EU officials flag vulnerabilities to foreign control in defence sector

Not all European Union members have enacted national policies for screening foreign direct investments in their critical industries, hobbling attempts at fostering an integrated defence supply chain for the bloc, according to a European Defence Agency official.

Agency officials diagnosed the problem during a study of defence-industrial strategies published by member countries that concluded over the summer, Defense News reports.

Pieter Taal, the head of the EDA's industry strategy and EU policies unit, said the lack of control policies when it comes to non-EU companies buying stakes in potentially crucial suppliers remains a "complicating factor".

Depending on the foreign investor, external control of key companies could directly challenge the vision of Europe's strategic autonomy, he told reporters in an October 26 video call from Brussels.

Roughly half of the 27 EU members lack requisite screening policies, Taal said. That is because setting up control mechanisms is each nation's prerogative, he added.

Some may find them needless, others have yet to enact them, Taal explained.

Vulnerabilities in critical supply chains are a major concern on both sides of the Atlantic. Pentagon officials have long worried about Chinese access, in particular, to critical nodes in the defence-industrial base that contribute to advanced weapon systems. The fear is malicious actors could introduce manipulated parts into the supply chain, or steal trade secrets.

But simply discovering foreign-controlled lurkers in the multilayered web of the defence industry has turned out to be a thorny task in its own right.

The European Commission flagged Russian and Belarusian foreign direct investment in Europe's industrial landscape in the spring following Moscow's attack on Ukraine.

"In the current circumstances, there is a significantly heightened risk that FDI by Russian and Belarusian investors may pose a threat to security and public order," commission officials wrote in a note to member states. "These risks may be exacerbated by the amount of Russian investments in the EU and the intensity of prior business relations between EU and Russian companies," he said.

Of the 27 member states, 18 have registered with the commission their existence of a national policy regime covering the screening of foreign direct investments, according to a list published by the EU.

Those without such policies should "urgently" create them and, in the meantime, use other legal avenues to ward off malicious foreign investments that could leave the bloc as a whole vulnerable, according to the commission document.