Diplomacy
NATO summit focuses on arms race in the Silicon Valley age
The NATO summit in The Hague begins today, June 24, with a large-scale meeting attended by numerous defense ministers, defense experts, and representatives from the arms industry.
According to the alliance’s statement, the NATO Defence Industrial Forum aims to assist NATO countries in a quantitative rearmament “at an unprecedented pace” and to make the latest technologies more useful in future wars.
Israel’s attacks on Iran, where artificial intelligence (AI) technology is being used more extensively than ever, are currently setting the standard for military technology. According to reports, the Israeli armed forces are integrating “air, cyber, and ground operations,” primarily with the help of AI, to coordinate “drone swarms, clandestine networks, and sabotage missions in real time.”
While the US is also rapidly advancing the integration of AI into its defense, German startups are achieving success in producing AI-controlled unmanned aerial vehicles (UAVs). Among these is the defense startup Helsing, which is considered Germany’s most valuable startup, surpassing even civilian companies.
Ukraine as a testing ground
At this year’s Defence Industrial Forum, NATO is drawing conclusions from experiences showing that wars are largely decided by the defense industry capacities of the warring parties.
For example, according to Dutch Defense Minister Kajsa Ollongren’s State Secretary, Christophe van der Maat, the war in Ukraine has become a “war between industries.” Van der Maat’s ministry is organizing the forum jointly with NATO and in cooperation with the industry association VNO-NCW and the Dutch Ministry of Foreign Affairs.
It is emphasized that those who can produce large quantities of military equipment, and do so quickly, have a decisive advantage. More than 400 participants, including defense ministers, defense experts, and particularly representatives of the defense industry, have been invited to the forum.
According to pre-meeting statements, discussions will focus on “expanding and intensifying arms production at an unprecedented pace.” In addition to quantitative increases, the meeting will address financing options and how the latest technologies, “including autonomous systems,” can be used in warfare.
AI warfare: The examples of Azerbaijan and Ukraine
A look at reports on the Israeli armed forces’ operations in the conflict with Iran provides insight into how the latest technologies are being employed. The use of UAVs is not new, but the turning point for drone warfare occurred in 2020 during the Azerbaijan-Armenia war. UAVs are now playing a crucial role in the war in Ukraine.
The widespread use of artificial intelligence has also come into play in the conflict with Iran. According to an analysis by Al-Monitor, AI-based warfare has taken center stage for the first time. An expert from the Washington-based Middle East Institute (MEI) stated that Israel is using AI to integrate “air, cyber, and ground operations, coordinating drone swarms, stealth jets, and sabotage missions in real time.”
AI-based cyberattacks and electronic warfare have also made it possible to neutralize Iran’s air defenses. The MEI expert cites a prime example: Mossad established a secret drone base near Tehran, from which Tel Aviv launched AI-controlled attacks. Israel is also reportedly using civilian vehicles equipped with explosives as offensive weapons in Iranian cities, guided by AI.
Silicon Valley’s growing influence in NATO
In the US, the current administration continues the policy of shifting towards high-tech warfare with various tools, including artificial intelligence. The military budget, which already accounts for more than a third of global military spending, has been increased by 13.4% to $1.01 trillion.
Simultaneously, resources and capabilities are being shifted from the five traditional US defense companies (General Dynamics, Lockheed Martin, RTX, Northrop Grumman, and Boeing) to startups in the artificial intelligence and aerospace industries. An example of this is the “Golden Dome” project, a continental missile defense system modeled on Israel’s Iron Dome. Elon Musk’s SpaceX and Starlink companies, along with young tech firms like Palantir and Anduril, hope to secure major contracts from this project.
Despite Elon Musk’s official withdrawal from government advisory roles, technology companies from Silicon Valley remain strongly represented in the administration in terms of personnel. For instance, employees of Palantir CEO Alex Karp hold influential positions in the State Department and the Pentagon. According to reports, there is now “a new tone” at the US Department of Defense, which is causing “near euphoria” among “startups and tech companies on the US West Coast.”
Germany’s most expensive startup
Although the German Armed Forces are far from achieving similar success, the first signs of progress are emerging in efforts to establish high-tech startups in the German defense industry, similar to those in the US.
