sure that for no future generation freedom will one day just be some memory of a distant past.
Europe is facing a critical moment that will shape our security and future for decades. We need to keep in mind that we have much to defend and a very real threat to defend against. With the right resolve and unified effort, I believe we can succeed.
Russia aspires to recreate its own vision of the world where force prevails – at our expense. Russia has shown that it does not care about the ways and means as long as its desired ends remain within reach. We have run out of room for error in second-guessing Russia’s willingness to use military force to achieve its hostile strategic aims. We must make sure we would not run out of time, too.
As things stand, the Russian Armed Forces are numerically stronger than they were two years ago. Russian military industrial complex has been mobilized. It produces considerably more equipment and ammunition in every category than the Euro-Atlantic community combined. In a matter of years, Russian military posture at the eastern flank of NATO will likely multiply. The Russian Armed Forces reform is already ongoing and new units are being formed by our borders in spite of the heavy fighting and losses in Ukraine.
This is not a reasonable setting for any kind of negotiations with a country whose credit score of honouring its commitments is close to zero. Let us not be fooled – Russia’s long-term interest is still very-very opposite of peace.
There are various estimates of how soon Russia will reconstitute and be in a position to attack again. The number – three, five or ten years, does not matter. Everyone agrees that they will be ready and willing for a next war. All they will be looking for is an opportunity – which we must deny them.
Russia is holding every single person in Ukraine at gunpoint – every day and every night. This could be Europe’s fate all the same. Or it could not, if we choose to act and avoid it.
The first and crucial step is to ensure Ukraine’s victory and Russia’s defeat. What Ukraine needs most is ammunition and air defence. And it needs it fast. Estonia has just sent Ukraine another package of military aid, including ammunition.
Ukraine also needs our long-term commitment. We have made the calculations: if all countries supporting Ukraine would commit to at least 0.25% of their GDP as military aid over the next few years, then Ukraine can win the war. I am glad to see that this initiative is gaining support.
The war in Ukraine has taught us that deterring Russia requires much more than we initially thought. It has also shown that we need to be prepared for the unlikely, even unthinkable scenarios. After all, they are only unthinkable until they happen.
Let me outline what needs to be done.
Together with our transatlantic allies, Europe needs to establish a new, permanent state of defence readiness that will far outlast the war in Ukraine. That is also the mission of the first ever European Defence Industrial Strategy. It provides the necessary foundation for the crucial step change of European defence.
Europe has entered the period of Great Awakening about the state of our industrial base. It is widely recognised that we need to ramp up our industrial capacity – not only for Ukraine, but also for ourselves. It is European nations’ armed forces whose combat effectiveness is limited by capability gaps, and European warehouses that lack sufficient supply for defending Europe.
The state of European defence is a strategic challenge that requires also strategic actions.
It means, first, a higher overall government spending on defence. The peace dividend is over and decades-long underinvestment into defence has proved to be a strategic mistake. The total defence expenditure of the EU member states as a share of GDP peaked at 1.6% in 2005. It has struggled to recover from substantial cuts that followed. In NATO, 2% is the agreed minimum, but not all allies are doing this. Some allies, including Estonia, are spending more than 3% or even 4%. To meet the demands of the new security reality, more is required from everyone. Not only those countries who are sharing their border with Russia.
It also means filling capability gaps and acquiring and maintaining large stockpiles of ammunition.
It means securing our supply chains – working together with our transatlantic partners to shorten and de-risk our supply networks.
It means sharing the burden of risk with industry when it comes to capital investments and spare capacity maintenance. At the same time, competitiveness and the normal functioning of the market must be preserved as much as possible.
It means increasing the pool of technologically skilled workers.
And finally, it also means preparing our societies at large. Because at a time of war, the first effective limits reached tend not to be raw materials or labour, but social discord and administrative friction.
Research indicates that one of the most important factors influencing defence resolve is the belief in the possibility of victory. However, “will to defend” is not granted; it must be nurtured and protected. This task becomes challenging if the necessary tools to fight are not there. We come full circle, back to defence spending and investment. Maintaining a constant state of preparedness is expensive, but it is nothing compared to the costs of actual war, which could reach trillions in a single year.
This does not have to mean only economic burden. The defence industry is not just crucial for security. It also creates jobs, boosts economy, drives technological innovation and other spill-over effects.
We have been slow learners, but European governments are picking it up. Europe’s defence-spending trajectory has had a sharp upturn. It reached a total of 360 billion euros last year – a level not seen since the Cold War. More and more of this spending is going towards investments that meaningfully improve our ability to defend. Defence readiness has taken its rightful place at the top of our priority list. We have set course for initiatives offering interim solutions for the most pressing concerns. Finding ways to ensure additional funds for European defence is no longer a political suicide, but an open and daily discussion of a matter of urgency.
But we are still stuck in a chicken-and-egg situation. Governments expect greater investment and risk-taking from industry, to be able to order more. Manufacturers at the same time, are expecting long-term visibility and contracts from governments before making capital investments into expanding production.
The reality is that both need to take initiative and do more. Fortune favours the bold.
For the governments, there has not been more of a reason to invest in defence for decades.
For the defence industry, the window of opportunity to scale, innovate and succeed has not been wide open for decades.
Only when tapping into this potential at both ends, we can create positive synergy.
Good examples are already happening.
One European company is constructing a new ammunition plant, with its own investment of 300 million euros. This will add hundreds of thousands of rounds of production capacity per year and create 500 new jobs. Another is planning to eight-fold its production of 155mm artillery ammunition within the next three years. A third one will reach a fivefold ammunition production increase in 2024 already.
All those companies also received a good amount of funding from ASAP – the EU’s industrial reinforcement fund. Such funding will be continued – and hopefully also increased – in the EU’s upcoming Defence Industrial Programme. Member States look for ways to significantly boost its budget.
Of course, it is up to the governments to create an environment where industry can prosper. As your sole customers, we are often difficult partners. We must do better to cooperate with you and tell you about our needs and intentions. Even more importantly, we must listen to your ideas and concerns. Only then can we provide the right stepping stones to enable and speed up industrial growth.
In Estonia, for example, we are developing our own industrial complex for local ammunition production. In the process, we are removing many of the barriers companies usually face when setting up new production lines in new locations.
We are fully aware of the obstacles that companies and particularly small and medium-sized enterprises face when trying to attract private investment and gain access to growth funding. That is why I fully support adapting the European Investment Bank’s funding policy to also allow investments into purely defence related projects. This will be an important signal to the wider capital market that the defence industry is an attractive and sustainable investment.
Ladies and Gentlemen,
The EU also needs to dedicate a higher share of its own 7-year budget to defence. The current level, a meagre 0.86%, is simply not enough. The new security reality is here to stay, and our actions must correspond.
But as we all know, everything in the defence industry takes time. Our opportunity for change may be over sooner than we think.
Time matters. Ukraine is buying us leeway to prepare. They are paying for this with their lives, taking out Russian equipment and manpower on the battlefield for the third year.
We also need to get serious about scale. Mass matters, too. We have seen Russia fire Europe’s monthly artillery production in a single day in Ukraine. Instead of days of supply, we need to be talking about months of supply. It is essential to scale up our production capacity to be able match these demands.
Like Garry Kasparov has said – and I quote: “The fight against authoritarianism is like a game of chess: it’s black or white, but this is not like chess. There is no draw. You win or you lose.“ The road ahead is long but I am confident that together we will call the right shots, once again make freedom triumph over tyranny, and make the future generations proud. There is no other way. There is simply no other way. Let’s not be afraid of our own power.
Thank you!
