Rearm Europe, enrich America

Whose rearmament?

In January 2020 Poland signed for 32 American stealth fighters at a cost of $4.6bn. At the time it looked like a bold purchase by a country that had spent the cold war flying Soviet jets and the years since making do. Half a decade later the order looks almost modest. Poland now intends to spend close to 5% of its national income on defence, the highest share in NATO, and its F-35s are among the smaller items on a shopping list that runs to hundreds of tanks, rocket launchers and air-defence batteries.

Poland is the extreme case, but the direction is shared across the continent. For three decades after the Berlin Wall came down, European governments treated their armies as a budget line to be cut. Brigades were disbanded, tank fleets sold for scrap and procurement money diverted to pensions and health care. Russia’s full-scale invasion of Ukraine in February 2022 ended that long holiday. By 2024 the members of the European Union were buying military equipment worth €88bn a year, up by 39% in twelve months. The European Commission reckons the bloc faces an €800bn gap in military capability, and wants spending to rise by a tenth every year, reaching some €575bn, about 3.15% of combined GDP, by 2030.

A surge on that scale creates winners, and the location of those winners is the part European leaders least like to discuss. Procurement records from more than a dozen countries point to an awkward conclusion. The biggest single beneficiary of Europe’s rearmament is American industry. The second, less predictable, sits in South Korea. European firms gain as well, but unevenly, and the divide between the governments that keep their defence money at home and those that send it abroad reveals the strategic bind the continent is in. Between February 2022 and June 2023, official figures show, 78% of EU members’ arms procurement went to suppliers outside the bloc. Of that, the United States took roughly two-thirds.

America’s good war

At the centre of the American windfall is a single aircraft. Lockheed Martin’s F-35 Lightning II, a fifth-generation stealth fighter, has become the reflexive choice of European air forces preparing for a possible war with Russia. Germany has ordered 35 for about €8.3bn, paid for from a special €100bn fund known as the Sondervermögen and intended in part to carry American nuclear bombs. The Czech Republic is buying 24 for roughly $5bn, Romania another 32, the Netherlands is enlarging its fleet towards 57, and Greece has clearance for as many as 40. Britain, a partner in the programme since its early days, has ordered 48 and added a dozen more in 2025 for a NATO nuclear mission. The lifetime cost of its planned fleet of 138 is put at £57bn.

Every one of those deals comes with decades of spare parts, maintenance and software updates, almost all of it flowing back through Lockheed. That makes the company the clearest industrial winner of the European build-up. Two more American giants follow close behind. Boeing has sold heavy-lift Chinook helicopters to Germany, where an order of around 60 is worth €6bn-7bn, as well as to Britain and the Netherlands, and Apache gunships to Poland and Britain. Raytheon, now part of RTX, is supplying Patriot air-defence systems and interceptor missiles to Germany, Poland and several others as European cities seek protection against the sort of missile and drone attacks that Ukraine endures most nights.

The appeal of buying American is not mysterious. The systems exist, they have been tested in combat, and the factories that build them can deliver at a scale European plants cannot match. For a defence minister who wants a capability within a few years, that is a powerful argument, whatever the political discomfort of posting the cheque to Washington.

The Korean surprise

If American dominance was easy to foresee, the arrival of South Korea as a major arms supplier to Europe was not. Almost the entire Korean gain runs through one customer. Poland turned to Korean factories because they offered something European industry could not: speed, and the capacity to produce in bulk. After thirty years of lean order books, European production lines simply cannot turn out hundreds of tanks in short order. Korean ones can.

The first package, signed in 2022, was worth about $12.3bn. It included 180 K2 Black Panther tanks from Hyundai Rotem, 212 K9 howitzers and a batch of Chunmoo rocket launchers from Hanwha, and 48 FA-50 light combat jets. A follow-on tank contract in 2025 added a further $6.5bn, taking Poland’s total Korean commitments above $19bn. Framework agreements point towards eventual deliveries of around 1,000 tanks and several hundred more guns and launchers. For Hyundai Rotem and Hanwha, the war in Ukraine achieved what years of sales pitches had not: a foothold in the European market and a reference customer at the heart of NATO.

