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Interview

``Türkiye Gains Attractiveness as a Trusted Partner, not Just to the Turkish Government, but to European Governments in an Overall Growing European Defense Industrial Context``

In this interview, ASD Secretary-General Jan PIE discusses the major challenges ahead in terms of engaging in a public discussion about what the defense community is all about.

Date: Issue 127 - December 2023 Update: February 23, 2024

Defence Turkey: Representing the Aerospace, Security and Defense Industries in Europe with the objective of promoting and supporting the competitive development of the sector, ASD comprises some of Europe’s largest defense companies. So, how do you assess the competitiveness of the European defense industry in the global market today? 

Jan PIE: Firstly I think it is rather easy to say that the European defense industry is a very competitive industry. I think the evidence is demonstrated through the export rates as you can see that the huge part of the turnover of the European defense industry actually is exports, and you wouldn't be able to export unless you were competitive. So, I think this is evidence that it is indeed competitive. The problem of the challenge for the European defense industry is not the competitiveness today, but of tomorrow, and this is really based on the fact that we are competitive today based on investments made in the past. Because when you really drive competitiveness where you develop where you innovate, etc. this is through new programs, and we had plenty of new programs a long time ago, but recently we haven't had too many and this means that the competitiveness for the future is really at stake. 

Defence Turkey: How will EU sanctions related to the ongoing Russia-Ukraine conflict affect the European Defense Industry and what are its possible consequences for the industry in the near future? What are the lessons learned here?

Jan PIE: On sanctions it may be difficult for me to give you more insight. So far on sanctions there is no ASD formal response or requests towards the Commission on anything. First of all, as an organization, we fully support all sanctions coming from the EU. So, we wouldn't question any sanctions, it's more about being able to ensure that you actually apply everything for industry. But I haven't picked up that we are affected negatively by the sanctions so far where I see that there could be effects. Generally speaking, for industry, the impact would certainly be on the export to some countries. Maybe there could be import sanctions from Russia, perhaps on certain materials, etc. that would be needed for industry that could distort the supply chain. But the sanctions so far have not had a major impact on the European defense industry. 

For the second part of your question, first of all, before we speak about lessons learned from the war, we need to see where we all started from and where we are heading. I think one of the things that I’ll start my response before the war, and we are coming from a situation where the European defense industry is very fragmented. We have numerous different options for land vehicles for naval vehicles, etc. Whereas there in terms of platforms we might end up with 15-16 different platforms with which the US would have won. This is very bad from a cost perspective, it’s very bad from an interoperability perspective, it’s very bad in terms of whether you want to lend materials from one to another, anyway you want to cooperate. This is just bad. The fragmented situation is really not helpful. At the same time, we're also coming from a situation where Europe and US as a part of the global economy is on a path where our party is shrinking constantly. This is a, I don't know whether one should call it the long-term process, it happens over a number of decades, but if you look at the 1980s, 75% of the global GDP was made through Europe and the US. If you look at the forecast for 2050 that number (75%) is down to 45%. So, it's a massive loss of the European and US common size of the global GDP and of course it means that you have a growth somewhere else. So, the growth is obviously the on the Asian side; you have the growth in China you have the growth in India you have growth in a number of different countries and that growth is simply out growing what we have as far as growth in Europe and the US. 

At the same time maybe, I should add that as well, this growth is not just to growth in demographic numbers. It’s a growth in real economics, which means that these numbers are where you will find the investments in R&D where you will have the innovative landscape. This is where you will invest in new technologies, artificial intelligence, data computing, etc., etc. and with all of that if you think about what really is building the competitiveness for the future, who are we up against? Of course, it is an alarming signal that you become a smaller and smaller player on the global market that is becoming increasingly bigger and bigger. We can look at the numbers, I think we have some interesting examples. The common European defense spending before the war was roughly at the same level as the Chinese, and this is now in 2020. Only 30 years ago the Chinese were at the almost at a very much lower level, and they've climbed up to the level of Europe in 30 years and their trend is peaking very much upwards and the European trend has been very flat. Then we have the US operating at 3.5-4 times the size of these budgets, obviously at a totally different level. But for China to be at crossroads with Europe as we speak, China is only investing 1.7% roughly, it's difficult with Chinese numbers, but these are pretty close numbers 1.7% of the Chinese GDP, and they are at the same level as Europe. Now, if you apply then some mathematics and you realize that the Chinese economy by 2050 is forecasted to be 50% bigger than the US and at the same time, if China would want to increase the 1.7% GDP, they could go to 3.5%, they could go to 4% somewhere around where you have the US and Russia today. You could very well find China to be at least the second biggest spender, but maybe even at the same level as the US by the midcentury by 2050.

