Orbán wants Ukraine to ‘negotiate’ for military aid cash – POLITICO

— As EU leaders meet again today, Viktor Orbán is still refusing to free more cash for military aid to Kyiv.

— Ammunition: Beyond the pace of production, the next biggest issue is cost.

— In Ukraine, the future of warfare is a $400 drone killing a $2 million tank.

Good morning, and welcome to Morning Defense. Tips to [email protected], [email protected] and [email protected] or follow us at @joshposaner, @LauKaya and @calebmlarson.

EUCO BUDGET TALKS: It’s Day Two of the latest summit of EU leaders, with debate on aid to Ukraine bubbling in the background. Some, such as German Chancellor Olaf Scholz, have said that more could be done to reallocate existing EU budget cash rather than ask countries themselves to cough up €66 billion toward extra military funding for Kyiv, among many other things.

Orbán in deal mode: Hungary will not be dropping its veto on the release of a further €500 million in military subsidies for Ukraine today: A line calling for “swift adoption of the 8th set of assistance measures” under the European Peace Facility was dropped from the conclusions. “We are waiting on the Ukrainian delegation to come to Budapest to negotiate that,” said Hungarian PM Viktor Orbán at the summit. “We are open and ready to make a deal.”   

Military mobility: Zooming out, the current multitude of security threats has refocused attention on the contentious topic of military mobility — building out Europe’s roads, railways, ports and runways that have dual use for both armies and civilians. The Baltic states are particularly enthusiastic on the topic.

Times change: Military mobility was a major loser the last time EU leaders set about forging their new multiannual budget way back in 2018 and 2019, with the Commission’s proposed €6.5 billion dedicated fund being whittled down to just €1.7 billion.

Calls for more: While there are “diverging views” on how to spend any new budget financing as part of the budget top-up being considered, according to a Spanish presidency discussion document obtained by our colleague Paola Tamma, several states want investment in “military mobility to strengthen the dual-use of transport infrastructure capacity” and “to support frontline member states affected by the war in Ukraine.”

Next time: There will be no deal this time around on expanding the budget, or on the extra €20 billion in European Peace Facility cash. In the European Council conclusions, leaders pledged to reach a deal on the revision of the budget by year end. The next Council meeting is penciled in for December 14-15.

Follow Day Two on our live blog here, and get the full write-up of the first day here.

NATO: Secretary-General Jens Stoltenberg welcomes Norwegian Foreign Affairs Minister Espen Barth Eide. 

GERMANY: The Berlin Security Conference kicks off on Sunday, featuring high-level speakers including German Defense Minister Boris Pistorius and several of his European counterparts, as well as the active leadership of the German armed forces and defense industry CEOs. Caleb will be in attendance.

MARK YOUR CALENDAR: Our weekly defense calendar landed in your inbox on Thursday. You can also go online to export and plan your week or suggest your own event.

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SWEDEN READIES FOR NATO: Swedish officials believe their country could enter NATO by late November after Turkey took an important step toward ratification. For the military alliance, the unblocking of Sweden’s accession clears the way for further integration of its defensive assets in the Baltic Sea region. 

Read Charlie Duxbury’s report from Stockholm here.

CHEAPER SHELLS NEEDED: The war in Ukraine has sent demand for 155mm artillery shells soaring. Beyond the pace of production, however, another issue affecting the availability of the ammunition is its cost — which is being squeezed by an acute supply bottleneck. Earlier this week, NATO pressed countries to reprioritize the standardization of artillery shells to reduce the average cost per shell.

Costly fight: Recent reporting shows that the price per shell the German government paid to Rheinmetall for use in Ukraine increased from about €2,000 before the Russian invasion to as high as €3,600 today.

Expansion costs: Gustav C. Gressel, senior policy fellow at the European Council on Foreign Relations, told Caleb that “producers need to charge the expansion of facilities [to] someone.” Production is a considerable challenge, he said, and costs include “new staff, new machinery, new buildings.”

Chemical imbalance: “Second, there is a supply crunch on chemicals for charges and propellant,” Gressel said. “TNT is not produced in the U.S. anymore. Many chemicals used in the process of making powder are not produced in the EU because of environmental hazards. So, few supplies meet high demand.”

