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Eastern Europe's defense industry: from boom to bang?

Eastern Europe's defense industry prospects have rarely looked better, as NATO puts its military money where its mouth was. But could upping the alliance's presence in the region set off a new arms race with Russia?

Tensions have been building since Russia's annexation of Crimea two years ago and the West's imposition of sanctions, but the collapse of a US-Russia brokered ceasefire in Syria on October 3 and Washington's accusations that Moscow has been using cyberattacks to disrupt the US presidential election have seen already-fragile relations worsen.

NATO goes forth

With NATO's policy regarding Syria seemingly on ice until a new president is sworn in in January, and a series of defense contracts up for grabs among its mainly Eastern European members, the alliance made good this week on its July promise to bolster its presence in northeastern Poland and the Baltics as of 2017.

The alliance's plan is to set up four battle groups with a total of 4,000 troops from early 2017, backed by a 40,000-strong rapid-reaction force.

NATO chief Jens Stoltenberg

NATO chief Jens Stoltenberg

NATO Secretary-General Jens Stoltenberg said on Wednesday the move was "a measured response to what the alliance believes are some 330,000 Russian troops stationed on the country's western flank near Moscow."

"Close to our borders, Russia continues its assertive military posturing," Stoltenberg said. "This month alone, Russia has deployed nuclear-capable Iskander missiles to Kaliningrad and suspended a weapons-grade plutonium agreement with the United States. And Russia continues to destabilize eastern Ukraine with military and financial support for the separatists. These moves do not lower tensions or restore predictability to our relations."

"NATO does not seek confrontation with Russia. We don't want a new Cold War and we don't want a new arms race," he added.

The US will contribute 900 troops alongside artillery, tanks and explosives experts to NATO's build-up against Russia, Secretary of Defense Ash Carter said on Wednesday. They will lead British and Romanian troops in what he called a "deterrence" mission against Russia. 

France, Denmark, Italy and other allies are expected to join the four battle groups led by the US, Germany, the UK and Canada to go to Poland, Lithuania, Estonia and Latvia, with forces ranging from armored infantry to drones.

The big bad bear

But to justify such a move, NATO still needs a threat and in this case the old enemy, Russia, is seemingly ready-made.

"The question of how real the threat is remains, in my opinion, open," Jan Mus, a lecturer at Vistula University in Warsaw, says. "Russian operations in Crimea and Donbass suggest that options of actual invasions should not be ignored. Therefore, I believe the threat is real."

In early October the Polish General Roman Polko, former head of the GROM military unit, claimed a "Russian invasion" of the Baltics was inevitable "in the nearest future."

"There are a lot of provocations, so Russia may attack on some artificially masterminded pretext in the coming months," Polko said, adding that "the defense of interests of the Russian minority" in Lithuania or Estonia may be such a pretext…as well as defense of the Russian memorials in Poland."

"A threat is a still a threat even if it does not materialize," Mus said.

One of Russian President Vladimir Putin's tactics is clearly to fan fears based on uncertainty, both for Russians and for their neighbors. Images, for example, emerged this week showing Russians taking part in a nuclear war drill. Added to Putin's decision recently also to suspend a treaty on cleaning up weapons-grade plutonium it seems clear he is willing to use nuclear disarmament as a bargaining chip in disputes with the US over Ukraine and Syria.

Russia also recently unveiled pictures of its largest ever nuclear missile - dubbed Satan 2 by NATO - which is reportedly capable of destroying an area the size of the UK.

Reports out of Russia, meanwhile, suggest the Kremlin has reinforced its Baltic Fleet in Kaliningrad with two small warships armed with long-range cruise missiles. The newspaper "Izvestia" cited an unnamed military source saying the two ships, the Serpukhov and the Zeleny Dol, had already entered the Baltic Sea. The so-called Iskander-M cruise missiles can hit targets across Poland and the Baltics.

There is also a strong Russian armed presence in Belarus, and worry over the scale of military exercises, in which the scenarios include nuclear weapons and assaults on Poland, Sweden and the Baltics, an official said.

'Russia is the aggressor'

Until the Kremlin authorities change their approach, Russia should be treated as the biggest threat to peace in Europe and the world, Polish Defense Minister Antoni Macierewicz said in July in an interview with the newspaper "Rzeczpospolita."

"The part of Europe we live in is in real danger. Russia is the aggressor. Not since World War II have we faced such a situation. What's more, Russia is not hiding its aggressive intentions, either towards Ukraine or towards other countries of the region, including Poland."

poland's Defense Minister Antoni Macierewicz

Poland's Defense Minister Antoni Macierewicz

Where there's muck there's brass

Amid all the bluster, the wheels of big business whirr. Warsaw plans to raise its military spending to 2.5 percent by 2030, replacing old Soviet equipment with modern armaments that can counter the increased threat from Russia. Under the program Poland plans to spend at least PLN 83 billion (21.7 billion euros, $23.7 billion) on new weapons and military hardware over the next five years.

To get things started, Warsaw reiterated this week it plans buy the US Army's Patriot air-and-missile defense system, in what is clearly a response to Russia's deployment of nuclear-capable missiles to Kaliningrad. The deal could reportedly be worth as much as $5.6 billion.

Poland is in the middle of its third Strategic Defense Review (SDR) since joining NATO in 1999.

"Major procurement decisions in the next 12 months, as well as impending government acquisition reforms and foreign defense arrangements, are sure to shape the Polish defense industry for decades," Dominik Kimla, a Warsaw-based consulting associate at Avascent, said.

"How Poland invests for the coming years can also transform its military from a defensive-oriented one to a force whose capabilities will make Moscow think twice about taking any action against its neighbor to the West."

"This underscores a clear doctrinal shift by the defense ministry away from its strictly defensive posture towards an emphasis on offensive capabilities that could serve to engage or deter potential enemies, namely Russia," Kimla said.

Meanwhile, the US has implied - and presidential candidate Donald Trump said outright - that if NATO members want security, they will also have to start paying more for it.

The only European NATO members that currently meet the alliance's defense spending target of 2 percent of GDP are the UK, Estonia, Greece and Poland. The other 23 fall short of the NATO guideline by an average 1 percentage point.

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