Then one could think are there any reasons to believe that this could happen? Well, let's look at the global situation, the geopolitical situation, we have the tensions around the Eastern side, China, Taiwan, South Chinese Sea, etc. and if China is growing like that, and they're building as they state openly, someday will take care of the Taiwan issue even if they have to use military power. If they want to do that further on, of course they will have the muscles and the resources to do so. And if you look at the US, I mean the constraint that the war has now imposed on Europe and the US together to support Ukraine, one could imagine because where we are really, I mean struggling with being able to support Ukraine against one country, Russia. If the US would be occupied towards the Asian front, towards something going on in China and Taiwan and then you would have a conflict in the European area, then you can really see that the US would not have the capacities to help out on the European conflict. I think the US has warned us constantly before the outbreak of the war. Europe, take care of your agenda. You need to be better at your own resources. You need to be better at handling conflicts in your own neighborhood. 

So, this is where we are coming from, and the medicine that we had in place already before the outbreak of the war, the medicine for what I call the sickness in the system and the sickness being that we are fragmented and that we've done so little defense industry cooperation in Europe, so the EDF (European Defense Fund) is supposed to be a catalyst for cooperation. This is the medicine for that sickness. The EDF is European money as we speak. €8.5 billion invested in common projects where you cover the research phase, the development phase of the market, uptake all of it from the cradle to the grave of a product. If you do that together with a number of countries, a number of companies and then you can get financing from the EDF. So, it incentivizes common European projects and the reason why it covers from the cradle to the grave is simply that when we start a discussion between your resources and mine and say OK, we should have only one platform but we have two so you can keep yours, but I need to keep mine. That would be a very complex discussion, a difficult discussion between member states. It would be easier if we agreed that OK, we have what we have but the future capabilities that we will need, none of us has it today. Could we develop those together?  Because we know as well that every new generation of technological platforms will be more expensive than the one in the past. It will be more capable than the one in the past, but we are simply looking at the global trends that were just addressed. We are all aware when I say we in this perspective, I’m not just speaking on the all the member states in Europe, as well as a fully aware that none of the European member states are up to handling this challenge alone. We need to start cooperating. This is where you should see the EDF. 

Then the war breaks out and then the war shows us what we have. First of all, we have a peacetime economy with peacetime structures. We have a peace trans time military capability and that goes for the defense industry as well. We have very nice technologies but when you start consuming those technologies in volumes then we don't have the production capacity to fill the stocks. Now it’s been mostly about ammunition in the beginning of the war, but now we're going to tanks and soon we will have maybe combat aircraft as well. If you put the battle tank on the battlefield, if the tank is destroyed, do you intended just to give up or do you intend to send the next one?  So now we can actually continue what we started. Engaging with battle tanks and then combat aircraft etc. can continue to support Ukraine with the material that is lost as well. Including the training and services and maintenance and everything that is needed. Here simply, we don't have the capacities. So now Europe is beefing up everything it can. There is a number of initiatives on the member state level on the European Commission level. They all have different acronyms. The Act in Support of Ammunition Production (ASAP) is about supporting ammunition production by supporting common procurement. It will be a more long-term development of the European Defense Industrial base, all with a common goal to be better at what we should do much quicker, much faster. 

