EU set to shut UK and US out of defence fund

The European Union (EU) will on 13 June present its new $15.3 billion defence fund, but conditions for taking part will shut out ‘third countries’ including post-Brexit Britain and the US, officials have told AFP.

The European Defence Fund (EDF) is a major plank of the bloc's strategy to boost its ability to guarantee its own security, as it frets about the threat from Russia and the US' apparent ambivalence under President Donald Trump.

The money it offers for research and development when it starts in 2021 will only be available to EU member states – not Britain, which will have left by then, and not the US.

To qualify for EDF funding, ‘companies will have to be based in the European Union, have their infrastructure in the European Union and above all, decision-making cannot be controlled by an entity based outside the European Union,' an EU official told AFP, speaking on condition of anonymity.

This means a European subsidiary of a US defence manufacturer for example could not receive financing from the EDF.

These conditions will also apply to Britain, which is leaving the bloc in March 2019, another official confirmed to AFP – unless London negotiates a special defence cooperation deal.

This is despite Britain saying it wants security cooperation with the EU to be a key part of the two sides' future relationship.

The second official said: ‘Countries that are not members of the EU and the EEA (European Economic Area) will not be associated to the Fund unless a specific agreement is concluded to that aim. The programme is designed to apply as of 1 January 2021 and therefore for a Union of 27 Member States.’

Since the EU launched its defence cooperation pact in December 2017, there have been US concerns that it would become a protectionist vehicle used to shield European defence companies such as France's Dassault from American competition.

But Brussels insists there is no unfairness, with one official saying: ‘It is normal that European money goes to European companies. These conditions are not discriminatory. This is about reciprocity. To benefit from US funds, firms have to be based in the US, exclusively employ American personnel and no information can go back to the parent company if it is not based in the United States.’

European officials say the EDF will help free the bloc from dependence on the US and add to its ‘strategic autonomy.’

The EU has given the EDF a budget of $15.3 billion over the period 2021-2027, including $4.8 billion for research and $10.5 billion for developing military capabilities.

France hopes to get finance for a military drone project it is working on with Germany, Italy and Spain, French Defence Minister Florence Parly told AFP.

Part of the rationale for the EDF and European defence cooperation more broadly is to get EU countries to spend more efficiently and effectively.

One of the EU officials said: ‘Currently 80% of research and development in the European Union is done on a national basis. The result is 173 weapons systems that are not inter-operable. We cannot let things go on like this.’

Trump helped get the long-delayed concept of a ‘Europe of defence’ off the ground with his repeated verbal attacks on allies and hinting the US may no longer be willing to guarantee their security as it has since the end of World War II.

But Washington is starting to worry about European ambitions and is pressing them more and more openly to buy American as they try to hit their NATO commitment to spend 2% of GDP on defence by 2024.

A senior NATO diplomatic source said: ‘The pressure applied by the United States to buy American equipment is becoming a problem.’