Currently, Germany’s most valuable startup is Munich-based Helsing. The company’s co-founder, Gundbert Scherf, was once sent by McKinsey to serve as Federal Defense Minister Ursula von der Leyen’s “Commissioner for Strategic Arms Control.” Helsing made a name for itself by producing kamikaze drones for Ukraine that are controlled with the help of artificial intelligence and cannot be stopped by jammers. Recently, it has been reported that Ukrainian soldiers consider Helsing drones to be too expensive and of lower quality compared to some competing models.
Nevertheless, Helsing is in talks to supply equipment for a “drone wall” planned for NATO’s eastern flank. Besides drones, the company primarily develops artificial intelligence for fighter jets, submarines, and tanks, which will enable these vehicles to be used more efficiently in the future. Valued at €12 billion, Helsing is currently Germany’s most expensive startup and is preparing to equip Eurofighter jets for electronic warfare in collaboration with the Swedish company Saab.
German AI efforts focus on Ukraine
In addition to the AI and drone company Helsing, Quantum Systems, a drone manufacturer based in Gilching near Munich, is also on the rise. Quantum Systems was founded in 2015 by former German Armed Forces officer Florian Seibel. The company produces not only for the German military but also for Ukraine.
It will also work closely with Airbus Defence in the future. A letter of intent regarding this collaboration was recently signed at the Paris Air Show at Le Bourget Airport. According to the letter, Quantum Systems will participate in the Future Combat Air System (FCAS) project, a sixth-generation fighter jet that will work in conjunction with drones and drone swarms. To date, Quantum Systems has been financed with €40 million from Airbus Defence.
Pentagon-linked capital flows to Europe
While Helsing and Quantum Systems are German companies, Rheinmetall is collaborating in the drone and AI sector with the American company Anduril, which is partly financed by the renowned US tech billionaire Peter Thiel. Last week, Rheinmetall and Anduril signed a strategic partnership agreement to produce military drones.
According to a statement from Anduril, the partnership focuses on developing three proven capabilities, with the aim of expanding over time: integrating a European version of Barracuda, part of Anduril’s family of low-cost, mass-producible autonomous aerial vehicles, into Rheinmetall’s digital sovereignty framework (“Battlesuite”); incorporating a European version of Anduril’s high-performance, multi-mission Group 5 autonomous aerial vehicle (AAV), Fury, into Rheinmetall’s digital framework; and exploring opportunities for solid rocket motors for use in Europe by leveraging Anduril’s new production approaches.
Anduril Industries CEO Brian Schimpf said, “This is a different model of defense collaboration, built on mutual respect for co-production, operational fit, and sovereignty. Together with Rheinmetall, we are developing systems that can be produced quickly, deployed widely, and adapted as NATO missions evolve.”
This agreement allows a US tech company to gain a significant position in the proliferation of weapons technology in Europe, which runs counter to the efforts of Berlin and Brussels to become as autonomous as possible from the US in arms production.
Anduril sets its sights on Europe
Last March, it was announced that Silicon Valley giant Anduril was considering manufacturing drones in the UK and signing contracts with European arms manufacturers as the continent prepares to increase its defense spending. Rich Drake, Anduril’s UK and Europe general manager, said in an interview with Bloomberg, “If we get enough orders, we definitely plan to open a facility in the UK. We are determined to become a standalone British company.”
American defense technology companies like Anduril and data analytics developer Palantir have seen growing interest in Europe since the start of the war in Ukraine. In early February, Anduril and the British government announced a deal worth approximately £30 million ($38 million) to supply offensive drones to Ukraine. In June 2024, Anduril and Rheinmetall signed an agreement to collaborate on air defense systems focusing on small unmanned aerial vehicles. Drake mentioned that the company has also started talks with defense companies in “several other countries” besides Germany.
Anduril is backed by a number of leading Silicon Valley venture capital funds, including Andreessen Horowitz and Founders Fund, and has recently achieved a series of successes, including an agreement with Meta to provide mixed-reality headsets for soldiers.
The importance of Europe for traditional American arms companies
Leading US defense companies have long-standing ties in Europe, which account for a significant portion of their annual revenue, and they hope that deeper partnerships will allow them to continue doing business on the continent.