One of the lessons learned is obviously that we are set up in a peacetime economy and peacetime situation, and then we cannot respond to wartime threats. So, our awareness level and preparedness level is far too low. I think one of the key challenges after the war would be what is the new balance. If we can deliver, if we can ramp up dramatically the defense industry production to support Ukraine if there is peace around the corner, be it to two years, three years, five years. Whenever this happens, what would be the new balance? Because then Europe is again about to bring down to know it’s not a war anymore. You need to bring down the production capacity to something. What is this new something? Because what we know is it won't be the same low level as we had. Because then we would be in the same situation as before the war. If we go for a mid-level somewhere, how do you do that? Either you produce a lot to just stockpile everything, or you have some sort of quick response mechanism where you can ramp up production quickly. Production quickly is also a lesson learned. You need the skills, you need the competences, you need the facilities, you need the engines, the tools. You need the technologies and all of them, you need the full supply chain. So, if a company and OEM is saying I can increase my production capacity by 100%, it means the full supply chain of the company is likely to have to do the same and when five different companies in similar areas are to ramping up then they realized that they were all talking to the same sub-supplier somewhere in the system, which becomes an increasingly important bottleneck for all. So, some sort of new mechanism would have to be found and I think a major challenge before we get to that news, I think that new balance is indeed a very big challenge. 

Maybe a major challenge before that new balance is found, a major challenge is that the crisis mechanism tools that we use today with all of these new instruments and all of the increased defense budgets, etc. does not lead automatically to a situation that is even worse for the next crisis, which it can be. Because if the money that we now try to flood into the system, if that money doesn't find its way to the European Defense industrial base simply because the production can't be ramped up in the speed that we're asking for the money could be invested in buying US or South Korea etc. technologies, which means yes, you help Ukraine here and now, but drawing a new non-EU technology into the European market that you will probably have to live with for another 10 or 15 years or 20 years or so. Because you can't change from day to day. So, what is important now is that the extra money is not being used to beef up the non-European Defense industrial base, but the European one. That's tricky, it's really a balance. 

So, I think in terms of major challenges, what has the war taught us? The awareness is that preparedness was absolutely too low. The thing you can't imagine happening will happen. It’s just a matter of time. When it will happen and then you need to be prepared for that and that preparedness will have a cost. How do we deal with the acute situation ramping up production immediately? How do we do that without investing all the extra money in a non-European defense base, and how do we find the balance when the war is over? I think roughly there you have a number of challenges that we have to deal with. 

Defence Turkey: As you mentioned, the defense expenditure will be high, and investments will be made. Then what will happen in peacetime? This is one of the biggest challenges. So, for example, can dual-use components can be solution? Do you encourage companies or have a strategic view about dual-use products? Because dual-use technology is actually one of the main tools in the world right now especially in commercial aviation and healthcare. Do you have any mechanism or strategy about the utilization of dual-use technology?

Jan PIE: I think you are pointing at a very good direction here. I think dual-use is indeed something that one should think about, but ASD we don't have a direction or guidance for our members because this is really into the strategic thinking from the company perspective. So, the ownership of this challenge, how do I survive in this environment, is really for the CEO and the Board of Directors. Based on their product portfolio each company will decide where they can go and which direction they can take; they will find the way forward. But I think that you will see a number of companies trying to increase dual-use components because it makes sense to be ready to shift, to be able to use part of your production facilities in peacetime towards dual-use products that are being used in peacetime, but they can be quickly modified for military purposes as well. I think this would be excellent if you can have that in your portfolio. 

Defence Turkey: As you mentioned, there will be a big supply chain problem not only because of the war, but also on the commercial side. So how do you see the supply chain problems being solved in the future and also do you think that Türkiye can be a bridge in improving this issue?

Jan PIE:  For the supply chain problems, first of all, I think that the COVID pandemic revealed a number of problems that were brought up to the surface as we had the feeling that they would be there. But they made it very evident. You don't have to end up with a war to have true supply chain issues and we saw that with COVID. I think the next examples were with semiconductors and the automotive industry where there were delays on orders because simply, they couldn't get the product from China. This was a shipping problem, nothing else right? Then after COVID when there’s this war with Russia and Ukraine you have a no-flight zone over Russia. 

