Export Regimes, Ukraine, and Why German Defense Industry May Not Be a Good Investment
(Destroyed Leopard 2 MBT in Syria)…
Countries have export control laws that are mostly designed to prevent the transfer of sensitive technologies to foreign entities that are deemed to be untrustworthy. An “untrustworthy” entity is most often characterized by open hostility to the exporting country’s values, or is one that is open to trade with other entities that are in some way not trustworthy to the original exporting country.
For example, it is easy to understand that Israel will not export air defense systems to Iran because of the open hostility and opposing ideologies. It is probably also easy to understand that Israel would not even export the most minor components for fear of them being used by Iran to develop a domestic air defense system, or counter-system, with even minimal inspiration from an Israeli-designed component solution.
Similarly, Israel would not export the same or related technology to any country that may be less critical of Iran out of fear that the country will re-export the technology, or at least the technical specifications, to Iran to be reverse engineered.
Another aspect of typical export control processes is review of the intermediate countries, companies, and/or carriers who are expected to have temporary possession of the controlled exported technology. You can imagine one of these entities could be enticed to conveniently ‘lose’ the item in transit or at least allow the technical data to be copied and redirected to an entity not approved in the export license/agreement.
Another interesting aspect of export control law relates to what is generally referred to as dual-use technologies. Some things are not so overtly threatening like an air defense missile could be. In the news over the past few years has been microchips. Chips are increasingly found in nearly all electric devices, and they are increasingly impressive with respect to less size, weight, and power consumption necessary to provide the logic that controls how a system functions.
Nearly all defense technology is increasingly precise and deadly largely due to a network of capabilities that is mostly facilitated by microchips. Similarly, home appliances are far more precise and capable of their respective tasks, be it brewing coffee, refrigerating food, managing household humidity and temperature, or facilitating communication. Unfortunately, in many respects a chip-is-a-chip[1] and they can often easily be repurposed from managing a home appliance to managing a weapon system. Russia, for instance, has been repurposing chips since the trade restrictions imposed when they invaded Ukraine (here).[2]
But dual-use doesn’t have to be as cutting-edge as microchips. Under the right circumstances something as apparently benign and easy to manufacture as a nylon zip-tie could be subject to aggressive export control if the selected end-user is likely to use the zip-ties as an inexpensive physical means to restrain and manage targeted populations in a fashion that the originating country disagrees with.
It is valuable to understand the essence of export laws when thinking about German political tactics and the future of German arms-exports. Keep in mind that the export agreement applies not only to the initial sale to a documented “end-user”; the originating country of manufacture controls how the end-user uses the technology, to where they may re-export it, and likely retains effective control of key spare parts and perhaps even the manufacture of related technology such as ammunition.
Germany has been heavily criticized by many for its limited and reluctant military support to Ukraine in its defense against the Russian invasion. Ukraine quickly proved that it was ideologically committed to its defense which is the foundation of military success, but they certainly didn’t have the military hardware and munitions to effectively arm their ideology against a Russian invasion. Thanks to great intelligence, a variety of quickly delivered man-portable missile systems from countries other than Germany just before the invasion and, of course, ideological commitment, Ukraine stalled the Russian invasion while many countries coordinated to adequately arm Ukraine and economically isolate Russia.
One would expect that the European Union would be aggressive and forceful in defense of Ukraine for obvious geographic and ideologic reasons, and most members were. However, it was the largest European economic power, Germany, that seemed far less committed to Ukraine than each of even the smallest EU members. Why? The forgiving interpretation is that Scholz is looking for allied commitment and not wanting to lead the way militarily for historical reasons; but this may not be true.
Germany seemed to accede to supplying comparable weapon systems to those already provided by other nations. However, the contributions are far less as a percentage of GDP and arms inventory, and, in the case of the Pzh-2000, seemed to be linked to a Ukrainian commitment to purchase ten times the number gifted. There was an immediate lack of spare parts for Ukraine which is also worthy of deeper investigation.
Although Germany is by far the largest economic power in Europe, where the conflict presents the greatest and most immediate threat, there are thirteen countries who are providing more aid as a percentage of GDP. And as a percent of GDP within the EU, there are nine countries that are providing more aid than Germany!
Table 1: Aid Commitments to Ukraine as a GDP% Jan-Nov 2022 (source here)
Despite the obvious evil invasion and overt Russian threats to other former Soviet states that are now part of the EU, Germany doesn’t recognize an immediate military opportunity and necessity to arm Ukraine! A viable reason is that Scholz and members of his political party are somehow beholding to Russia. When other countries export comparable weapons, Scholz is forced to act in order to avoid being more overtly connected to Russia.
Or, Germany has a similar fear to Russia’s, that Ukraine could evolve into Europe’s most powerful economy and democracy. While this would obviously undermine the asserted value of the Russian political system, it might also erode German EU influence.
Any way you look at it, Germany is failing Europe. And if you are relying on German arms for your military, you are likely reconsidering the source due to Germany’s uninspiring commitment to European defense. Why adopt weapon systems from a country that has dubious allegiances, lest you get stranded with weapons that you are not free to use in the interest of your defense, or subject to a spare parts and maintenance logistics path that may be closed?
What do you think?
[1] Yes, I know, chips can vary extensively in terms of design, materials, content, capabilities. The point here is just to emphasize that chips are not inherently restricted to use in the hardware they are first integrated to.
[2] This story also implies the extent to which export control laws are largely ineffectively enforced or adequately considered except under only the most extreme conditions.