In 2024, this region represents approximately 11% of the annual revenue for both Lockheed Martin and RTX. Many European armies operate Lockheed’s F-35 fighter jet, while RTX’s Patriot missile is the clear market leader in air defense. Both Lockheed and RTX’s defense subsidiary, Raytheon, have announced the establishment of extensive co-production partnerships on the continent over the past two years. Lockheed will establish large-scale missile production with Rheinmetall, and a joint venture between Raytheon and European missile manufacturer MBDA will produce Patriot missiles for NATO in Germany.
Thomas Laliberty, president of land and air defense systems at Raytheon, noted that countries exhibit “different approaches to the concept of sovereignty.” He added that Raytheon tries “to understand each one and help them meet those requirements as best we can.”
Lockheed Martin’s chief operating officer, Frank St. John, told the Financial Times in Paris that the company is not only expanding its supply chain in Europe but also establishing production facilities. He added that partnerships ensure the region’s financing is appropriate and that European requirements can be met.
Boeing also states it is “examining what collaboration opportunities are available.” The company has indicated its desire to replicate the joint development approach it used with Australia to develop the MQ-28 Ghost Bat unmanned combat aircraft in Europe as well.
Diplomacy
US expands Middle East air operations using German bases as regional casualties rise
Germany continues to provide crucial logistical support to the US military as Washington prepares for a major expansion of the war against Iran, utilizing its extensive network of installations across the country.
According to a report by German Foreign Policy, US fighter jets and troops are being routed through Ramstein Air Base—mirroring operations conducted prior to the outbreak of hostilities and throughout the first 40 days of the conflict—where forces remain stationed ahead of an announced wave of heavy airstrikes.
Spangdahlem Air Base is playing an equally vital role in the logistical pipeline. F-16 fighter jets stationed at the site were redeployed last week to staging areas in the Middle East, having returned from combat missions in the region only a few weeks prior.
Meanwhile, Landstuhl Regional Medical Center—the largest US military hospital outside the United States—serves as a critical medical hub. In recent days, approximately one dozen US service members, including several with severe injuries, were evacuated to the facility for treatment.
Medical staffing at Landstuhl has been expanded significantly in anticipation of a further rise in casualties.
Ramstein
The US armed forces are drawing heavily on their military infrastructure in Germany to execute troop concentrations directed at Iran.
Ramstein Air Base near Kaiserslautern—the largest US Air Force installation outside the US and headquarters for US Air Force forces in Europe and Africa—is operating continuously to facilitate the deployment.
Ramstein has long drawn international attention for housing a satellite relay station used to control US military drone operations across Africa, the Near East, and the Middle East.
Data streams for other operational maneuvers are also routed through Ramstein, specifically those serving the war in Iran.
Furthermore, the installation operates as a permanent logistical turnstile for the conflict. Shortly after the outbreak of hostilties, Spanish military aircraft that were denied permission by Madrid to participate in the war effort were rerouted to Ramstein.
In contrast to the Spanish government, Berlin has raised no objections to providing logistical support for the military campaign against Iran.
On Wednesday, a US E-11A Battlefield Airborne Communications Node (BACN) aircraft landed at Ramstein after departing Robins Air Force Base in the US state of Georgia, before proceeding toward the Middle East.
The aircraft provides real-time relay and tactical coordination between fighter jets and bombers during airborne strike operations.
Spangdahlem
Spangdahlem Air Base, located in the Eifel region, is serving as a key node in reinforcing the US Air Force presence in the Middle East ahead of a comprehensive expansion of the war.
Last week, US F-16 fighters permanently stationed at Spangdahlem were dispatched to the Middle East.
Their movement was complemented by F-35 jets deployed from RAF Lakenheath, northeast of Cambridge, and additional F-16s launched from Aviano Air Base in northeastern Italy.
The Spangdahlem-based F-16s had returned from combat operations in the war zone just weeks earlier.
These aircraft are specialized in Suppression of Enemy Air Defenses (SEAD) missions, designed to neutralize hostile air defense systems.
David Deptula, a retired US Air Force lieutenant general and dean of the Mitchell Institute for Aerospace Studies in Washington, told the US military newspaper Stars and Stripes that deploying fighter jets in such large numbers from all three US Air Force units in Europe to the Arabian Peninsula was highly unusual.
However, Deptula noted that toward the end of the Cold War, the US Air Force maintained nine operational units in Europe rather than three, pointing to a long-term decline in overall force capacity.