If you could ship from China then you could go with the big vessels, but you couldn't fly it because you can't fly over Russia, then you would have a major rerouting etc. So, you could see the supply chain issues being distorted by trade wars, by pandemics, by different kinds of shut-downs, and the globalization really comes with a cost as soon as something goes wrong. So just in time delivery is very fragile. This is clear. Secondly, you realize as well that there are a number of subcomponents as well as even lower levels of critical raw materials where you have non-European dependencies. That becomes very obvious. Some of these critical raw materials were delivered by Ukraine, not that easy to do, and some were delivered by Russia. So, it's tricky when Ukraine and Russia are at war. I think lessons learned from that is that one needs to really analyze their supply chain. You need to find out where you have critical dependencies, and you need to evaluate whether you are fine with having that dependency or whether you need to move the supply for whatever it might be to somewhere else. One solution could be that you completely move parts of your supply chain to another country, another region. Another solution could be a diversified supply chain so that you have more than one supplier and that you can play around with depending on where you have the crisis, etc. But I think it’s a huge awareness of the of the fragile supply chain set up that comes globalization and just in time delivery.  

Now the solutions, we have already touched upon those. I think Türkiye can play a role in bridging to a certain extent, some of these challenges. I think Türkiye from one perspective when we speak about the European Defense industrial base, we are often centered around the EU defense industrial base, which is obviously not the whole story. Because the UK is an important component, Türkiye is an important component etc. But Türkiye is maybe not an EU member state, this is clear, but Türkiye is a NATO member and as a NATO member, I think Türkiye is very trusted when you have contracts with Türkiye. When you have industrial cooperation with Türkiye, I don't think that there are any industries that question whether or not Türkiye will deliver, whether there is a situation.

I think, imagine that we fully trust you as a supplier as well because I think that what we're doing now it's not about the EU or the US it is about the EU and the US. We need to face this challenge together, but if you have your supply chain partially in the US and if the US is drawn into a conflict towards Asia and that turns out to be a very serious conflict and if the US maybe at the same time in the conflict in the Middle East or whatever it might be and then Europe gets a problem at home and simply your supplier on the US side is running absolutely short of what they can deliver because of the big borders from the US government for the conflict in the Asia. You might find a situation where even a very trusted partner can't deliver anymore because it is simply the demand side is bigger than the supply side. This could happen and from that perspective I think that having suppliers in Europe as a geography, at least you get rid of these problems with the transport and things like that for goods. So, you will you minimize those problems. You still have, I mean the demand on the supply side, you still have those if there’s an unbalance you still have a problem but at least to get rid of the transportation across the Atlantic and so on. I think Türkiye can be a trusted partner, I think it can play on the fact that it’s a NATO country and I think from that perspective Türkiye could be a bridge outside of the NATO community as well. 

Defence Turkey: So, from your perspective, what are the business opportunities and the challenges between Türkiye and Europe? Today, you know that there are some political issues which makes things a little bit harder. So, what is your opinion on this topic, can any program or event can be carried for Turkish companies to increase their awareness? You have mentioned some working groups and some events that have been organized so Turkish companies can show themselves. 

Jan PIE:  So, first of all, I think that is the best-case scenario all of these lessons learned now from the war leads to increased defense budgets. We see that temporarily, let's hope that this is something that is here to stay. Let's hope that the European countries find a new balance after the war, a new level of preparedness and the money for that new level is invested in the European Defense Industrial Base. If this is the case, the European Defense industrial base will grow. Would Türkiye be an EU member state? Of course, you would have the advantage of Türkiye also being able to fully participate in projects that are funded. So, I can’t escape from the fact that this is a disadvantage from that perspective, but having said that, I think first of all that the EDF is only one part of the overall growth and it's a small part of the overall growth. Most of the overall growth of the European defense investments would anyway be made by direct acquisitions and there will be bilateral solutions, trilateral solutions, etc. where Türkiye can effectively team up in any consortium if it's not an EU funded project. So, I think that Türkiye has all the possibilities to gain attractiveness as a trusted partner, not just to the Turkish government, but to European governments in an overall growing European defense industrial context. One should not focus and say that Türkiye is not an EU member, therefore it won't be. It has definitely a role to play here and how to increase the possibilities for Türkiye. I think that from the ASD perspective I’d be very interested to see what we can do. I mean what do we do as ASD? We do advocacy on the European level. We do advocacy in Montreal through ICCAIA to produce standards, so these are the three pillars. What we are exploring today with an ASD development plan is the kind of services that we could do for our members as well. And I think that we could look into a possible service where we start to create networking events together with the different members, such as we could do an industry day between the ASD industry and the non-EU industry and the EU industry. We could have a combined effort with the SASAD and ASD event where it could be a great networking opportunity. This has been discussed in the conferences today and I think I like the idea very much and I’m ready to explore in Brussels whether there would be an appetite amongst the European companies for such an event. 

