EU to exclude US, UK and Turkey from €150bn rearmament fund

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Arms companies from the US, UK and Turkey will be excluded from a new €150bn EU defence funding push unless their home countries sign defence and security pacts with Brussels.

The planned fund for capitals to spend on weapons would only be open to EU defence companies and those from third countries that have signed defence agreements with the bloc, according to a European Commission proposal put forward on Wednesday.

It would also exclude any advanced weapons systems upon which a third country had “design authority” — restrictions on its construction or use of particular components — or control over its eventual use.

That would exclude the US Patriot air and missile defence platform, which is manufactured by defence contractor RTX, and other US weapons systems where Washington has restrictions on where they can be used.

The policy is a victory for France and other countries that have demanded a “Buy European” approach to the continent’s defence investment push, amid fears over the long-term dependability of the US as a defence partner and supplier triggered by President Donald Trump.

At least 65 per cent of the cost of the products would need to be spent in the EU, Norway and Ukraine. The remainder could be spent on products from third countries that have signed a security pact.

“We have this opportunity to really build up the European defence industry,” said Kaja Kallas, the EU’s chief diplomat, adding that the war in Ukraine had demonstrated the importance of having weapons without foreign restrictions. “In crisis, your military really needs to have free hands.”

The UK has lobbied hard to be included in the initiative, particularly given its key role in a European “coalition of the willing” aimed at bolstering the continent’s defence capabilities. UK defence companies, including BAE Systems and Babcock International, are deeply integrated into the defence industry of EU countries such as Italy and Sweden.

If third countries such as the US, UK and Turkey wanted to participate in the initiative, they would need to sign a defence and security partnership with the EU.

Talks between London and Brussels on such a pact have begun but have become embroiled in demands for a larger EU-UK agreement that would also include controversial issues such as fishing rights and migration.

“We are working on having this defence and security partnership with the UK,” said Kallas. “I am really hoping that for the [EU-UK] summit in May we can have results . . . the understanding that we need to do more and do it together is there.”

The exclusion of the UK and Turkey will create big headaches for big European defence companies with close ties to producers or suppliers in those markets.

Asked about the UK’s position on the rules for the new EU fund on Tuesday, a British official said: “We stand ready to work together on European defence in the interests of wider European security to prevent fragmentation in European defence markets and to create legal structures to allow member states to partner with third countries.”

The move will cause significant consternation in Britain’s defence sector. One senior UK defence industry insider said it was a “considerable concern”, adding: “We see a huge amount of opportunity and it’s right the UK is seen as part of Europe. But if the EU — and especially France — is going to be transactional about this, it undermines the entire philosophy of a joint and unified Europe in defence and security terms.”

Previous French efforts to ringfence defence spending for EU companies only have met with stiff resistance from countries such as Germany, Italy, Sweden and the Netherlands that have close ties with non-EU defence producers.

The proposal needs to be approved by a majority of EU states.

Under the terms of the plan, EU countries would be able to spend 35 per cent of the loans on products using components from Norway, South Korea, Japan, Albania, Moldova, North Macedonia and Ukraine, officials said.

Additional reporting by Philip Georgiadis