Bundeswehr special fund: more seltzer, less champagne for the navy

Necessary digression: Federal budget

On 16 March 2022, the Federal Government adopted the budget for 2022 as well as the key figures for 2023 and the financial plan up to 2026. One hundred billion euros are to flow into a special fund to equip the Bundeswehr. The necessary amendment to the Basic Law was also initiated by the cabinet.

At 457.6 billion euros, the federal budget in 2022 will be lower than in the previous year. Due to the pandemic, it reached a record value of 556.6 billion euros. Eleven percent of the budget, 50.3 billion euros, is earmarked for Section 14, the defence budget (ESuT reported). An increase of almost three percentage points compared to the 8.2 per cent of 2021. In the years after 2022, the defence budget is to be fixed at 50.1 billion euros.

By fixing the budget at 50.1 billion euros, more money is ostensibly available in section 14. A cumulative total of 12.4 billion euros more from 2023. However, this is only half of what the defence minister had demanded in February.

The path to meeting the two percent margin promised by Federal Chancellor Olaf Scholz for defence spending is also not yet visible. In 2006, the defence ministers of the NATO countries agreed to allocate at least 2 % of their gross domestic product to defence spending in order to ensure the Alliance's continued military readiness. At the Wales Summit in 2014, the Heads of State and Government of the member states vowed to "strive for a real increase in defence spending in line with GDP growth and to work towards the 2 % guideline within a decade in order to achieve their NATO capability goals and close NATO's capability gaps."

The German government has failed to meet the NATO target of spending at least two percent of gross domestic product on defence for as long as it has existed. And will continue to miss it with the current draft budget. The share of gross domestic product of 1.46 per cent in 2022 will continue to fall.

The 100 billion euro special fund for the Bundeswehr announced by Scholz is intended to help out of the crisis. It is to be implemented via a clause in the Basic Law. According to the Federal Government's website: "The Federal Government has also passed a draft law to amend the Basic Law to secure the special fund under constitutional law. It provides for a new paragraph 1a in Article 87a of the Basic Law, which authorises the federal government to establish the special fund with its own one-off credit authorisation. This credit authorisation is excluded from the credit ceilings of the debt rule." (Source: https://www.bundesregierung.de/breg-de/aktuelles/sondervermoegen-bundeswehr-2016560)

But it is not only the procedure for getting the special assets on the railway that is shrouded in question. There are also questions about its final utilisation. According to the intention of those behind it, the special fund is intended to make a "significant" contribution to further strengthening the Bundeswehr's defence and alliance capabilities. In conjunction with the strengthening of the original budget, defence spending is to be increased to over two percent of Germany's economic output, the gross domestic product. The German government intends to define the specific use of the 100 billion euros in an economic plan, Handelsblatt reported on 16 March, citing Reuters. According to the report, all income and expenditure is to be estimated in the economic plan. This is to be drawn up at a later date. According to ESuT information, a list of priorities is currently being drawn up. It is important that the billions announced are not channelled into major projects in the distant future, but are used quickly where equipment, materials and weapons are lacking.

Irrespective of this, the financial injection announced as a turnaround is not sufficient as a perspective for sustainable funding of the Bundeswehr. With a constant budget, the purchasing power of the allocated funds is already falling due to inflation.

Based on the gross domestic product of 2021, 71.4 billion euros are required annually in Section 14 (data source: Federal Statistical Office). Even with a favourable calculation, this value would not be achieved over the five years. This does not take into account the increase in gross domestic product or inflation. The 50.1 billion euros in 2023 amount to a share of 1.30 per cent. In other words, a decrease compared to 2022.

End of digression.

Marine: more seltzer, less sparkling wine

According to the information available here, the sip from the Bundeswehr special fund for the navy is likely to be far smaller than was to be expected from the pleasing announcements made by Federal Chancellor Olaf Scholz in his government statement on 27 February 2022. The draft budget for 2022 of 16 March 2022 does not bring any relief to the Bundeswehr or the Navy. Compared to the previous version, it contains the necessary details for the projects initiated in 2021 and the continuation of armaments programmes that have already been decided. As far as the navy is concerned, the procurement of the Naval Strike Missile Block 1A (NSM) missile was included.

Marineforum takes a look at the requirements of the navy and the possible procurements for the navy in terms of the special fund. Which strategic projects could realise the short-term windfall?