Europe’s smaller share

European manufacturers are far from shut out. The most successful cross-border exporter is BAE Systems, a British company whose Swedish subsidiary, Hägglunds, builds the CV90 infantry fighting vehicle. The Czech Republic has ordered 246 of them for about €2.5bn, the Netherlands is buying a Nordic variant, and Sweden is overhauling its own fleet. BAE’s Type 26 frigate has been chosen by Britain and, for around £10bn, by Norway. MBDA, a missile-maker owned jointly across Britain, France and Italy, is the continent’s leading supplier of guided weapons, with contracts worth billions in Poland, Italy and Greece. KNDS, a Franco-German group that builds Leopard tanks and Caesar howitzers, dominates European sales of artillery and armour, supplying France, the Czech Republic, Portugal and Germany. Rheinmetall, the fastest-growing arms-maker on the continent, sells tanks, ammunition and air-defence guns widely, though the full value of its order book is hard to establish. Saab of Sweden, maker of the Gripen fighter, has watched its military sales rise by half in two years and has sold artillery and anti-tank weapons to Britain. Israel takes a slice too: Germany is its first export customer for the Arrow 3 missile-defence system, and the Czechs have bought Israeli air-defence missiles.

Yet Europe’s champions labour under a disadvantage no single order can repair. In 2023 the 27 largest European defence companies booked combined revenues of about $130bn, roughly half those of their American rivals. The three biggest American firms on their own match the entire European industry’s output. When a government needs a weapon quickly, the deepest and most battle-proven production lines are usually American. That structural imbalance, more than any special affection for Washington, explains why the money flows the way it does.

Keepers and buyers

On the question of who keeps the money at home, the continent splits in two. A small group of countries with their own arms industries retain most of their spending. France is the purest example. Its military-programming law commits €413bn over 2024-30, and a 2026 revision pushes the target towards 3.5% of GDP by 2035 while expressly favouring French and European suppliers. Rafale jets from Dassault, Caesar guns from KNDS, warships from Naval Group, electronics from Thales: French orders, which reached €31bn in 2026, go almost entirely to French firms. Britain is the other big home producer. Since the middle of 2024, 89% of new defence contracts by number have gone to British-headquartered companies, and £17bn of the £23bn awarded in 2024-25 stayed with domestic suppliers, even as BAE wins large contracts abroad.

The second group imports almost everything. Greece spends a hefty 3% of GDP on defence, yet every big contract since 2020 has gone overseas, mainly to France for frigates and fighters and increasingly to America for the F-35. Opposition politicians in Athens complain that not a cent of it reaches Greek industry. Poland, for all its spending, leans on Korean and American factories. The Czech Republic buys from five countries at once: American jets, Swedish-British vehicles, Franco-German tanks and guns, Israeli air defence and Swedish fighters on lease. Ireland, which has almost no domestic arms industry and one of the smallest defence budgets in the bloc, orders its helicopters and radars wholesale from abroad. For these countries, higher defence spending means in practice a larger transfer of cash to foreign suppliers.

Brussels pushes back

The European Union understands all too well that “rearm Europe” has so far often meant “enrich America”. It has built a tangle of new instruments meant to keep more of the money on the continent and to nudge governments into buying together. The largest is SAFE, a €150bn loan facility that 19 member states signed up to within months of its launch. A clutch of smaller schemes, with acronyms only a Brussels official could love, subsidise joint purchases of ammunition, missiles and armoured vehicles, and steer funds towards defence start-ups. The bloc has set two benchmarks for 2030: at least half of procurement spending should go on equipment made in the EU, and at least 40% should be bought collaboratively.

For now those benchmarks are an ambition and little more. The 78% of procurement still going to non-EU suppliers shows how distant they are. Building a new tank factory or certifying a new missile takes years; buying an American system that already works takes months. As long as European governments believe they are racing against time, and Russia ensures they do, the pull of the proven foreign supplier will stay strong.

Buy now, build later

This is the contradiction at the core of Europe’s rearmament. Spending more was supposed to deliver two things together: security against Russia, and a stronger, more self-reliant European industrial base. In the short run the two aims work against each other. Every F-35 bought from Texas and every tank ordered from South Korea provides capability faster than a home-grown alternative could, while deepening the continent’s dependence on suppliers it does not control. Europe’s leaders speak constantly of strategic autonomy. Their cheque-books, for now, say something else. The test of the coming decade is whether the money starts to stay on the continent, or whether the great rearmament is remembered chiefly as a windfall for Fort Worth and Seoul.

A note on sources

This article draws almost 1,500 references, overwhelmingly from primary official records. Parliamentary questions, debates, bills, committee reports and government gazettes from more than a dozen national legislatures, together with documents from the institutions of the European Union.