Defense opportunities in Poland

According to a McKinsey report, Poland has “been growing continuously for almost a quarter century now,” and should continue to do so. With its policy of economic liberalization, the country can boast the largest economy in Central and Eastern Europe, and the eighth largest in the EU in terms of gross domestic product. Poland was the only EU nation to keep its economy out of recession during the 2008-2010 downturn. In short, Poland offers a strong market for US and European products. And, since it is a significant military ally, it is an especially strong market for aerospace and defense exports.

The White House claims that a ratified T-TIP (Transatlantic Trade and Investment Partnership Treaty — a trade agreement bedeviled by difficulty and currently expected to pass by 2020) will accelerate US-Polish trade, promoting six critical areas for US enterprise engagement in Poland. These are “infrastructure, green-building [sic], intelligent transportation systems, energy, defense, and information technology.” Promising sectors, all six, but defense arguably will eclipse the others.

Poland’s motivation

To be sure, Poland wants to upgrade its infrastructure, gain energy independence and promote sustainable building practices. However, these projects lose their urgency — indeed, perhaps even their importance — in the face of an existential threat.

Only a generation ago, Poland crawled out of the clutches of a crumbling Soviet empire, the memory of which must contribute to the country’s wariness. Russia, for its part, has recently revitalized Cold War anxieties and given Poland plenty of reasons for alarm. It illegally annexed Crimea in 2014, and continues an unofficial destabilization program in Ukraine. The Russian military stages massive military exercises in the Baltic Sea and elsewhere. These include large, unannounced drills — snap drills, in military parlance — which the United States and its European allies have not done since the end of the Cold War. Snap exercises are generally disavowed by the international community, but Russia takes advantage of a loophole in a security agreement that it signed with Western powers.

For its part, Russia claims to ramp up its military only to counter an increased NATO presence in what it sees as its sphere of influence. This claim, even if a pretense for armament, is not without merit: inherent in an arms race is the idea of mutual deterrence, with both parties trying to keep up with or outdo one another. Indeed, according to basic principles of game theory, if one’s enemy or potential enemy — and anyone not bound by alliance is a potential enemy — militarizes, one must do the same or risk inviting destruction. Such is the anarchic nature of international relations, all wishes for world peace to the contrary.

Poland has the ninth largest military of all NATO countries, and the largest of all Eastern and Central European countries, with approximately 100,000 active personnel. It stands, in effect, as NATO’s primary bulwark against Russian aggression, hypothetical or real. Even though other countries such as Belarus, Latvia and Lithuania lie between Poland and Russia, they are not seen as having sufficient military might to even begin to deter, much less repel a Russian invasion.

Poland’s right-wing Law and Justice Party (Prawo i Sprawiedliwość, in Polish, abbreviated PiS) is considered the most hawkish toward Russia of any European government, which may be part of the reason it so aggressively seeks to enhance its defense capabilities. Not waiting for T-TIP or anything else, Poland has embarked on an extensive program to upgrade the country’s military hardware, which consists primarily of Soviet-era production relics. “Security is a fundamental pillar of the U.S.-Poland bilateral relationship,” according to a fact sheet on US-Poland relations on The sheet goes on to describe a “10-year, $35 billion defense modernization program” that will turn Poland’s creaking military machine into a sleek, formidable component of NATO’s collective deterrence doctrine. Dubbed the Armed Forces Technical Modernization Program (TMP), the endeavor has “made Poland a bright spot in the European security landscape” and “will eventually make for a better equipped and more lethal Polish military,” according to CEPA.

A bittersweet business opportunity

The financial opportunities for US and European aerospace and defense manufacturers are as golden as the humanitarian implications are dire. A second arms race bodes poorly for geopolitical peace, while simultaneously offering huge commercial opportunities.

With all of this Polish money flowing into the US and EU defense sectors, a lot of companies will profit. Through primary players such as Lockheed Martin, Airbus and Boeing to secondary contractors like Adel Wiggins and Ontic and on down to tertiary suppliers such as Advanced Composites Inc. and ACT Aerospace, the contracts will infuse cash all the way through the supply chain and provide an arena for innovative companies to offer solutions.

Poland’s involvement in joint deterrence programs continues to expand. The country has committed to become a framework nation for NATO’s Very High Readiness Joint Task Force. The framework nation concept, introduced to NATO by Germany in 2013, involves cohesive multinational military units. Smaller armies could plug their remaining capabilities into an organizational backbone provided by a larger, framework nation. By providing such a framework, Poland will serve as a hub for a military consortium of specialist forces from various NATO members. In theory, this allows the proficiencies of each nation’s military to complement the others, resulting in a synergistic force more well-rounded than that which could be assembled by any one constituent member state. The scheme is also attractive because it distributes cost and human contribution, making a lower barrier to entry for small players. All of this, of course, is hypothetical; the framework concept has yet to be tested on the battlefield (one would hope, perhaps, that it never will have that opportunity).