Landstuhl
Alongside Ramstein and Spangdahlem, Landstuhl Regional Medical Center—the largest American military hospital outside the US—is being utilized with heightened intensity in connection with the war in Iran.
In recent days, approximately 12 severely wounded US service members were evacuated from Jordan to Landstuhl for specialized care.
The arrivals have drawn public scrutiny, in part because the Trump administration has reported US casualty figures far less frequently than previous administrations.
While the death of US military personnel must be publicly disclosed under statutory requirements, observers in the US note that these requirements do not extend to private military contractors, who constitute a significant share of personnel on US military bases.
Following recent admissions by the Pentagon that three US service members were killed in Iranian strikes near Muwaffaq Salti Air Base in Jordan, investigations by US news outlets revealed that roughly 100 US military personnel were wounded between June 7 and last weekend.
Material damage from Iranian retaliation
In addition to figures on wounded US military personnel, initial investigative media reports have begun detailing the extent of structural damage inflicted on American weaponry and military infrastructure.
As reported by The New York Times on Wednesday, Iranian forces concentrated their strikes this month on nine locations with a US military presence, down from 18 during the first 40 days of the war.
Muwaffaq Salti Air Base was struck four times. According to the newspaper, drone strikes destroyed three buildings, two hangars, and structures believed to serve as living quarters.
Tower 22, a US military outpost in far northeastern Jordan along the Syrian border, also sustained severe damage.
In addition, hangars and a radar system at two other military bases in Jordan were hit, as was King Hussein International Airport, where US personnel are stationed.
In Bahrain, at least one warehouse was damaged, while a military tent was destroyed at Erbil International Airport in northern Iraq, where US troops are deployed.
Ali Al Salem Air Base in Kuwait was also struck, and a radar system at Ahmad Al Jaber Air Base—which had been operational for only six months—was destroyed.
These incidents represent only a portion of the damage confirmed to date.
Undisclosed US casualties
Beyond Washington’s public statements, preparations behind the scenes are underscored by the recent deployment of more than 150 additional US medical personnel to Landstuhl Regional Medical Center.
Should US President Donald Trump order an expansion of US attacks, officials anticipate a parallel escalation in Iranian retaliatory strikes and a corresponding rise in US casualties.
These casualties will include severely wounded personnel who will be evacuated to Germany for medical treatment.
Servicemen killed in Iranian counterattacks are also likely to be routed through Germany before their remains are repatriated to the US. Flights operated by Air Force Mortuary Affairs Operations (AFMAO) carrying fallen personnel from the combat zone to the US routinely make layovers at Ramstein.
This procedure was followed during the recent repatriation of the bodies of four US soldiers killed in the Middle East. Flights from Ramstein to Dover Air Force Base in Delaware reportedly take between nine and ten hours.
Legal implications for Berlin
To expand a war of aggression that violates international law, President Trump has formally announced upcoming US strikes on civilian infrastructure—actions that constitute war crimes.
The announcement of an intent to order war crimes carries serious legal implications for the German government.
Germany continues to allow the US armed forces to utilize military infrastructure on its territory, including Ramstein, Spangdahlem, and Landstuhl, and grants overflight rights without hesitation.
According to Michael Riegner, professor of public law, international law, and comparative law at the University of Erfurt and director of the university’s Global Justice Clinic, the argument that this support carries no legal consequences is untenable.
Riegner argues that limiting Article 26, Paragraph 1 of the German Basic Law strictly to the Bundeswehr is legally unacceptable.
The constitutional clause mandates punishment for “acts tending to upset the peaceful relations between nations, especially an act preparing for a war of aggression.”
Riegner contends that anyone who assists in the execution of a war of aggression is guilty of aiding and abetting an unlawful act.
Diplomacy
Bipartisan lawmakers raise concerns over US-Saudi nuclear agreement
Some lawmakers from both parties are warning that a newly signed US nuclear cooperation agreement with Saudi Arabia could trigger a regional arms race in the Middle East.
Although the agreement stems from negotiations that began before the outbreak of the war with Iran, Democratic Senator Chris Murphy, a member of the Senate Foreign Relations Committee and a longtime critic of Saudi Arabia, argued that announcing the deal now would have an immediate impact on the conflict.
