There is a dispute behind the scenes of NATO – Finland chose its side

During the NATO summit in Ankara, a competition has started among the allied countries for two different models, the aim of which is to speed up defense investments and respond to Europe’s growing security challenges.

The United Kingdom’s Multilateral Defense Mechanism (MDM) and the Defense, Security and Resilience Bank (DSRB) promoted by Canada and Luxembourg are in opposition.

Finland has positioned itself to support the British model. According to a joint statement published on Monday, Finland, the United Kingdom, the Netherlands and Poland have made significant progress in the preparation of the MDM mechanism and aim to implement it by 2027.

Two different models

There are significant differences between the two projects in terms of how to increase defense investments and what role public money plays in them.

Great Britain’s MDM is not an actual bank, but a cooperation mechanism between member countries. Its purpose is to coordinate defense acquisitions, combine demand and reduce the cost of acquiring weapon systems. According to the British government, European defense procurement is currently too fragmented, slow and expensive.

British Chancellor of the Exchequer Rachel Reeves announced on Monday £400m in funding to support the establishment of the MDM. The goal is to develop common procurement models, increase defense investments and strengthen the allies’ critical capabilities.

The Canada-Luxembourg-led DSRB, on the other hand, would be a new type of multilateral financial institution. Its purpose is to provide funding for defense and resilience projects and to attract private capital to sectors that commercial financiers have traditionally approached with reservations.

Canada has held technical negotiations with more than a dozen potential member countries in Montreal. According to Reuters, the Prime Minister Mark Carneyn is expected to announce about ten founding members at the Ankara summit. At the same time, Canada has tried to attract especially European AAA credit rating countries to lower the bank’s financing costs.

Finland chose its side

Finland belongs to the core group of the MDM project together with Great Britain, Poland and the Netherlands.

The Ministry of Finance and the Ministry of Defense already announced in March that Finland and a number of other NATO countries are jointly examining the establishment of a new financing mechanism. On Monday, Finland, Great Britain, the Netherlands and Poland issued a joint statement on the development of a defense financing mechanism.

In their joint statement, the countries emphasized that the changed security environment and Russia’s war of aggression in Ukraine require closer cooperation than before. The statement also assured that support to Ukraine will continue.

The four countries announced that they would start the treaty negotiations on a fast schedule. The purpose is to start detailed planning work already during the fall and put the mechanism into use in 2027, taking into account the ratification processes of the member countries.

According to the statement, MDM’s goal is to increase defense investments, speed up joint procurement and increase the overall demand for critical defense capabilities. The idea is to create economies of scale that enable allies to meet their military needs more efficiently than at present.

Criticism of the Canadian model

Although the new defense financing models have received support from several governments and defense industry players, they have also aroused opposition.

A critical group of non-governmental organizations, economists and human rights activists say the Canadian-run defense bank amounts to an expansion of the infrastructure for warfare without sufficient public debate or citizen mandate.

The Canadian-run DSRB has also come under fire because the bank aims to use public funds to reduce the risks of private defense investments.

According to critics, the project creates a situation where the risks of investors and defense companies are transferred to taxpayers. If weapons development projects fail or suffer losses, the costs may end up being paid by the public sector. Instead, potential profits would remain with company owners and investors.

According to critics, this distorts the market and favors the defense industry with the support of public power. According to them, the same public funding could be used, for example, for climate investments, infrastructure or social services.

However, from the supporters’ point of view, the defense sector suffers from a long-term investment deficit, which the private market alone cannot fix. This is why new financial arrangements are needed.

Competition for influence

The competition between MDM and DSRB reflects a broader debate about how NATO countries and European allies will finance their defense in the coming decades.

The British model emphasizes joint procurement and coordination of cooperation, while the Canadian model is built around a new international financial institution.

The Ankara summit may become decisive for which approach will gain wider support among NATO countries.