The Ukrainian War was a “wake-up call” to Europe’s need to worry about its defense spending, which will grow “dramatically” due to the threat posed by Vladimir Putin’s Russia.
The assessment is by Micael Johansson, 61, the president of Saab, Sweden’s main weapons maker. For him, his country’s application for admission to NATO, the US-led military alliance, represents an opportunity for expansion, although there is an inherent risk of exposure to more competition.
“I think the conflict was a wake-up call for several countries, including mine. Unfortunately, the war made that very clear, as we saw what exactly Ukrainians need to defend themselves,” he said.
In a video chat with Sheet from BrasÃlia, he states that “the defense market in Europe will grow enormously, and we are positioned”. Since Russian missiles began to fall on its neighbor on February 24, the entire continental stance has changed.
The German case is eloquent: the country, refractory to defense issues since the end of the Cold War in 1991, tripled its defense budget with the creation of a fund of € 100 billion (R$ 544 billion today) to be spent this year. . Other countries, such as Poland, have already announced military purchases.
Closer to Johansson is the Nordic case: Sweden abandoned more than 200 years of neutrality to apply to join NATO, as did neighboring Finland, which maintained seven decades of military non-alignment to avoid offending Moscow.
“I didn’t expect to see this in my life,” said the executive. “The Swedish decision is political, it is not for me to comment, but I assume that the adhesion will happen. I have difficulty seeing something negative in this, as an industry, if we are competitive”, he says.
“Even though all our systems are NATO-compatible, the alliance doesn’t usually buy from countries that aren’t members,” he says. “In some areas, like command and control and electronic warfare, if you’re outside the alliance, they might not trust you very much.”
Johansson admits, however, that opportunities come with risks, as is clear in the case of fighter jets, its most famous export. Its Gripen model, for example, lost two important bids this year: in Finland (64 units) and in NATO member Canada (88 aircraft).
The winner was the American F-35, which has established itself as the alliance’s standard model — Germany has already announced that it will buy the plane with stealth radar capabilities.
“These acquisitions, regardless of how fantastic your product is, are politics in the end. It’s about security policy. We have to take that into account when we go on a sales campaign, we have to know that we are exposed to it”, he says, stressing ” respect Finland’s decision on the terms that are most important to them”.
Indeed, as in the case of the sale of the Gripen to Brazil that prompted Johansson’s visit to Brazil this week, the amount of technological exchange put into these deals has tied governments together for several decades.
Saab produces a large line of defense, with submarines, artillery pieces and electronic systems, in addition to fighter jets. In Ukraine, its portable NLAW anti-tank missile launchers were, alongside the American Javelin, the front line of Kiev’s resistance to the botched initial Russian invasion.
Despite his focus on the European market as a whole, although he is wary of talking about an arms race, the Saab chairman emphasizes the weight of Swedish needs. “NATO is not going to take care of national defence, politicians have to understand that,” he said, defending Saab’s 84-year legacy.
It’s a little paradox. The Swedish military industry is strong because it was organized to defend its neutrality, and in the post-Cold War period it gained traction as an exporter —between 65% and 85% of Saab’s revenue comes from foreign sales. The company is in the bottom ranks of the top 30 in the world.
Now, Johansson believes, the new commitments should increase the need to exercise the country’s military muscles. “I hope we have more responsibilities over the Baltic Sea region, over the defense of the Nordic countries,” he said.
Sweden currently has 96 C/D model Gripen on the front line, which will be gradually replaced by the new E/F generation, the same one purchased by Brazil in 2014. “In the coming months we will know how quickly we will reach 2% [de gasto do Produto Interno Bruto com defesa, a marca desejada na Otan]”, he said. Today Sweden spends 1.3% of GDP in the sector.
Even if the Turkish opposition blocks the Swedish-Finnish claim to join NATO, Saab believes in the heating of European needs.
Since the beginning of the war, its market value on the stock exchange has almost doubled: its shares were traded on the eve of the conflict at around 210 Swedish kronor and today are at 400 kroner. Its operating profit in the first quarter was above expectations, at US$ 69 million (R$ 355 million)
Is war good for business, then? Faced with the openly rhetorical question, Johansson responds as much as possible. “I only see conflict as a complete mistake, a tragedy and a humanitarian disaster. That’s not why we do what we do. We do it because we want to protect society, people,” she says.
He says that, before the hostilities, there was greater questioning about the role of the defense industry, since making lethal weapons does not fit very well into the fashionable concept of ESG (Environment, Sustainability and Governance, in its acronym).
“We had politicians in Brussels [sede da União Europeia] saying that we needed a defense capability and praising our companies, but on the other hand they said that maybe we did dangerous, socially harmful things. This is absolutely unbelievable, there is no logic,” he said. “But that was before the war. Now, all those discussions are gone.”
Election may affect schedule of new Gripen in Brazil
Micael Johansson is on one of his regular visits to Brazil to discuss the progress of the Gripen program. The Air Force has just announced that the initial order for 36 aircraft, part manufactured jointly with Embraer locally, will have 4 more units.
The executive did not speak in detail about this or about the FAB’s intention to acquire the second batch of fighters, with 26 units, also already announced. “There are also elections coming up which, of course, could affect the timetable, but the dialogue is constructive,” he said.
The purchase of Gripen was finalized under Dilma Rousseff (PT), so it seems unlikely that an eventual victory by Luiz Inácio Lula da Silva will change the scenario for the Swedes. The same cannot be said of Colombia, where the fighter competes with the American F-16 for the primacy of exchanging the fleet of old Kfir models operated by the country.
There, the process is advanced, but the president-elect on Sunday (19), the leftist Gustavo Petro, said during the campaign that he would not spend money on weapons. Johansson is, of course, diplomatic. “We have good support from the Air Force, we are waiting for what the new administration will do. All we know is that they need to change their planes,” he said.
