Mr. Dermot Ryan:

I am also pleased to be here this afternoon and to give the Department of Defence’s perspective on this issue. I am a principal officer in the Department. I am accompanied this afternoon by Mr. Brendan Fitzgerald, who is the defence attaché at the Irish Permanent Representation to the EU in Brussels. He attended the meetings of the ad hoc working party on the defence industry in which member states considered and agreed this proposal last year..

I understand the committee’s focus is on scrutinising the draft amending budget, particularly as it relates to the set-up and financing of the new defence industrial reinforcement instrument established by ASAP. As these budgetary issues are very much within the domain of my colleagues in the Department of Finance and the European Commission, I will instead focus my remarks on the background to and the content of the regulation.

The background to this proposal is the European Union’s response to Russia’s illegal, unprovoked and unjustified invasion of Ukraine. With many member states donating significant quantities of weapons, ammunition and other equipment to the Ukrainian armed forces, stocks were left significantly diminished with several member states in the position of needing to replenish those depleted stocks in order to continue to support Ukraine and meet their own defence objectives.

The proposal for ASAP was the European Commission’s response to a tasking it received from the European Council to present concrete proposals to urgently support the ramping up of the manufacturing capacities of the European defence industry, secure supply chains, facilitate efficient procurement procedures, address shortfalls in production capacities and promote investments, including, where appropriate, mobilising the Union budget. It was part of a three-track approach the European Council had taken in March of last year in response to the need of the Ukrainian armed forces for weaponry and associated ammunition, including ground-to-ground and artillery ammunition. The other two tracks involved an invitation to member states to urgently transfer ammunition from their own stocks to Ukraine - track 1 - and an agreement to jointly procure one million ammunition rounds - track 2. Following an accelerated negotiating process, EU colegislators reached a political agreement on ASAP on 6 July 2023. The final act was signed on 20 July 2023.

Having regard to the amendment to the budget in April, the programme has an overall allocation of €514.8 million. The Commission anticipates that, with the expected cofunding by industry, the overall budget could exceed €1.5 billion with new production capacities all across Europe. This funding envelope does not represent fresh contributions by member states. Instead it is rather sourced through a redeployment from existing instruments, in particular the European Defence Fund, to stimulate the production of ammunition in a number of critical areas to cause a ramp-up in ammunition production capacity across Europe. Additional manufacturing capacity will help member states replenish national stocks while delivering ammunition urgently required by Ukraine. ASAP will further seek to reduce delivery lead time and address potential bottlenecks that could delay or impede the supply and production of relevant defence products.

Following the regulation’s entry into force in July last, the Commission issued calls for proposals in the areas of explosives, powder, shells and missiles as well as and testing and reconditioning certification.

Following an evaluation of the responses to those calls earlier this year, the European Commission selected 31 potential projects in 15 member states with a total funding of just over €500 million under ASAP to assist European industry in increasing its ammunition production and to achieve a level of defence readiness. Grant agreements with the selected companies are expected to be signed with the European Commission this month. The focus on these five areas reflects the bottlenecks identified in the ammunition supply chains and also addresses the obsolescence, testing or reconditioning certification of relevant defence products.

I should also mention another EU instrument that aims at addressing the EU's most urgent and critical defence capability gaps and incentivises member states to procure defence products jointly - EDIRPA. It is a complementary initiative to ASAP - one incentivising the supply side and the other the demand side. EDIRPA entered into force on 27 October last and since then, three calls have been launched for the joint acquisition of ammunition, anti-aircraft defence systems and the modernisation of equipment.

Last October, the European Commission adopted the ASAP work programme, which covers the period 2023 to 2025, by which time all ASAP-funded projects will have been completed. The focus now is on ensuring that the grants in the value of €500 million to 31 companies deliver on the programmes’s objectives of supporting the EU’s defence industry to ramp up its manufacturing capacities to match increased demand for ammunition and missiles, securing supply and availability of critical inputs such as raw materials and components, facilitating access to finance for EU defence companies and mobilising private funding to address bottlenecks in production to enable faster delivery rates.