Previous decisions

A look back for now. Just in time for the end of the legislative period in September 2021, the German Bundestag approved 27 procurement projects in summer 2021. In the last week of the session before the summer break, the Navy was able to secure 8.9 billion euros for sea-going and flying units. Class 212 Common Design (U212 CD) submarines, fleet service boats, fuel supply vessels, test boats and maritime reconnaissance vessels were contracted. In addition, expenses were incurred to ensure operational availability, i.e. modernisation of the Class 123 frigates and long overdue modernisation of the Class 332C minehunting boats, for the cross-sectional procurement of radar navigation systems and a communication system to manage the on-board damage control and combat service. Budget funds were also approved for the Naval Strike Missile Block 1A missile and for the certification and repair of the RBS 15 Mk3 anti-ship missile. Decisions on the Class 126 frigate (ex MKS 180 - multi-purpose combat ship), the supplementary procurement of the K130 corvette and a new generation of naval helicopters had already been made earlier. 2013 in the case of Sea Lion and 2020 for Sea Tiger. In April 2021, the responsible parliamentary committees (Defence and Budget) gave their approval for the implementation of the Sea Falcon drone system to equip the Class 130 corvettes, which was long overdue. The navy will then have a total of four flying segments (two Skeldar V-200 drones each) and control stations on the five corvettes and in Naval Air Wing 5.

In addition to the units for the German Navy, the decisions in favour of a multi-purpose boat and a test boat for the Wehrtechnische Dienststelle 71 as part of the 'Seeversuch Küste' procurement measure complete the picture.

Skills and other gaps

Even if the parliamentary parforce ride in summer 2021 has "hammered down important pegs" for a complete overhaul of the navy, the investment backlog is significantly larger and is due to the peace-oriented austerity programme. The needs of modern warfare, including in national and alliance defence, have often been ignored.

"Dergels"

To date, support vessels and other naval operating vehicles (such as diving boats and harbour tugs), the "dergels", have been given more than insufficient consideration in the procurement plans. In a procurement prioritisation, the harbour operating and support vessels, among others, have never been at the top of the list. For example, the navy's tugs (harbour and sea tugs) are getting on in years and their towing and towing capabilities are no longer adequate for the new large units of the F125, F126 class and also the EGVs that have been in service for a long time. The extension of their service life, which shone through as an option in parliamentary debates (in April and August 2021) ('uninterrupted maintenance of the capabilities provided by towing vehicles'), is not a solution in view of their repeatedly delayed replacement procurement. Not only because specific qualifications are associated with the material and personnel involved. The Class 725 A/B harbour tugs have a maximum bollard pull of 23 tonnes, the operability of which must be TÜV-certified. The crews are safety-checked, instructed in military seafaring, perform and can perform gunnery analyses and much more. The functional personnel of naval vessels experience at bases, especially in delicate situations, that the naval tug always comes and nothing needs to be explained to them.

Tug launches are used to provide support services within the base, for example for hauling pontoons and oil barges and for docking and undocking operations. But it's not just about towing. In addition to towing and manoeuvring, the tugs and barges also provide a range of support services: Shuttle services for anchorages in the roadstead, diver support, securing naval infrastructure, escorting naval units (e.g. when passing through the Kiel Canal). The catalogue of tasks of the "Wangerooge" and "Spiekeroog", the class 722 sea tugs, also includes support for 'survival training at sea'. Aircraft crews practise their behaviour in the event of an emergency ditching under real conditions. This training is conducted for all Bundeswehr aircraft that have to fly over the sea. If the "Wangerooge" fails, will the air force pilots no longer be able to fly at sea?

Box

Naval tugs: Overview of class, number and age

The end of the useful life is specified as 2025 for all of them.

Source: Bundestag printed paper 19/31844

End of box.

It is easy to see from the list that the Bundeswehr is operating a "historic fleet" rather than a support capability geared towards today's military requirements. As the units age, the need for maintenance increases and their availability decreases.

Mission boats

Multidimensional naval warfare includes the possibility of impact from sea to land. The German Navy has four 'weapons' at its disposal for this purpose: In addition to naval artillery and the RBS 15 MK 3 missile, which can also be used against land targets, there is also the personnel component of the naval battalion and the Special Forces Command of the Navy (KSM), commonly referred to as the combat swimmers. However, there is a lack of appropriate transfer resources and the requirements need to be better covered. For this reason, operational vehicles have long been on the list of requirements of the naval command and operational command. Possible solutions are available in principle, but the availability of the necessary budget funds for procurement and operation in line with requirements could not be made possible in Section 14 (Defence).