Defence Turkey: As ASD you have some several prominent industry members such as MBDA, Airbus, and Leonardo. Are these companies selected by ASD or can any company be a member? As you know there are some big Turkish companies here, can they also apply for membership with ASD?

Jan PIE: Yes, indeed. Indeed, they can. So, it's not that we have selected them, we have what we call direct company members and then were National Associations. So, the direct company members they have all applied to become direct company members. Our statutes define the different categories of direct company members. You can have a major player in Türkiye apply for direct company membership in ASD and if they comply with the conditions in the statute, this is absolutely a possibility. If you want to be a direct company member in ASD you don't have to come from an EU country and this, I think you have evidence for that because we have Rolls Royce, we have BAE Systems all of them based in the UK direct company members of ASD. Normally we speak about companies with roughly 5,000 employees and up to become a direct company. 

Defence Turkey: What are the developments in technology, innovation and R&D studies of the defense industry in Europe? What might be the future trends? How does ASD provide support to its members and defense industry companies? How does it respond to members' needs?

Jan PIE: What I can say is that indeed we work on supporting the research agenda for our members, both on the defense side as well as on the commercial side. On the commercial side, its rather easy to see which technologies we speak about because there you have what we call destination 2050 which is a road map on how to decarbonize aviation from now on to 2050. And that roadmap is rather detailed about what the different instruments are and new technologies brought to the market, and what the effect of all of them will be. And then we work in order to make sure that the joint undertakings are industry friendly and funded to the extent needed to support these technologies. So, there we can outline technologies. On the defense side, we support the general research climate from the perspective that we work on the policies and the regulation, implementation of the EDF, the money, the envelope and all the components in it to make sure that this works for industry. But it is a bit more difficult to point out which are the technologies for the future. There I think the discussion is more between the different MODs and the prime contractors on what they believe. There is something called critical technologies that is obviously worked with in the EU and the EU has built up what they call an observatory for critical technologies, and this observatory is part of the of the Joint Research Committee which is monitoring which technologies might be critical for Europe in the future due to which criteria etc. But as you can imagine, that means also handling classified information, so it's not very easy for a trade association to have an insight into exactly where we are on those. So, I would say on critical technologies or future technologies, the ones that I’m aware of basically are on the overall areas such as, Cyber technologies, space technologies, all of that. Obviously more detailed. Then you have to be in the company, or you have to be in the JRC or in the Commission. Even sharing that kind of information with the Commission is sensitive for the company. 

Defence Turkey: Can you give us more information about EDF? How does the European Defense Fund work with the companies?

Jan PIE:  So, the EDF is progressing well. I think one of the key challenges for the EDF when it was put in place was to ensure that the call for tenders, when you have a response from those calls, but you don't find just German French Italian companies and that's it. Because would that have been the case then basically, what you would do is you would collect money all over Europe because taxpayer money is going into the European Defense Fund and then you give money to those countries where you already have a strong defense industrial base, and the rest are standing without return on investment. Which would mean that the EDF would not survive in the Parliament when it’s time to renew it. In the Parliament everybody really looks for ways to get their fair share of this investment. So, to break the custom that we have very national supply chains on the defense side where roughly as an average today, roughly 80% of the supply chains are national defense and in bigger countries like France and Germany, it’s up to 90%. We need to break that; we need to have what we call cross-border supply chains.

