Häkkänen: A huge opportunity opens up for Finnish companies – “There’s a lot of positives in that now”

Ukraine will receive the first tranche of the 90 billion euro loan granted by the EU in June. High representative of the EU’s foreign and security policy Kaja Kalla said on Tuesday in his press conference after the meeting of EU defense ministers that the first funds to be given will be directed to drones.

Defense secretary Antti Häkkänen (kok) said after the meeting of defense ministers that the focus of aid to Ukraine is shifting from stock handing over to long-term industrial cooperation, which creates an opportunity for Finnish companies as well.

“Not so much stock transfers anymore, but bilateral and multilateral industrial projects,” describes Häkkänen.

According to the Minister of Defense, Finland is moving to industrial cooperation with Ukraine in drones and other unmanned systems, but other types of cooperation are also being sought.

“For example, Ukraine has had a very good ability to cheaply and mass-produce missiles and long-range surveillance capability”, i.e. the ability to strike deep into the enemy’s rear.

According to Häkkänen, these are currently being evaluated.

“There are a lot of positives in that now,” says the minister.

Häkkänen highlights in particular Iceyen, Patrian, The message and Forcitinaround which Finland aims to build extensive European procurement rings.

According to Häkkänen, there is growth potential especially in unmanned systems and drone production, where, according to the minister, the Finnish business field is in transition.

“There are traditional players, but also a lot of small new promising companies. We have to build a drone industry ecosystem in Finland that could work with Ukrainian companies.”

The goal is for Finnish and Ukrainian companies to cooperate even more closely in the future, also with regard to possible production in Finland. “This is just taking shape,” describes Häkkänen.

Industrial cooperation related to missiles is also under evaluation. According to Häkkänen, several countries are currently figuring out how missiles related to the critical capabilities of the United States could be produced more than before in Europe and also in Finland. Solutions are sought both in cooperation with Ukraine and in cooperation with American arms industry companies.

Bottlenecks of two theaters of war

The situation in Europe is overshadowed by the simultaneous Russian war of aggression in Ukraine and the crisis in the Middle East. According to Häkkänen, the problem is stark: the defense industrial capacity of NATO countries is not enough for two large war theaters.

“If there are two major military conflicts in which the West and NATO are supporting, the capacity is not sufficient to deal with such a situation,” says Häkkänen.

According to the minister, the United States already warned about this last fall, when it was communicated at the defense minister level that simultaneous crises are a possible scenario – and now it has come true.

The situation is complicated by the fact that, according to Häkkänen, Russia, Iran, China and North Korea work in parallel and are able to take advantage of Europe’s capacity problems.

According to Häkkänen, in the longer term, the tensions in the Pacific and the Indo-Pacific region may escalate in a way that is reflected in Europe.

“The Americans have communicated quite clearly that Europe needs to have a stronger defense and defense industry for such situations,” says Häkkänen.

According to Häkkänen, NATO should have a strong American and a strong European defense industrial capacity at the same time, which can withstand situations where stocks are depleted in one war theater, but defense readiness must be maintained in Europe.

“For us Finns, this is crystal clear”, states Häkkänen. Therefore, Finland is currently looking for solutions to increase the industrial defense capacity either in the Nordic countries or in Finland.

Price and scale are decisive

Although the European defense industry is growing, according to Häkkänen, it still lags behind Russia both in terms of production scale and unit costs.

Häkkänen says that the biggest problems of the European defense industry are related to too expensive production, fragmented decision-making, scarce incentive funding and fragmented markets.

According to the minister, the key to the solution lies in the member countries.

“The member countries are at the center here, and the defense ministers of the member countries have a key influence on how domestic industrial capacity or cooperation with other countries is actually done,” says Häkkänen.

According to him, Finland has shown that results can be achieved with long-term commitments. Examples are Patria’s joint ventures, Iceye’s satellite sales, and Forcit’s TNT factory, which was created with a 12-year order base agreement.

“It wouldn’t have happened if we had just placed a normal order,” says Häkkänen about the Forcit factory.

According to Häkkänen, the problem at the European level is that each country still has to build its projects separately and look for buyers on a case-by-case basis. At the same time, too little EU incentive money is available.

“At the moment, it’s really scarce,” Häkkänen states.

Häkkänen names the incompleteness of regulation and the common defense market as a problem at the EU level. He emphasizes deregulation and fair competition so that SMEs can also participate.

“If Europe does not make this defense industry market, this will not be able to stand on its own two feet – and neither will European defense,” says Häkkänen.

Finland is like an island

Häkkänen emphasizes military mobility and the large infrastructure investments needed for it as one of the critical issues for Finland.

“We are practically like an island during exceptional circumstances.”

It is for this reason that Häkkänen hopes that Finland will receive significant EU resources for military mobility projects in the next EU funding period. It is especially about track width projects and strengthening of bridges, which secure the transfer of troops and equipment in a crisis situation.

In Finland, the resources for the projects have already been negotiated in the framework scramble, and now the eyes are on the EU.

“We are currently planning the track widths, but we hope that we will then get large resources for them,” says Häkkänen.

He says that he discussed the matter with several ministers and the EU defense commissioner Andrius Kubiliuksen and the Vice-President of the Commission Henna Virkkunen with.