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EU divided over defence funding

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Although increasing EU defence production has been on the agenda of EU leaders since the start of the war in Ukraine, the issue has been slow to gain traction.

The most sensitive issue is how to finance further defence investment in the future. EU leaders agreed on Thursday (21 March) to force the European Investment Bank (EIB) to ‘adapt its policy on lending to the defence industry and its current definition of dual-use goods, while maintaining its financing capacity’.

They also made progress on using proceeds from frozen Russian assets to help Ukraine within months, under a plan to use most of the money to buy arms for Kiev.

The European Commission had proposed that 90% of the proceeds from frozen Russian assets be used to finance Ukraine’s defence production and military aid, while the remaining 10% would be given to Kiev as budget support.

European Council President Charles Michel and European Commission President Ursula von der Leyen said the idea of using the proceeds from frozen Russian assets to benefit Ukraine had broad support among EU countries.

Concerns of ‘neutral’ countries

But the use of this money to buy weapons is a problem for some countries, including militarily neutral states such as Austria, Ireland and Malta.

“For us neutrals, it must be ensured that the money we approve is not spent on arms and ammunition,” said Austrian Chancellor Karl Nehammer. Michel said Brussels could find ways to address their concerns.

“Russia must feel the real cost of war and the need for a just peace,” Ukrainian President Volodymyr Zelensky said, urging EU leaders to go further and use the assets themselves, a step the bloc has not yet considered.

Proposal for joint defence borrowing rejected

At the same time, EU leaders disagreed on a broader initiative for European financing of arms for Kiev, such as the ‘Eurobond for defence’ requested by Estonia and France.

Member states such as the Netherlands and Sweden are sceptical about joint borrowing on the financial market for defence purposes.

“The urgency of the issue means we have to consider options we don’t like,” an EU diplomat told Euractiv.

The leaders asked the European Commission to “explore all options for mobilising financing and report back by June”, a choice of words pushed by the Baltic states, Poland and Greece.

Leyen told reporters that the discussion was still at an early stage.

Fear of ‘power grab’

Although there is no coherent plan for new funding, the Commission has recently outlined plans for a European defence strategy.

These include Leyen’s idea of a new defence (industry) commissioner for the next term, more defence funding, an expansion of the bloc’s defence industrial base and the use of frozen Russian assets.

The plan even goes as far as the EU executive being prepared to place arms orders with member states to support joint arms procurement.

But this is where the controversy erupts. Leyen’s plan for a European defence industrial strategy is drawing criticism from some EU countries, including Germany, which supports strengthening the sector but fears the plan involves usurping national competences.

EU diplomats said there was considerable scepticism during Thursday’s summit discussions.

German Chancellor Olaf Scholz told EU leaders that the bloc did not need ‘another state-like structure for defence’ or the creation of new powers that would amount to a power grab, two people familiar with the talks told Euractiv.

While Scholz stressed the need to develop the bloc’s potential for joint procurement, he rejected the idea of the Commission as a mediator that could slow down processes.

“She wants to be a war president but forgets that the EU is not a state,” an EU diplomat said of Leyen, suggesting that critics of her using the defence issue to win a second term were right.

Member states still opposed to investment programme

In recent months, many EU countries have raised concerns about the Commission’s intentions behind the European Defence Investment Programme (EDIP), the bloc’s ambitious framework for strengthening the military-industrial complex.

As the programme will give EU member states and the Commission the power to redirect industrial priorities, finance arms production and give the EU body an overview of production capacities and supply chains, often protected by governments for national security reasons, some measures are considered ‘sensitive’ by member states.

Presenting the text, internal market commissioner Thierry Breton said his organisation was not interested in a ‘power grab’ and rejected a loose interpretation of EU treaties prohibiting the transfer of EU funds to military operations.

To avoid this accusation, the European Commission based its industrial policy proposal on Article 173 of the EU treaty, which allows the bloc to work on industrial competitiveness.

The Commission’s directorate-general in charge of implementing the programme (DEFIS) recently sent envoys to prepare the ground with EU countries to avoid potential problems.

Despite concerns, EU leaders on Thursday instructed their ministers to examine the EDIP text ‘without delay’.

