The arms industry is developing as Eastern Europe arms Ukraine

  • E.Europe arms companies increase production for Ukraine
  • I hope we find new markets as defense spending increases
  • Can manufacture and service Soviet-era and NATO-standard weapons Poland, Czechs are among major suppliers of military aid to Kyiv
  • The history of the industry stretches from the 1800s to the Cold War

PRAGUE/WARSAW, Nov 24 (Reuters) – Eastern Europe’s arms industry is churning out weapons, 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.

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

The United States and Britain provided the most direct military aid to Ukraine between January 24 and October 3, according to the Kiel Institute for Monitoring the World Economy, followed by Poland in third place and the Czech Republic in ninth.

Some former Warsaw Pact countries, still wary of Russia, their Soviet-era ruler, see aid to Ukraine as a matter of regional security.

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

“If we take into account the reality of the ongoing war in Ukraine and the visible attitude of many countries aimed at increasing spending in the field of defense budgets, there is a real chance to enter new markets and increase export earnings in the coming years,” he said. Sebastian Chwalek, CEO of Polish PGZ.

The state-owned PGZ controls more than 50 companies producing weapons and ammunition – from armored personnel carriers to unmanned aerial systems – and holds stakes 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 goal, 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 competing to hire workers, companies and government officials from Poland, Slovakia and the Czech Republic.

In the immediate aftermath of the Russian attack, some Eastern European militaries and manufacturers began emptying their stockpiles of Soviet-era weapons and ammunition familiar to Ukrainians while Kyiv awaited NATO-standard equipment from the West.

As these stocks dwindled, arms manufacturers increased production of both legacy and modern equipment to maintain supplies. The flow of weapons has helped Ukraine push back Russian forces and reclaim swaths of territory.

Chwalek said PGZ will now produce 1,000 Piorun man-portable air defense systems in 2023 — not all for Ukraine — compared with 600 in 2022 and 300 to 350 in previous years.

The company, which has also supplied Ukraine with artillery and mortar systems, howitzers, body armor, handguns and ammunition, is likely to exceed its pre-war 2022 revenue target of 6.74 billion zlotys, he said.

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

The Eastern European arms industry dates back to the 19th century, when Czech Emil Škoda started producing weapons for Austria-Hungary.

Under communism, huge factories in Czechoslovakia, the Warsaw Pact’s second-largest arms producer, in Poland and elsewhere in the region employed people and produced weapons for the Cold War conflicts that Moscow fomented around the world.

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

“This is a great chance for the Czechs to increase what we need after giving the Ukrainians old stock from the Soviet era. 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 into the region forced companies to modernize, but “they can still quickly produce things like munitions that fit Soviet systems,” said Siemon Wezeman, a researcher at the Stockholm International Peace Research Institute.

The shipments to Ukraine included “Eastern” caliber artillery rounds, such as 152mm howitzer rounds and 122mm rockets, which are not made by Western companies, officials and companies said.

They said Ukraine obtained weapons and equipment through donations from governments and direct trade contracts between Kyiv and manufacturers.

NOT JUST COMMERCIAL

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

Ukraine received almost 50 billion crowns ($2.1 billion) worth of arms and equipment from Czech companies, of which about 95% were commercial supplies, Czech Deputy Defense Minister Tomáš Kopečný told Reuters. According to him, Czech arms exports this year will be the highest since 1989, with many companies in the sector adding jobs and capacity.

“For the Czech defense industry, the conflict in Ukraine and the help it provides is clearly a boost that we haven’t experienced in the last 30 years,” said Kopečný.

David Hac, CEO of the Czech Republic’s 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. According to him, in a tight labor market, the company is trying to poach workers from the slowing automotive industry.

Defense sales helped Czechoslovak Group, which owns companies including Excalibur Army, Tatra Trucks and Tatra Defense, almost double its sales in the first half of last year to 13.8 billion crowns.

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

He said supplying Ukraine is more than just good business.

“After the beginning of Russian aggression, our supplies to the Ukrainian army multiplied,” said Čirtek.

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

($1 = 4.5165 zlotys)

(1 dollar = 23.3850 Czech crowns)

Reports by Michael Kahn and Robert Muller in Prague and Anna Koperová in Warsaw; Editing by Catherine Evans

Our standards: Thomson Reuters Trust Principles.

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