The Very High Readiness Joint Task Force, as its name suggests, will deploy on short notice, and would serve as an initial onslaught in the event of actual war. Containing about 5,000 warfighters, the force will launch proactively following the first warnings and indicators of potential threats, before a crisis begins, to act as a deterrent to further escalation.

However, “funding issues and decision-making challenges” threaten to prevent the task force from becoming a reality, according to a March 2016 article in Atlantic Council. Originally scheduled for operational duty by early 2016, it remains conceptual as of late 2016. Indeed, the force’s struggles may reflect the fact that NATO itself is experiencing significant challenges. These include insufficient funding (five of NATO’s 28 member states meet their 2% of GDP defense spending commitment) and consensus-making difficulties in which member states have difficulty agreeing to and sustaining a coherent strategy. Despite such obstacles, an increasingly powerful and hungry Russia will almost certainly motivate NATO members to overcome their differences and invest heavily in collective and individual defense and deterrence.

In addition to its contribution to the joint task force, Poland has a NATO Force Integration Unit (NFIU), the role of which, according to NATO, is to “represent a visible and persistent NATO presence” and “facilitate the rapid deployment of Allied forces.” Poland does not limit its military partnerships to NATO. The country plays an active role in the Visegrad Group along with the Czech Republic, Slovakia and Hungary. It is a member of the up-and-coming Lithuania-Poland-Ukraine Brigade, and also of Operation Atlantic Resolve. Under the latter of these, Operation Atlantic Resolve, US military forces conduct training and security cooperation activities with Poland and other Eastern European states such as Latvia, Estonia and Bulgaria.

Specific opportunities for defense manufacturers 

The TMP was actually initiated not by PiS, but by the previous administration. The original TMP entailed 14 distinct defense acquisition programs; PiS, however, has reduced its scope to just four. The thinking behind this reduction, presumably, is that $35 billion spent on fewer programs will more substantially bolster the programs of focus. PiS’s revised TMP prioritizes the areas of air defense, cybersecurity, armored units and, finally, the less-defined category of procuring systems to address naval threats to Poland. According to Colonel Karol Dymanowski, head of Poland’s Armament Policy Department, these defense clusters will define “the niches in which the industry should operate,” including Poland’s international trading partners.

Missile proliferation in the Middle East and a rearming Russia have spurred Poland to the realization that it must develop a national air defense system. To be sure, the country envisions its air defense system as a component of NATO’s larger deterrence project. At the same time, aware of the volatile geopolitical landscape, Poland has decided that it needs the capacity to defend itself independently of allies and outside assistance.  Accordingly, the Polish government has drafted the three-prong Tarcza Polski, or Shield of Poland.

The Shield of Poland’s first tier of air defense uses anti-aircraft shoulder-fired Grom missiles. The Grom can also be truck-mounted in the quad Poprad system. Already, the Polish government has contracted Polish defense firm Pit Radwar to provide 79 Poprad systems to the tune of $273 million.

The second tier of the Shield relies on batteries of short-range conventional anti-aircraft missiles. Companies such as Diehl (Germany), RAFAEL (Germany) and Raytheon (USA) are reportedly competing for contracts.

In Tarcza Polski’s top tier, medium to long-range missiles will defend against incoming ballistic missiles, as well as strike at enemy targets. Reportedly, Lockheed-Martin, Israel’s SIBAT, and Raytheon seek to gain the bid; Poland is evaluating the merits of Lockheed’s MEADS, SIBAT’s Stunner and Raytheon’s PATRIOT. PATRIOT appears most likely to win out.

In addition to the Shield of Poland, the Polish military needs air power. The US and Poland signed an FMS (Foreign Military Sales) agreement for 40 Lockheed Martin AGM-158 cruise missiles; these are fired from an aircraft and have a range of 230 km. Poland plans to purchase “32 new attack helicopters” and “24 heavy-lift helicopters” according to a 2016 Congressional Research Service report. The Polish Air Force is rumored to seek aerial unmanned aircraft (drones) to supplement its manned aircraft. Additionally, some sources report Poland to be eyeing Eurofighter Typhoon fighter jets.

Cyberwarfare — presumably on the part of Russia or Russian-sponsored actors — has factored prominently into the Ukrainian conflict. Understandably, such attacks have impressed upon Poland the necessity of improving its cybersecurity defenses. Considering that cybersecurity entails a number of connected disciplines and technologies (encryption, cyber forensics, risk analysis), business opportunities abound for international IT and security firms.