Negotiations on technical details are expected to start in early April, with the European Council due to adopt its position in June, before the new European Parliament convenes in the summer.

Middle East

US waives human rights terms on $320m military aid to Egypt

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The US State Department stated that it has waived human rights conditions on more than $300 million in military aid to Egypt.

The statement emphasised that this decision was taken in consideration of Cairo’s “helpful role” since the outbreak of the war against Iran.

Egypt began receiving substantial support from the US after signing a peace treaty with Israel in 1979.

Since the late 1980s, the country has received approximately $1.3 billion annually in US military assistance.

A portion of this aid is subject to conditions related to human rights and democracy, which can be waived on national security grounds.

Withholding funds, including during the administration of former US President Joe Biden, has caused tension between Cairo and Washington in the past.

A letter dated 21 September and addressed to various congressional committees, obtained by Reuters, stated that Secretary of State Marco Rubio “decided to waive the certification requirement under the fiscal year 2025 Foreign Military Financing programme for Egypt of $320 million.”

This waiver was subsequently confirmed by the State Department.

An accompanying memorandum justifying the decision stated that this portion of military aid was “essential for counterterrorism, border security, or non-proliferation programmes, or otherwise important to the national security interests of the United States.”

The memorandum, dated 4 September and bearing Rubio’s signature, stated: “Exercising this waiver authority is critical to the US-Egypt relationship and to US national security priorities, particularly given the helpful role Egypt has played in the aftermath of Operation Epic Fury.”

“Operation Epic Fury” is the designation used by the US military for the campaign launched jointly with Israel against Iran in late February.

The State Department memorandum, whose authenticity was confirmed by two sources in Washington familiar with the letter, did not provide detailed information regarding what was termed Egypt’s “helpful role”.

The State Department’s annual decision on military aid to Egypt typically covers funds allocated for the preceding fiscal year, which ends on 30 September.

A State Department spokesperson stated that Rubio waived the certification in the interest of US national security and that the US continues to cooperate with the Egyptian government across a range of issues.

In an emailed statement, the spokesperson said: “This waiver recognizes the importance of maintaining security cooperation with Egypt at a time of significant security challenges in the region.”

The Egyptian Ministry of Foreign Affairs did not immediately comment on the matter.

The spillover effects of the Iran war have imposed a heavy toll on US security partners, including Egypt.

Owing to rising fuel prices and other disruptions, the Egyptian economy is passing through a difficult period.

Under the Biden administration, the US withheld portions of the annual military allocation on multiple occasions over Egypt’s human rights record.

In 2024, following the Hamas-led 7 October attack on Israel and the subsequent war in Gaza, the Biden administration set aside human rights conditions, disbursing the entire $1.3 billion allocation to Egypt for the first time in its tenure.

Human rights organisations have long accused Egypt, under the administration of President Abdel Fattah al-Sisi, of widespread human rights abuses, including torture and enforced disappearances.

This week, Egyptian police detained six journalists from a fact-checking and investigative media outlet, accusing them of spreading false information on behalf of the banned Muslim Brotherhood.

Egyptian authorities state that they have taken steps to address human rights issues. Sisi said stability is paramount and that the government supports human rights by working to provide for basic needs.

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Middle East

Britain expands curbs on arms exports to Israel over Gaza risks

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Britain has significantly broadened its military export restrictions targeting Israel, suspending or rejecting more than 80 licences for items the IDF could use in Gaza.

This figure is nearly triple the number affected when the policy was first introduced in September 2024.

United Kingdom Minister of State for the Middle East Stephen Doughty said that as part of what he described as a “tighter system” for assessing exports to Israel, more than 50 further export applications have been refused since approximately 30 licences were initially suspended.

Under the initial decision taken in September 2024, 30 of roughly 350 licences were suspended after the British government concluded there was a “clear risk” that certain military exports could be used to commit or facilitate serious violations of international humanitarian law in Gaza.

The affected equipment included components for military aircraft, drones, naval systems, and targeting gear.

Doughty said additional measures adopted this month established what he termed a “double safeguard” mechanism within the approvals process.