The EDF is delivering on that. The incentive in the EDF is cross-border cooperation. It’s delivering because I see the average of the calls responded to in 2022 consisted of nine countries and 22 legal entities. So, they can really see that the cross-border mechanism is actually functioning. And from that perspective, I can see generally speaking that the appetite from industry to respond to the EDF is huge. The cross-border component is really there. So now it remains to be seen because this is a very new thing. So, it remains to be seen when these projects are finalized that the market uptake is there as well. This is the last component that we don't yet know, but everything on the EDF looks good from the perspective that it will deliver. That being said we obviously also have shortcomings where ASD will have our concerns made heard when it comes to the next generation of the EDF 2.0 under the next MFF. Then we would want to see a bigger envelope and we would want to see some changes in the regulatory environment as well to make it more interesting and friendly than it is. But having said that we are not coming from a situation where say the EDF is not functional. No, we are coming from a situation where we are saying the industry appetite for the EDF is huge. So, I think it’s a very promising situation.

Defence Turkey: You have mentioned that the EDF, first and foremost, is established for European countries rather than for the US or other countries like South Korea.

Jan PIE:  So, the regulation in the EDF allows third country participation but a third country cannot first of all be funded. If you're a third-party country, if you're an industry headquartered in a third country, you can participate in a call, but you cannot have your part of the consortium refunded by the EU taxpayers money. So, this is the mechanism and secondly you can only participate in the call of course if you get access to a number of things. Therefore, there are special criteria as well to how IPRS are being handled. What you can do, what you cannot do, etc. So, a third-party country participation is possible, but obviously not at all at the same conditions as for EU member states. I think from my perspective I think that we will not see the day when EU funded projects with the funding can go to non-EU industry. This I think is not logical but as to the conditions for participating in EU funded calls there you have different conditions. For example, between the defense side of the portfolio and the commercial side of the portfolio. So of course, conditions can change depending on how you review one another. What is the common view between the EU and Türkiye? What are the different roles to play between the EU and the UK? After all, I believe, even if the EU is in a way in the center of Europe, I believe that the UK is still a part of Europe and will continue to be so. I believe that Türkiye is part of Europe and will continue to be so and these are very important flanks of Europe. So, I think the preconditions for participation in European programs is always up for discussion and this will be very much related to the trust between the EU members and non-EU different third countries. 

Defence Turkey: Given the growing global emphasis on environmental and social responsibility, we wonder how the European Defense Industry attempts to attain sustainability across its operations, technologies, and supply chains.

Jan PIE:  We have been active for a while on one part of the Sustainable Dossier. I mean sustainability as a concept is driven by these three ESG criteria where ‘E’ stands for environmental, ‘S’ stands for social, and ‘G’ stands for governance. Environmental is more or less self-explanatory decarbonized, get rid of chemicals etc. Social don't use child labor, take care of your employees, a number of things that you have to do correctly. You should not do any harm to the social community. Governance is about good governance. This is business ethics. This is about bribery, corruption etc. So, the ESG portfolio is there and now what has happened over a number of years starting maybe four or five years ago already is that the financial market actors, being banks, being financial institutes; they started to work with ESG criteria and to put in place what they call ESG labeled sustainable funds. And to do so they invented themselves what are the criteria to be seen as socially sustainable. Because it was easy to talk about the environmental part. There, you can see if you have an agenda to decarbonize etc. but on the social part, they invented themselves an interpretation that defense by nature is to be seen as a non-sustainable activity. 