“Everything that happens in Riyadh echoes in Tehran,” Murphy said. “One reason the United States was reluctant to offer Saudi Arabia this agreement was that we knew it would move Iran one step closer to a nuclear weapon, and that remains true today.”
Republican Senator John Kennedy said even the possibility that Saudi Arabia could one day enrich uranium would have the potential to rapidly alter the strategic balance in the region and beyond.
“I worry about nuclear proliferation in the Middle East, Japan and South Korea,” Kennedy said.
With the Trump administration having already committed to the agreement with Saudi Arabia, the authority to reject it now rests with Congress.
Blocking the agreement, however, will be difficult, as opponents would need to secure a veto-proof two-thirds majority in both chambers.
The 30-year agreement announced on Wednesday allows private US nuclear companies to export to the Saudi market and establishes a framework for US security safeguards.
While the agreement does not guarantee that Saudi Arabia will enrich uranium, and any such capability would likely take at least a decade to develop, members of Congress argue that even this initial commitment could create a domino effect.
Republican Senator John Barrasso, also a member of the Senate Foreign Relations Committee, said he was concerned the agreement could further complicate US efforts to persuade Iran to abandon uranium enrichment entirely.
“I am deeply concerned about nuclear proliferation in the Middle East because of the consequences it could produce,” Barrasso said.
The United States and Saudi Arabia have spent nearly two decades negotiating an agreement under which Washington would assist Riyadh in developing a civilian nuclear program.
According to two sources familiar with the matter, both the Biden and Trump administrations initially presented the proposal as an incentive for Saudi Arabia to normalize relations with Israel.
After the Oct. 7, 2023 attacks on Israel made normalization significantly more complicated, however, the Trump administration decided to separate the two issues.
Asked about the agreement while traveling in the Philippines on Wednesday, Secretary of State Marco Rubio dismissed concerns that the arrangement could contribute to nuclear proliferation.
“The United States will not enter into any agreement with any country that creates a risk of nuclear weapons proliferation,” Rubio said.
In announcing the agreement, Energy Secretary Chris Wright said, “Rest assured, these agreements uphold the highest standards of nuclear security and nuclear nonproliferation.”
Saudi Arabia said in its own statement that the agreement is intended to strengthen cooperation in the peaceful use of nuclear energy “in accordance with the highest international standards for nuclear security, nuclear safety and nuclear nonproliferation.”
For decades, the United States has generally avoided allowing new nuclear cooperation partners to enrich uranium domestically, instead insisting on a no-enrichment commitment known as the “gold standard,” most notably in its 2009 agreement with the United Arab Emirates.
Concerns in Washington have also focused on Saudi Arabia’s refusal to sign the document known as the Additional Protocol.
The protocol is an agreement with the UN’s nuclear watchdog that grants inspectors broader access beyond declared facilities to detect undeclared nuclear activities.
That refusal, combined with Saudi Arabia’s potential enrichment capability, leaves the new agreement well short of the “gold standard” established by the 2009 UAE agreement.
Under that agreement, Abu Dhabi accepted such inspections and renounced the right to enrich uranium or reprocess plutonium on its own territory.
Critics argue that abandoning both commitments marks a departure from the template Washington has relied on for decades to prevent nuclear proliferation.
The United States announced on Wednesday that it had also reached a bilateral safeguards agreement with Saudi Arabia but did not provide further details.
Republican Senator Ron Johnson of Wisconsin said he was surprised the administration had negotiated an agreement that could permit Riyadh to enrich uranium, unlike previous US nuclear cooperation agreements.
“What concerns me is the enrichment potential of Iran or Saudi Arabia. But I can also envision a scenario in which it is kept completely under control,” Johnson said.
Victoria Coates, who examined whether the United States could sell nuclear technology to Riyadh while serving as a senior official during the first Trump administration, said the agreement carries risks but that “those risks can be mitigated.”
Now serving at the conservative Heritage Foundation, Coates said, “As long as we monitor the situation closely and have clear visibility into what is happening, I think it is a risk worth taking.”
Republican Senator Mike Rounds said he would not object to Saudi Arabia enriching uranium on its own territory depending on the extent of the enrichment permitted under the agreement.
“It depends on how much they enrich the uranium. If it is 60% or less, that is far above what is needed for civilian purposes. But if we are talking only about enrichment to levels that can be used in nuclear power plants, I have no problem with that. Somebody is going to do it, and it is better that we do it than someone else,” Rounds said.