Export applications must now be assessed both against existing international humanitarian law criteria and in light of Britain’s position on the legality of Israel’s presence in the Palestinian territories.

“We have so far suspended or refused more than 80 licences,” Doughty said, adding that he had personally examined each licence.

Despite the wider restrictions, British-origin parts entering the international F-35 fighter jet supply chain continue to be largely exempt.

The UK government argues that preventing British-made components from entering the global F-35 pool could undermine the programme as a whole and have serious consequences for the security of the UK and its allies.

Direct exports of F-35 parts intended specifically for Israel remain suspended.

Doughty defended maintaining the supply of components via the international programme, arguing that halting it could have severe ramifications for the broader European and allied security architecture.

Foreign Affairs Committee Chair Emily Thornberry challenged this position, arguing that the issue was political rather than purely legal.

Thornberry suggested adopting an approach similar to the Dutch model, under which components entering the international supply chain could be flagged as “not intended for aircraft bound for Israel”.

The initial suspension was implemented in September 2024 by then Foreign Secretary David Lammy.

Lammy stressed at the time that the measure did not constitute an arms embargo and applied solely to items assessed as usable in military operations in Gaza.

Since then, the policy has been tightened further under Prime Minister Andy Burnham.

The expanded export restrictions follow the Burnham government’s adoption of a more confrontational policy toward the Israeli government.

Foreign Secretary Ed Miliband drew sustained applause at the Labour Party’s annual conference in Liverpool after delivering a sharp critique of the Netanyahu government’s policies and defending the decision to ban trade with Israeli settlements in the West Bank.

Accusing Israel of committing war crimes in Gaza, Miliband stated that the British government heard public outrage over the conflict, telling delegates: “We hear you. You were right.”

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Middle East

Netanyahu holds secret UAE talks with Saudi Arabia and Arab officials

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Israeli Prime Minister Benjamin Netanyahu met with representatives of Gulf and Arab nations that lack diplomatic ties with Israel, including Saudi Arabia, during his weekend visit to the United Arab Emirates.

Sources close to the gathering told the Israeli newspaper Yedioth Ahronoth on Monday that representatives from Morocco, Libya, Jordan, and Qatar also took part in the meeting.

Netanyahu made a unannounced visit to Abu Dhabi on Sunday, where he met with the country’s leader, Mohammed bin Zayed Al Nahyan.

According to Israeli media, this marked the first time the United Arab Emirates officially confirmed a visit by Netanyahu.

The meeting was arranged by Mossad Director Roman Goffman “at the request of Saudi Arabia, which asked for Israel’s assistance against Houthi attacks in the Red Sea region,” according to Yedioth Ahronoth.

The discussions addressed Iran and the Houthi militia. The newspaper added that the Arab states heard from Israel that “Israel is prepared to assist countries in the region with air defence systems, just as it aided the UAE during the conflict with Iran.”

Conflict in Yemen intensified in September when Ansarullah militiamen launched a rapid offensive that seized Yemen’s entire Red Sea coastline, including the vital maritime corridor of the Bab el-Mandeb Strait.

The Yemeni resistance also imposed a blockade on Saudi Arabia’s energy exports and staged multiple attacks against the kingdom.

Saudi Arabia reportedly sought military assistance from the US to counter Ansarullah.

Washington declined to attack the Houthis directly, but announced that it would provide intelligence and targeting support.

Reporting on the same visit, The Jerusalem Post said Netanyahu spent six hours in the UAE and that the principal subject of his discussions with MBZ was Iran.

Citing sources familiar with the matter, the newspaper added that the trip came “after Netanyahu exerted heavy pressure on the United Arab Emirates to arrange a meeting ahead of the Israeli elections on 27 October.”

Separately, the Associated Press, citing a person with direct knowledge of the meeting, reported that Netanyahu’s visit to the UAE was arranged in part to ask MBZ to deny reports that he had warned the Israeli prime minister of an impending Hamas threat prior to 7 October 2023.

According to Israeli media, Netanyahu’s office denied the AP report, issuing the following statement:

“Fake news. The visit focused solely on strengthening ties between the two countries and on regional issues.”

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