Defense is all about destruction. Destroy the enemy, kill people, shoot down material whatever. So, we have had a huge movement in Europe that has been about the financial market, just turning the back on the defense industry due to seeing the industry as non-sustainable. The EDF took action, when we learned about these. We started lobbying heavily a couple of years ago. We brought it to the top of the of the EU institutions and we explained to the EU that on the top level, you put in place the European defense fund because you think you should boost the defense industrial base and then at the lower level, you start different files such as the taxonomy file and the ecolabel file where you in your preparatory work proposed that defense is seen as non-sustainable. This is the 180-degree contradictory with yourself. And those files were stopped at the EU level. But the thing is that the financial market actors, they are still, I mean, they're business driven. If they have problems, serious problems with NGOs… For example, exemplifying is easier, let’s say you have a bank. This bank is lending money to a defense company; an NGO is scrutinizing the portfolio of the bank and sees that you have the defense companies amongst your customers. Then the NGO starts lobby campaign against the bank on social media and the banks will say this is very difficult to defend yourself and when you start looking at it from a business perspective, I have one customer that gives me a headache. How big is that customer? Well, the defense component is one 0.5% of my lending portfolio but gives me a lot of headaches. Get rid of it, it's easier. So, the fact that we have banks that have closed down existing customers’ accounts, we've had banks that refused guarantees for new loans for defense companies. We have energy providers that refused to deliver green energy to companies because they are in the defense sector, and we have many examples of states that are acting in contradiction with themselves. Because at the top level, the Prime Minister or the Head of State, depending on the country, can say that investment in the defense sector is the most sustainable thing you can do because that’s part of the key enabler for defense capabilities, which again is a key enabler for military capabilities, which again is a key enabler for security. So, without the defense industry there’s no security. Look at your brain. What more proof do you need? 

Once you have the heads of states making those kinds of statements, you still have a number of states where they produced ecolabels and allow state-controlled entities to exclude defense just by nature. But just by default it still happens as we speak. I think one very interesting example we have; we have a German defense company that wants to go green… Because all coming back to your question, all the defense industry supports the ESG, but we need commonly agreed upon criteria. We can't have a financial sector inventing their own. So, we have this defense company in Germany that wants to go green. They find a green energy provider in Denmark and this green energy provider in Denmark is 51% state owned. So, the German company knocks on the door; ‘Hey guys, we want to go green. Can we buy energy from you’ and the energy provider looks at them and says, ‘Hey guys, you’re defense right? Sorry you can't buy from us.’ So, they turned them down. At the same time, the Danish government is placing an order with the very same German company for defense equipment. So, you see, the problem here is that Member states are not coherent with their own policies. They can have one level; they can say we need a defense industrial base and at another level they can say these guys are not sustainable. To me, I mean also in the NATO Industry Forum that took place last week, there was an expression from one panelist on an ESG panel that defense material can never be seen as ethically defendable. This is simply not ethical because it’s all about destruction and I think the problem with that is that you try to apply what is ethical on a product. Ethical is about what you do, it's not about what you produce. If you produce a knife and you use it to slice your bread, do you have an ethical problem? If you use the very same knife to stab your neighbor in the back, you might have an ethical problem but it's not the knife that is the ethical problem. It is what you do, right? If you build a tank and you are attacked by another country and you defend your citizens, do you have an ethical problem? I wouldn’t think so. I think you have an ethical problem if you don't defend your people. But if you build the very same tank and use it as an aggressor to invade another country, then you have a problem.  It’s the actions that are ethical and unethical, not products. 

By nature, I think the defense industry should not be excluded for being unethical. This is you can't use that on products. This you can use on actions, and I think we all know that most of the products that the defense industry is producing is there for deterrence for European deterrence and for exports to trusted partners. As this is a difficult world we live in and then you need to cooperate with trusted partners. So, in terms of ASD, what have we done? We have lobbied hard on the commission’s proposal on the taxonomy and ecolabel file. We were able to have those files aborted by the commission, so they're currently off the table. We continue to talk to financial market actors to try to convince them that they need to review how they handle the defense industry. And on the EU going green, I think more or less all of our companies have started seriously to do the transformation to go as green as you can. There’s a number of things you can do. You can see that many of them, I mean almost all now the bigger companies they have sustainability directors. They work with the plan to go green as much as they can, but in some cases, they can go green a lot. You can read about the production facilities. You can work with green energy in the production facilities. You can work with recycled materials, there’s a number of things, but at some point, you would come to the performance of a product where you say that simply get the balance here. If I go green on this product, it will have a negative impact on the performance. Then you have the balance between what can you do, and what are the capabilities. You can certainly put the battery in a battle tank, but you won't be an effective battle tank. So, that would have to be something where the balance is driven together with the member states in a discussion with the members. How far do you want to take this. Industry will have to be in the driver seat we have. We can't escape our responsibility. We have to push and go as green as we can. We have to recycle as much as we can. We have to do it, but we also have to point out that if I go green in this version of a product, it will not have the same capabilities. Of course, in certain cases, what we will strive for is to increase the capability as well. So definitely, industry is working on it. ASD has working groups greening defense and we have an environment commission on sustainability for the aviation sector.

