Arms industry booms as Eastern Europe arms Ukraine

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  • E.Europe arms companies increase production for Ukraine
  • Hopes to find new markets as defense spending rises
  • Can produce and service Soviet era and NATO standard weapons Poland, checks among major suppliers of military aid to Kiev
  • The history of the industry stretches from the 19th century and through the Cold War

PRAGUE/WARSAW, 24 Nov. (Reuters) – Eastern Europe’s arms industry is handing out guns, artillery shells and other military supplies at a pace not seen since the Cold War, as governments in the region lead efforts to help Ukraine in its fight against Russia.

Allies have been supplying Kiev with weapons and military equipment since Russia invaded its neighbor on February 24, depleting their own stockpiles along the way.

The US and UK committed the most direct military assistance to Ukraine between January 24 and October 3, shows a tracker from the Kiel Institute for the World Economywith Poland in third place and the Czech Republic in ninth place.

Still wary of Russia, their Soviet master, some former Warsaw Pact countries see helping Ukraine as a matter of regional security.

But nearly a dozen government and business officials and analysts who spoke to Reuters said the conflict also presented new opportunities for the region’s arms industry.

“Given the realities of the ongoing war in Ukraine and the visible stance of many countries targeting increased spending within defense budgets, there is a real chance to enter new markets and increase export earnings in the coming years,” said Sebastian Chwalek, CEO of Poland’s PGZ.

State-owned PGZ controls more than 50 companies that make weapons and ammunition – from armored personnel carriers to unmanned aerial systems – and has shares in dozens more.

It now plans to invest up to 8 billion zlotys ($1.8 billion) over the next decade, more than double its pre-war target, Chwalek told Reuters. That includes new facilities located further from the border with Russia’s ally Belarus for security reasons, he said.

Other manufacturers are also increasing production capacity and are hiring workers, companies and officials from Poland, Slovakia and the Czech Republic.

In the immediate aftermath of Russia’s attack, some Eastern European militaries and manufacturers began emptying their stockpiles of Soviet-era weapons and ammunition familiar to Ukrainians while Kiev waited for NATO-standard equipment from the West.

As these stocks have dwindled, arms manufacturers have ramped up production of both legacy and modern equipment to keep supplies flowing. The flow of arms has helped Ukraine push back Russian forces and recapture swathes of territory.

Chwalek said PGZ would now produce 1,000 portable Piorun manpad air defense systems by 2023 – not all for Ukraine – compared with 600 in 2022 and 300 to 350 in previous years.

The company, which he said has also supplied artillery and mortar systems, howitzers, bulletproof vests, handguns and ammunition to Ukraine, is likely to surpass a pre-war 2022 revenue target of 6.74 billion zlotys.

Companies and officials who spoke to Reuters declined to provide specific details about military supplies to Ukraine, and some did not want to be identified, citing security and commercial sensitivities.

HISTORICAL INDUSTRY

Eastern Europe’s arms industry dates back to the 19th century, when Czech Emil Skoda began manufacturing weapons for the Austro-Hungarian Empire.

Under Communism, huge factories in Czechoslovakia, the Warsaw Pact’s second-largest arms producer, Poland and elsewhere in the region kept people busy, supplying arms for Cold War conflicts that Moscow fomented around the world.

“The Czech Republic was one of the powerhouses of arms exporters and we have the personnel, material base and production lines needed to increase capacity,” its NATO ambassador Jakub Landovsky told Reuters.

“This is a great chance for the Czechs to increase what we need after giving the Ukrainians the old Soviet-era stocks. This can show other countries that we can be a reliable partner in the arms industry.”

The collapse of the Soviet Union in 1991 and NATO’s expansion in the region pushed companies to modernize, but “they can still quickly produce things like ammunition that fit the Soviet systems,” said Siemon Wezeman, a researcher at the Stockholm International Peace Research Institute.

Deliveries to Ukraine have included “eastern” caliber artillery rounds, such as 152 mm howitzer rounds and 122 mm rockets, not produced by Western companies, officials and companies said.

They said Ukraine had acquired weapons and equipment through donations from governments and direct commercial contracts between Kiev and the manufacturers.

NOT JUST BUSINESS

“Eastern European countries support Ukraine significantly,” said Christoph Trebesch, professor at the Kiel Institute. “At the same time, it’s an opportunity for them to build their military manufacturing industry.”

Ukraine has received nearly 50 billion kroner ($2.1 billion) worth of weapons and equipment from Czech companies, about 95% of which were commercial supplies, Czech Deputy Defense Minister Tomas Kopecny told Reuters. Czech arms exports this year will be the highest since 1989, he said, with many companies in the sector adding jobs and capacity.

“For the Czech defense industry, the conflict in Ukraine and the assistance it provides is clearly a boost that we have not seen in the last 30 years,” Kopecny said.

David Hac, CEO of Czech STV Group, outlined to Reuters plans to add new production lines for small-caliber ammunition and said it is considering expanding its large-caliber capacity. In a tight labor market, the company is trying to poach workers from a declining auto industry, he said.

Defense sales helped the Czechoslovakian group, which owns companies including Excalibur Army, Tatra Trucks and Tatra Defence, almost double its first-half revenue from a year earlier to 13.8 billion kroner.

The company is ramping up production of both 155mm NATO and 152mm Eastern caliber rounds and refurbishing infantry fighting vehicles and Soviet-era T-72 tanks, spokesman Andrej Cirtek told Reuters.

He said that supplying Ukraine was more than just good business.

“After the Russian aggression started, our supplies to the Ukrainian army multiplied,” Cirtek said.

“The majority of the Czech population still remembers times of a Russian occupation of our country before 1990, and we do not want to have Russian troops closer to our borders.”

($1 = 4.5165 zlotys)

($1 = 23.3850 Czech crowns)

Reporting by Michael Kahn and Robert Muller in Prague and Anna Koper in Warsaw; Editing by Catherine Evans

Our standards: Thomson Reuters Trust Principles.

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