Controlled ‘Europeanisation’? The KMW–Nexter merger and the Germany’s new strategy for the arms industry. OSW COMMENTARY NUMBER 180/26.08.2015

On 29 July a deal was signed in Paris concerning a merger between Krauss-Maffei Wegmann (KMW), Germany’s largest manufacturer of tanks, infantry fighting vehicles and artillery systems, and its French counterpart Nexter. The new holding formed as a result of the merger will be Europe’s largest producer of arms systems for land forces, comparable to the Airbus Group in the aerospace industry. While work on finalising the merger was underway, the German government was developing a new strategy for Germany’s arms industry, which was published on 9 June 2015. The strategy’s provisions show that German politicians, despite holding negative opinions on previous mergers between German arms companies and foreign businesses, have concluded that consolidation at the European level is nonetheless the only way to go. However, the strategy also states that the German government should exercise more influence than previously on the terms and conditions of any such consolidation. To this end, it identified key national technologies which will be supported and protected through various instruments, including also the conclusion of intergovernmental agreements on strategic defence co-operation. Such agreements may regulate questions such as the ownership structures of the new companies, the locations for developing technologies and for manufacturing products, subcontractors and exports of jointly developed arms and military equipment. In relation to the KMW–Nexter merger, such a deal between France and Germany is expected to be signed this autumn.

Ukraine, Russia and the EU. Breaking the deadlock in the Minsk process. CEPS Working Document No. 423 / June 2016

Although the Minsk process brought about a de-escalation of the conflict in Eastern Ukraine, not all of its 13 points have been implemented, including a ceasefire and withdrawal of heavy weaponry. In the absence of a military option, economic sanctions have become the core instrument of the EU and the US, to respond to Russia’s aggression. At the end of June 2016, when EU Heads of State and Government meet to discuss the extension of sanctions against Russia, they should bear in mind that Russia did not implement the commitments it took upon itself in the framework of the Minsk agreements. Given the persistent deadlock in the Ukraine crisis, the leaders of the EU ought to agree to prolong the sanctions against Russia, push for the renegotiation of the Minsk II agreement and widen the ‘Normandy format’ to include the US and bolster reforms in Ukraine.