Defence Turkey: You mentioned that since defense investments are increasing due to the increase in defense budgets there could be another challenge. Because you mentioned that in the UK or US there is public awareness and public support. But in Europe there is not much public support. So, do you have any plans to manage this situation? What you advise?  For example, in Türkiye, the public sentiment is very positive towards the defense industry. It is one of the most supported sectors among all institutions. How is the situation in Europe when you look at the broader spectrum?

Jan PIE:  I think the situation is the same if you go to France, but if you go to Germany, it’s a totally different opinion. If you go to Sweden, you had a totally different opinion before the war. Now it shifted a bit but not very much.  I think this is very interesting as well, for some reason, if you ask the public interviews, we've had a very big survey done with over 6,000 interviews across six member countries. If you ask the public about whether they support to have armed forces in the country, they will support it. Everyone wants to have a military. They can see that this is part of our security, but if you ask the public about whether they think you should have your own defense industrial base, then the public drops dramatically in certain countries. So, if you then enter into a discussion where you explain a little more and say OK, you want an army, do you want them to be equipped or not? Oh yes, they should be equipped. Ok if they should be equipped should it be European equipment or should it be non-European equipment? Nice if it’s European equipment of course. Why? Well, there’s a number of reasons for that. Ok, but how can you provide European equipment if you don't have a European defense industrial base? So, then people start to think. You need that process to convince them. 

So, I think that we are in for a major challenge in terms of engaging into a public discussion about what the defense community is all about. How will this serve society as a whole, and I think the industry needs to play a major role in that. We don't yet have the plan for it. But we have started to talk about in ASD, and we have started, we will build it. We will launch a new website for ASD around end of year. We are building up the storytelling, we will also say what is this sector all about. What are the added values that this sector brings to society. As we speak about the industry and added value, before we speak about these, we say, what are the challenges for the sector. After that, this is ASD, and this is how we work with these challenges. So, a totally new set up as a starting point to be able to do the storytelling. We hope that the storytelling we do on our web can be distributed to all ASD members. And the ASD members can do the re-storytelling throughout their channels so that the messages could go out in Brussels from ASD, in Türkiye through SASAD, in Paris through GIFAS, in Berlin through BDSV, in Sweden through SOFF etc.

Here I think I mean a good country to compare with is the US and the AIA (Aerospace Industries Association). Where the AIA is producing a lot of good material which they hand over, they meet with the trade unions. They meet with different organizations; they have industry days when they open the industry to the public as they come on and see what they do etc. So, they keep the dialogue, the public dialogue alive constantly, and they do that simply because they realize that if you don't talk about the issue, public support tends to drop. If you don't have public support and you want to suddenly add money into the system because you have a new situation, you don't get the money if you don't have public support. However, if you drop the budgetary level and then you have the public support, you get the money to pour into the system but this time you don't get the resources because you don't have the facilities. You don't have the engineers, all of that is missing. So, if you lose the technology, for example, if Europe would be out of a technology, let's say that Europe lost its technology to build a combat aircraft. This is not about to happen but assume that it would lose its capability to build combat aircraft and we would just buy American aircraft and then 30 years later we would realize there is a reason for us to rethink the strategy. We need to rebuild our aircraft. From the time you decide that you want to build those aircraft again until you have the first aircraft produced would be decades. This is what it would take to ramp up the system to start pouring in money to start creating the education to start the attractiveness for the youngsters to start. To start the research centers, the clusters. All of them before all of that delivery so that you can actually start thinking about the production