Festering problem: Gressel hinted that chemical production facilities in places like Bosnia and Albania could help alleviate the propellant shortage. However, like expanding production of other war materials, “it takes time.”

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WHAT’S THE FUTURE OF WARFARE? A $400 drone killing a $2 million tank. Facing an enemy superior in troops and armor, Ukraine’s defenders are holding on with the help of tiny drones flown by operators like Sergeant Yegor Firsov that, for a few hundred dollars, can deliver an explosive charge capable of destroying a Russian tank worth more than $2 million.

The FPV (first-person view) drones used in such strikes are equipped with onboard cameras that enable skilled operators like Firsov to direct them to their targets with pinpoint accuracy. Others are watching, and learning, from a technology that is giving early adopters an asymmetric advantage against established methods of warfare.

Read Veronika Melkozerova’s fascinating account from Kyiv here.

SLOVAKIA ENDS MILITARY AID: The country’s new prime minister, Robert Fico, promised to stop military support to Ukraine in his first major announcement following his return to political office. More here.

GAUNTLET THROWN: Lithuania’s Foreign Minister Gabrielius Landsbergis posted on X that the EU is nowhere near meeting its self-set target of getting a million rounds of ammunition into Ukraine: “The EU promised Ukraine 1,000,000 artillery rounds. So far, we have delivered only 300,000. Meanwhile, North Korea delivered 350,000 to Russia. We surely have the resources to outperform North Korea.”

THREE THINGS TO WATCH IN FRANCE’S DEFENSE BUDGET: MPs on the French National Assembly’s defense committee this week adopted amendments to the country’s 2024 budget. First, however, a caveat: Under French budget procedure, lawmakers will need to greenlight them again in the plenary to see them included in the legislature’s version of the bill.

Aid to Ukraine: As anticipated, several political groups approved the creation of a new €200 million fund for military aid to Ukraine. For that to happen, however, the government will need to figure out how to finance it — as according to the seven-year military planning law, cash to help Kyiv cannot be taken from the overall €47.2 billion defense budget.

“We’re waiting for a commitment from the government to go and find €200 million,” Anne Genetet, an MP from Emmanuel Macron’s Renaissance Party, told Laura. “The armed forces minister backs us, but he needs to convince Bercy [meaning the finance ministry] and Matignon [a metonym for the prime minister’s office].”

Small-caliber industry: The defense committee also agreed to reshuffle money to invest in local production of small-caliber ammunition. France no longer manufactures that ammo — much to the dismay of some lawmakers, who argue it’s a sovereignty issue.

Saving for defense industry: Several lawmakers — including defense committee chair Thomas Gassilloud (Renaissance) and MP Jean-Louis Thiériot (Les Républicains)— are expected to put forward amendments in the plenary session on how to better finance the defense industry, according to a document seen by Morning Defense. They want “Livret A,” a savings account popular in France, to be able to fund defense contractors, specifically SMEs. The move is meant to compensate for the reluctance of banks to invest in weapons manufacturers.

Last but not least: The government, whose majority in the National Assembly is unstable, will likely use a constitutional tool to pass the budget without a parliamentary vote. The key question is whether they’ll do so before or after discussions on the defense budget.

AI, QUANTUM ROADMAP: Speaking at the launch of France’s new defense academy (more on this here), French Armed Forces Minister Sébastien Lecornu said his teams are working on a roadmap for military artificial intelligence and quantum. Announcements are expected by Christmas. 

UKRAINE WAR DRIVES SAAB EARNINGS: The Swedish firm published quarterly results, and it’s been a bumper year. Growth in all business areas increased for a 31 percent rise in total sales; net income, order intake and net liquidity all increased as well. The company even upgraded its already rosy outlook for sales growth to 19-23 percent from the previous 16-20 percent.

European boost, Middle East risk: Most sales come from Sweden, “the rest of Europe” and North America, according to the report, with the largest increase coming from Europe. “Geopolitical tensions are impacting our industry and driving the largest increase in defence investments in the last 30 years, particularly in Europe,” Saab President and CEO Micael Johansson said. The company has, however, identified a supply chain risk due to the war in the Middle East, the report reads, noting that the Swedish company has contingency plans and is in close contact with suppliers.

THANKS TO: Jan Cienski and Zoya Sheftalovich.

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