Poland’s National Security Bureau spent more than a year studying the cyber-landscape and drafting the country’s 2014 “Cybersecurity Doctrine of the Republic of Poland.” The 26-page Doctrine calls for the obvious: “pursuing active cyberdefence,” “maintaining readiness for cyberwar” and preventing “cyberviolence, destructive cyberprotests and cyberdemonstrations.” It also specifies the need to support and nurture private firms to supply cybersecurity solutions.

Soon after Poland released its Cybersecurity Doctrine, the United States Secretary of Commerce led the “Cyber Security Business Development Mission” to Poland (the delegation also stopped in Romania) in 2015. Containing representatives from US industry and trade associations, the mission aimed to give US security and IT firms “access to business development opportunities” in Poland and the greater Eastern European region. Members of the mission gained access to private meetings with Polish government officials and industry leaders and potential joint-venture partners.

Essentially, Poland has opened its doors and hung out a welcome sign to foreign firms that can supply the Polish government with the necessary systems and defenses.

As for armored vehicles, Poland has more than 900 tanks — more than twice that of France — the majority of which are, like so much of the country’s military hardware, of Soviet-era manufacture. It also has almost 2,000 “armored fighting vehicles.” Somewhere between a tank and a truck, these maneuver more rapidly than a tank while still possessing considerable firepower.

Yet, even with such a large armored division, Poland wants still more tanks and light armored vehicles. It recently finalized a contract with German defense contractor Rheinmetall Landsysteme GmbH for 119 Leopard tanks (the deal is worth $144 million). Poland’s own OBRUM (Osrodek Badawczo-Rozwojowy Urządzeń Mechanicznych, or Research and Development Centre for Mechanical Appliances) is building WPB Anders tanks for the country’s military. OBRUM is also collaborating with BAE Systems, a British multinational defense manufacturer, on development of the new PL-01 armored fighting vehicle.

We know less about Poland’s fourth pillar of the revised TMP having to do with naval threats. We can assume with some degree of certainty, however, that PiS will retain the “Operational Programme — Countering Threats at Sea,” laid out by its predecessors in power. The Operational Programme calls for the procurement of “three corvette-type coastal defence ships, four offshore patrol vessels…three mine countermeasures vessels, a military sealift / logistics support ship,” three submarines, and various other “specialist platforms.” Whether PiS follows the Operational Programme exactly or modifies it to suit its own priorities remains to be seen.

Defense partnerships

According to a report by the Center for European Policy Analysis, “Poland is in the process of emerging into the globally competitive defense sector.” Translation: Poland’s own defense sector has some catching up to do. Consequently, Poland looks to international firms for many of its acquisitions.

“Time is not on Poland’s side,” the report concludes, and Poland seems to recognize that reality. Thus, the scramble for defense modernization. In addition to dishing out defense contracts, the country has incentivized foreign defense partners to share their technologies. And, in a development unusual in the defense sector, foreign firms have obliged. They demonstrate a “willingness to invest in Poland” because of the vast “growth opportunities of the Polish market.” They also “see the country as a potential anchor for broader operations in Europe.” Therefore, they “have been willing to provide attractive packages to their Polish counterparts.” These packages often include technology transfers. In such a transfer, the foreign contractor wins the first part of a bid, with the stipulation that they partner with a Polish firm and bring them up to speed. In subsequent production runs, the two firms would perhaps collaborate. The end goal, however, would be to bring the manufacturing ability completely in-house.

Even considering such transfers, however, the opportunity for defense contractors is immense. From remote sensing to surveillance, electronic control systems to ammunition, the TMP represents an immense pie, and one with a piece for almost everyone with an invitation to the table. To get an invitation, one has but to offer a solution to any one of the hundreds of discrete technological challenges inherent in the TMP’s fulfilment.

Trump effect

The recent election of Donald Trump to the United States Presidency will certainly impact the Baltic regional geopolitical situation. However, given the proven unpredictability of president-elect Trump — after all, his unconventional approach to politics is the one thing his supporters and critics seem to agree on — the nature of the impact is difficult to predict. If Trump signals support for NATO and a willingness to defend US allies against Russian incursion, tensions are likely to continue to mount in the region. If Trump, as many already accuse him of, demonstrates a conciliatory posture toward Russia, the latter could easily interpret such a tone as tacit encouragement for further territorial annexation. In either case, however, Poland will be on the front lines of a brewing confrontation with a formidable adversary; its incentive to arm will be assured.