Under the agreement, the United States and Saudi Arabia will jointly study the feasibility of uranium enrichment within the kingdom.
According to two sources familiar with the agreement, if both sides determine such enrichment is acceptable, it would take place under a “black box” arrangement designed to prevent the transfer of sensitive technology to Saudi Arabia.
Saudi Arabia has long sought to establish its own civilian nuclear program. Some analysts argue that cooperation with the United States would be preferable to Riyadh turning to Moscow or Beijing.
Jonathan Panikoff, a former intelligence official now at the Atlantic Council, said, “Without an agreement with the United States, Riyadh would almost certainly have turned to China or Russia, whose agreements would likely not include the restrictions contained in the US deal. But that does not mean the risks associated with this type of agreement are zero.”
Diplomacy
World Bank warns US-Iran conflict could slash global growth to 1.3% as inflation looms
Escalating tensions between the US and Iran could reignite inflation, drive interest rates higher, and drag global economic growth down to 1.3% from last year’s 2.9%, World Bank Chief Economist Indermit Gill stated.
Gill, who is set to retire at the end of August, noted that due to high uncertainty surrounding the war in the Middle East, the bank had modeled three different scenarios in its June economic forecast. However, the worst-case scenario—defined by the conflict lasting six months or longer—is already close to materializing, he said.
Under this scenario, global headline inflation is projected to reach 4.5%.
Gill stated that prolonged conflict and damage to regional oil infrastructure would further deepen food insecurity by disrupting shipments of fertilizer, helium, and sulfur required for agriculture, triggering a series of secondary effects that could include rising interest rates.
This represents the first statement by a senior World Bank official since tensions between Washington and Tehran escalated sharply following the collapse of an April ceasefire agreement, which had previously fueled hopes that the impact of the conflict would be less severe.
Gill noted that poorer nations, which have yet to fully recover from the COVID-19 pandemic, could face greater food insecurity. Meanwhile, countries with high debt levels will be hit by rising borrowing costs as interest rates climb, restricting spending on education, health, and other vital services.
“My personal view is that we may be perhaps a few months away from this, because we do not yet see policy interest rates beginning to rise,” the economist said.
“Once inflation accelerates, heavily indebted countries could be just months away from facing severe difficulties in meeting their debt service payments,” Gill added.
Signs of strain have already begun to emerge. According to a source briefed on the matter, some cash-strapped nations have requested increases to existing loans from the International Monetary Fund (IMF), while Pakistan requested a $10 billion foreign exchange stabilization fund from the US this week.
The World Bank’s June forecasts revealed that 40% of low- and middle-income countries are either already in debt distress or at high risk of falling into it.
Gill noted that this percentage corresponds to 32 countries but warned that this number could rise rapidly if interest rates climb. He added that even if other countries do not default on their debts, their long-term growth prospects could still decline.
“This is like a slow-moving train wreck,” Gill said, pointing out that countries that do pay their debts will be forced to deplete resources from education, healthcare, and other areas necessary to support future growth.
According to World Bank data, the average debt-to-GDP ratio for emerging and developing countries stood at approximately 74% in 2025. This is significantly higher than the pre-pandemic levels of around 50-55% recorded in late 2019. For low-income countries, this ratio rose from approximately 40% to 67%.
Gill stated that some countries will require debt relief on a case-by-case basis.
He said that the world’s largest economies—the US, China, and India—have remained relatively insulated from the impact of the war, with each drawing on different sources of resilience. However, developing nations have faced far greater challenges.
As debt vulnerabilities have mounted, the G-20 major economies have made some progress on reforms to the debt restructuring process, though improvements have been slow to materialize.
Nevertheless, Gill noted that there is some good news for developing nations. A new World Bank analysis on artificial intelligence readiness shows that these countries could benefit from the emerging technology and the productivity gains it promises. Gill pointed out that while approximately 10% of people in poor countries are likely to be negatively affected by AI, that figure stands at about 30-40% in rich nations.
Gill continued:
“Therefore, for these countries, AI could be a major gain. Developing countries should be much more optimistic about the impact of AI compared to developed nations.”
Gill added that AI could potentially help return growth to levels not seen in decades, though this is unlikely to happen within the current decade.
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