4 Ways the US Funding Surge is Changing the Defence Sector

The biggest questions raised by last month’s decision by the US Congress to release defence spending for its allies.

4 Ways the US Funding Surge is Changing the Defence Sector

Now that the US Congress has finally agreed to release funds for the defence of Ukraine, Israel, and Taiwan, arms manufacturers are once again busy restocking depleted ammunition reserves or shipping orders out the desperate soldiers on the front lines.

However, the arrival of such a significant defence procurement budget to three countries in real need of bolstering their armed forces is having a significant impact on arms markets.

Here are the four ways that the US funding surge is changing the defence sector.

1. Raw Material Dependency

While much of the support funds for America’s allies will be spent inside its own industrial arms complex, some of the key raw materials needed to manufacture modern weaponry is sourced from less-friendly nations. For example, China has a near monopoly on the extraction and processing of rare earth elements essential for building the most advanced hardware. More than 400 kilos of rare earths are needed to run an F-35 fighter while a Virginia-class submarine needs ten times more.

US supplies of titanium, needed for the more durable metal components, such as tank armour and landing gear, is largely sourced from Russia.

To learn more about this topic read: Defence Industry Looks to Secure ‘Friendlier’ Raw Material Supplies or Europe’s Rare Earth Element Self-Sufficiency Challenge

While efforts are being made to correct this situation, such as opening rare earth mines and processing plants inside the US, the change will take a generation before self-sufficiency is achieved.

2. Changing Defence Requirements

The fighting in Ukraine has shown the world that trench warfare is still relevant in the 21st century. It has also proven the importance of drones in surveillance, artillery spotting, and tank busting roles.

The war has also highlighted the power and effectiveness of some stalwarts of the defence markets, driving up demand for Javelin missile systems, the HIMARS light multiple rocket launcher, and Stinger anti-aircraft missiles.

This is alongside the solid demand for other munitions where global stocks have fallen exceptionally low, such as artillery shells and mortar rounds.

As Mark Montgomery, a senior fellow at the Foundation for Defense of Democracies noted, “We’re going to be selling 155 mm (shells) like drunken sailor for a few years.”

3. Strengthen Allied Cooperation

In geo-politics, nothing makes a stronger friendship than a common enemy. And with Russia and China both adopting adversarial policies, the option to team up with like-minded countries for mutual defence has already seen NATO expansion.

Other more localised projects have now been given a boost with the Congress’s release of funds. These include:

· German assistance in production of Patriot air defence components.

· Turkish finance for a manufacturing facility for 155mm artillery shells in Texas.

· Australian co-production of guided rockets.

· The development of glide-phase interceptors with Japan.

4. Long-term and Near-term Strategy

The 2020s have started in a tumultuous manner. Knowing America’s political division, Taiwan is desperate for self-defence capabilities, Israel has its hands full in Gaza while bracing itself for attack from Arab neighbours, Houthi rebels are continuing their attacks in the Red Sea, and the war in Ukraine shows no sign of stopping until both sides are bled white.

This has left military chiefs with a quandary. Should they fix these immediate problems with arms spending to bolster these relevant defence shortages, or should they look to the problems that may arise ten years from now?

As Seth Jones, a senior vice president at the Center for Strategic and International Studies stated recently, “There are going to have to be some trade-offs between preparing for a near-term fight and near-term deterrence and probably making some trade-offs on some next-generation weapons systems.”

Today’s problems seem extremely pressing, but there are so many area of next-generation weaponry which could be game-changing in how war is conducted. Autonomous drones and military hardware, satellite communication and cyber security, laser weaponry, and augmented human robotics which enable soldiers to carry more, self-cooling/heating combat gear etc.

“Where can we look within the budget, and say, wouldn’t we be better to spend more money on these things that we really do need?” asks Adam Smith, a member of the House Armed Services Committee. “So, before I get into a discussion about ‘Gosh, it’d be great if we had another $50 billion,’ where are we spending the money that we have? I think that’s the first question.”

For while the defence industry figures out what is needed, and what will be needed in the future, and how to secure parts and raw materials, and organise logistics. It remains important to consider where the money is coming from and which way the wind is blowing in Washington.

The answer to that question will be known after the US Presidential elections in November.

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