Coastal apron surveillance, harbour protection, tactical mobility at sea and evacuations at sea can be found in the conceptual foundations of the armed forces. Tactical mobility at sea' refers to the landing capability for infantry forces, i.e. the movement of task forces ashore - even over long distances. Evacuations by sea basically address the same issue in the context of "Operations for evacuation from crisis situations abroad" (Bundeswehr concept, April 2018) and differ in terms of objectives and transport costs. Both 'tactical mobility and evacuation by sea' capabilities do not necessarily have to be provided only by the naval task forces, i.e. the naval battalion and the specialised naval task forces, the combat swimmers. The operational requirements of such (naval) warfare assets include manoeuvrability, protection and their own firepower, limited in size and weight. Mobility criteria such as suitability for road transport and possibly also air transport options will also play a role in the selection decision. In addition to these more intrinsic reasons, there are also external incentives. The memorandum of understanding signed in February 2016 on the gradual integration of the naval battalion with the forces of the Royal Netherlands Navy also implied plans for the naval battalion's operational boats.

However, it lasted until January 2021 with the signing of the CPM phase document 'Capability Gap and Functional Requirement (FFF)' for the project "Tactical Mobility of Maritime Forces on the Water". The FFF outlines the requirement for a total of fifteen units - ten for the tasks of the sea battalion, five for the combat swimmers. In a parliamentary enquiry in May 2021, the Ministry of Defence is still behind ten multi-purpose combat boats for the naval battalion and an independent capability. The timeframe for the increase in capability is given as 2027.

Due to the rapid availability, the user, the naval battalion, focusses on products that are available on the market. These include - without any claim to completeness - types from Scandinavian manufacturers. These include SAAB's CB 90 and the Finnish Navy Alutech with two types: Watercat M18 "Jehu" and Watercat 1250 Patrol from Marine Alutech.

The FCC17 Alligator design solution from the German shipyard Fassmer Werft roughly corresponds to the three types. The design by "Team Deutschland", the merger of Hagenuk Marinekommunikation GmbH, Hensoldt Sensors GmbH, Tamsen Maritim GmbH and Plath Corporation GmbH, also corresponds.

Exact prices are not given by the manufacturers. The Finnish Navy paid around 34 million euros for its twelve Watercat M18 "Jehu" combat boats from Marine Alutech OY, Finland, which equates to a unit price of 2.8 million euros. Sweden recently procured 18 CB90s from the court supplier Saab for the equivalent of 39.7 million euros - unit price 2.2 million euros. Switzerland budgeted just under 45 million euros for the procurement of 14 patrol boats (Watercat 1250 Patrol from Marine Alutech) - 3.2 million euros per boat.

The need is recognised. However, as with the "Dergels", there is a lack of realisation: the sea is calm. The Bundeswehr Special Fund could help here.

Where else are you stuck?

In addition, the capability maintenance of the spectrum currently represented by the Class 404 tenders as well as necessary adjustments to establish command and control capability (project name "Medium Support Unit", MuSE) are due for procurement. Other priorities for task-oriented equipment with a focus on national and alliance defence (LV/BV) include the accelerated procurement of threat-appropriate mine countermeasure vehicles, including the so-called 'toolbox' that is common today. Triggering the option for the fifth and sixth units of frigate 126 would not only benefit the navy, but also the German naval shipbuilding industry. Two submarines from the Norwegian-German joint programme U212CD, which were previously on the table as an option, are among the priorities, even if they cannot be realised in the short term. Additional P8 long-range maritime reconnaissance vessels can also support the operational base of a modern submarine hunt in a sustainable manner and maintain the available stock.

Long-range autonomous vehicles are also conceivable at a higher place in the list of priorities. Ammunition, including missiles, torpedoes and mines anyway. One element of this will come to fruition: The 2022 draft budget of 16 March does, after all, include the procurement of the NSM, as mentioned above. And if the inspector had his way, he would fill the warehouses with ET/AT.

With the planned end of the service life of the three Sachsen-class air defence ships, there will be a capability gap in maritime air defence in the areas of air defence and area protection from the mid-2030s. This gap is to be closed by the "Next Generation Frigate". The ships, known as F127s in the navy, will also include options for sea-based defence against ballistic and hypersonic missiles. All in the spirit of a German armed forces geared towards national and alliance defence. A 'military off the shelf' solution could be recommended for the rapid (re)realisation and gaining of operational and logistical synergies. Ships and designs are available from NATO partners. The design of the "Constellation Class" currently being realised for the US Navy, which is based on the FREMM class, would not only have the armaments partnership charm of the transatlantic constellation. It also opened up opportunities for German shipyards.

