EU on defensive over weapons strategy

Date: 15/04/1999

By Peter Chapman

LIKE the Gulf War before it, the conflict between NATO and Serbia over the ethnic cleansing of Kosovo has shown the world the remote-control face of modern air warfare.

While much of the humanitarian disaster unfolds away from the television cameras and journalists barred from setting foot in the towns and villages of Kosovo, television viewers are getting the chance to experience the war at second hand.

Every evening, gripping pictures from military briefings given by staid generals and commanders show cruise missiles homing in on bridges and power stations, while stealth fighters jet over Belgrade from their bases in Italy and the Adriatic Sea undetected by Yugoslav radar.

Once the conflict is over, the NATO powers will consider the strategic successes and failures of their mission, and the lessons to be learnt. But Europe's defence industry and arms policy makers will have to answer at least one other uncomfortable question in the de-briefing room - where would they be without the Americans?

It remains to be seen whether ground forces will be needed to force Yugoslav President Slobodan Milosevic to give in to NATO's demands. The harsh truth is, however, that in the air or on ground, it is likely to be US technology which wins the day in the Balkans.

They may have been embarrassingly unbattle-ready but at least the 24 Boeing-made Apache AH-64 attack helicopters the Americans called up for service in Kosovo last week are built and equipped with Hellfire air-to-ground missiles, and their pilots fully trained.

Development of Eurocopter's Tiger, the Apache's greatest potential rival as an attack helicopter, is on schedule and orders for 427 aircraft have come in from the French and German military. But despite claims from French President Jacques Chirac that they were betraying EU industry, British and Dutch forces ordered Apaches during their last multi-billion-euro procurement rounds largely because delivery could be guaranteed before the millennium.

Gordon Adams, deputy director of the influential London-based Institute for Strategic Studies (ISS), claims Europe has failed to learn the lessons of the Gulf conflict, when the US' massive technical superiority in areas such as missile systems and all-weather technology was first underlined. "What is interesting about Kosovo is the recognition that Europe is a step behind the US. You would have thought it would have learnt from the Iraq conflict," he says. "The US has perhaps learnt that it does not have a big enough supply of this hardware, but Europe has learnt that it does not have any of it at all."

There is no doubt, however, that Europe has the expertise. Companies such as the France's Aérospatiale, DaimlerChrysler's defence and aerospace unit DASA, and British Aerospace lead the world in niche markets.

The real problem, according to many analysts, is that much of the industry needs to merge to achieve the huge economies of scale which their US rivals such as Lockheed Martin, Boeing and Raytheon enjoy.

At the same time, European governments need to move closer together on defence policy - particularly when it comes to procurement - to ensure markets are not fragmented by a myriad of different specifications for kit.

" You need agreements to ensure that equipment is adaptable so that it can be used by others. At the moment it is not standardised," says Ben Fiddler, a defence sector analyst with London-based bank Dresdner Kleinwort Benson.

Mergers have already begun, with British Aerospace announcing earlier this year that it would be linking up with UK rival GEC's Marconi defence unit in a €10.2-billion deal.

But without broader consolidation, European firms appear destined to remain bit-part players, unable to handle the big projects.

The answer, many experts argue, is for Europe's industry to merge into one pan-European aerospace and defence company (EADC), creating a firm with the clout to compete with American rivals which have already consolidated over the last decade.

Across the EU, defence ministries and officials have paid a great deal of lip service to the advantages of the EADC in bridging the technology gap. That is why there were so many dissenting voices when British Aerospace chose to link up with Marconi instead of merging with one of its European rivals such as DASA.

But the ISS's Adams believes it would be a disaster for Europe. "That would be murderous. It would be the death-knell of the European defence industry," he insists, arguing that while consolidation is needed, the creation of one company would lead to higher prices for poorer technology than firms could otherwise supply.

" One company stifles competition. It would have no other reason than to live off the order book of existing technology. A single EADC would do just that," he says.

Adams argues that Europe should forget about meeting the US challenge by creating a monolithic structure to compete on all fronts. Instead, EU firms should merge only in sectors where it makes economic sense.

" The better solution would be to encourage sectoral alliances between, say, the top two or three companies in each sector, such as armoured personal carriers and missile systems," he insists. This, he argues, should be coupled with a greater willingness to strike deals with firms from across the Atlantic, with the aim of creating "cutting-edge technology at a cutting-edge price".

That message has not been lost on the companies themselves, according to Adams. "Things will probably warm up in the summer. I expect to see some pronouncements. Industry has been reeling from British Aerospace's deal with Marconi," he says.

Although politicians may still be willing to support the EADC despite the warnings from analysts like Adams, others point to a more pressing need if Europe is to catch up in the arms technology race - money.

" If people want a European defence identity," says Fiddler, "they need to get used to the idea that they are going to need to spend money. The UK and France does this already, but the others need to spend more. Unless this is the case, we will continue to show how little we can do."

the defence industry point out that Europe already has achieved a fledgling monetary union. They argue that one of the next steps should be to work towards a closer defence relationship including higher, closely co-ordinated spending.