Means of communication for +Multi Domain Operations+ as well as cyber capability in naval warfare are elements that are inherently to be covered by strengthening the command and control capability of the Navy as well as strike forces.

Corvettes K130

The idea of procuring new corvettes could also be realised: five additional K130 corvettes as an economical solution instead of modernising the first batch. The argument of ensuring the continuous operation of ten identical corvettes instead of modernising the first batch is plausible.

The obsolescence elimination and adaptation of the systems due for the first batch would not extend the service life of the units. The previous ideas did not take into account the shipbuilding condition and the main components of the platform operation. Installing new hardware in old hulls is not without risk, particularly in terms of availability. The procurement of five additional corvettes in the same state of repair as the units in the second batch will result in synergy effects in training, maintenance and operation.

Conclusion

An analysis of the Bundeswehr's previous requirement lists reveals few strategic projects that could be realised in the short term thanks to the windfall. Short-term or 'fast' is a term from another world when it comes to the procurement of defence articles anyway. This has to do not only with production, but also with the procedures. Public contracts have to be put out to tender. Europe-wide, unless the material to be procured falls into the 'key technology' category. Special forms of material purchasing such as 'immediate operational requirements' allow a fast lane. Such exceptions are subject to parliamentary approval. Projects with procurement costs in excess of 25 million euros must be authorised by the Bundestag. To put it simply, four thousand 25-million-euro proposals would be required in order to utilise the 100 billion euros. This in turn makes it clear how limited the options are for a more pragmatic approach to procurement. Ultimately, parliament is the ruler of the process. It could set the course for abandoning the usual procurement channels.

The 100 billion euros are important. Money is coming - one is inclined to say: finally! It enables holes to be plugged, orders to be increased and projects to be started that were previously out of reach. For the navy, support vehicles, patrol boats and an expansion of the fleet of maritime reconnaissance aircraft could be realised. However, the initial euphoria has faded. There are fears that there will not be much left over for naval and naval air forces.

Keyword 'market-available' products. In the case of the navy, 'market-available' does not mean that a new ship or aircraft will be added to the fleet tomorrow if a purchase is made today. Instead of developing a frigate 127 in-house, using an existing design (or in the process of being developed) would also amount to a political investment in the European or transatlantic partnership. When I formulate this sentence, the augurs of national key technology and the preservation of Germany as a shipyard location are already beckoning.

Five additional K130 corvettes could represent a more economical solution in view of the upcoming modernisation of the five units in the first batch and have a favourable effect on the availability of units in the already small German Navy. Tenders, minehunters, fleet service boats and fuel transporters are overdue replacements. And they do not contribute to the increase in flagstaffs, nor does the replacement of the dergels. Two or three additional P8 Poseidon maritime patrol vessels would restore or come close to the original fleet size of this capability. The open options for two more F 126 class frigates and two more U212CD submarines increased the navy's fleet, should the German government decide to honour them.

Germany on the way to the third largest defence budget in the world?

Looking over the edge of the naval cap: the Bundeswehr special fund alone will not solve the Bundeswehr's dilemma. Not only because of its organisation. What is needed is a strategy in security policy that defines the objectives and enables prioritisation. What is also desirable is a different social awareness of security policy issues and a different approach to the armed forces. Coupled with the realisation that military measures can certainly be a 'normal' political instrument.

Ultimately, a different culture of defence procurement is also required. Structures, procedures and laws complicate efficient procurement. Simplifications without compromising safety standards or taking risks for the life and limb of soldiers should be feasible.

The nails need to be hammered in quickly. The industry is full of expectation - and not just the maritime industry. It is now to be expected that the framework conditions will change to enable rapid implementation. Procurement, budgetary regulations, procurement law, armaments processes - they will neither be simplified nor accelerated, nor will they become less bureaucratic with the proclamation of a new era. The legislator is in the driving seat.

The world has changed, it's time for things to change. Let's keep our fingers crossed that the long-desired sip from the financial trough will have the desired efficiency effect. It would be a tragedy if this does not succeed. After all, the promised growth will help Germany to have the third largest defence budget in the world. The investments and armaments projects made possible by the special fund of 100 billion euros can actually improve the availability of equipment and thus increase the material operational readiness of the Bundeswehr in the short term.

Based on the gross domestic product of 2021, 71.4 billion euros are required annually in Section 14 (data source: Federal Statistical Office). Even with a favourable calculation, this value would not be achieved over the five years. This does not take into account the increase in gross domestic product or inflation. 50.1 billion euros allocated for 2023 amounts to a share of 1.30 per cent. In other words, a decrease compared to 2022.

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