Leopard 2: Can Germany's hesitation over Ukraine exports tank its reputation and arms sales?

Leopard 2: Can Germany's hesitation over Ukraine exports tank its reputation and arms sales?

Hesitation by Berlin over whether to send German-made tanks or approve the re-exporting of such tanks by other countries to Ukraine has damaged the country’s arms industry and leadership within Europe, according to experts.

While Berlin on Tuesday agreed to send 14 Leopard 2 tanks to Ukraine, EU and NATO partners, such as Poland, have been infuriated with how long the decision took and even threatened to act unilaterally.

“Germany’s foot-dragging on supplying Leopards to Ukraine has done irreparable damage to its reputation as a reliable ally within NATO, and as a supplier of weapons,” William Alberque, Director of Strategy, Technology and Arms Control for Europe at the International Institute for Strategic Studies, told Euronews.

“Countries will think long and hard before they purchase weapons from Germany due to its spending months blocking the re-export of Leopards to Ukraine,” he added.

The reputational damage will be lambasted by German arms firms, such as Rheinmetall, which had seen its share price skyrocket following Berlin’s announcement in February to swiftly raise defence spending to 2 per cent of Gross Domestic Product (GDP). The German government has since said this target may not be realised until 2025.

The harm to future German orders

Although Germany is now planning to send its tanks to Ukraine and will allow other Leopard 2 operators to do the same, the damage to the country’s arms industry will still be significant, according to Dr Benjamin Tallis, Senior Research Fellow at the German Council on Foreign Relations.

This is especially important for the country which was the 5th largest exporter of major weapons over the 2017-2021 period. Weapons exports reached a record €9.04 billion in 2021.

But since then, Germany has already lost market shares to rivals such as the US and South Korea who have clinched deals with former clients.

Last year Poland signed a mammoth deal with South Korea for almost 1,000 K2 tanks and over 600 K9 armoured howitzers in a significant blow to the German defence industry.

Poland also recently signed a deal to buy a second batch of 116 US Abrams main battle tanks.

However, Poland isn’t the only European country where German arms are being traded for others. The Baltic states have all either recently ordered or are opting for US-made weaponry.

The fact that Berlin wouldn’t approve re-export licences until the US also agreed to send its battle tanks to Ukraine could also spook future purchases of German tanks and weapons — although it’s seen by some in Berlin as a major win by Chancellor Scholz.

Poland pushes ahead as German leadership takes a hit

However, the diplomatic disagreements over the delay in approving the sending of Leopard 2 tanks aren’t Germany’s only tank trouble.

In December the country halted all further purchases of its new Puma tank after a mass breakdown saw 18 of the units rendered unfit for operations during an exercise.

More worrying for Berlin though will be the damage these debacles will wreak on German standing and leadership within Europe.

Last week, Polish Prime Minister Mateusz Morawiecki said that: “We will not passively watch Ukraine bleed to death”. He warned that if Germany would not act, then Poland would by building a smaller coalition of countries willing to send their Leopard 2 tanks, potentially without the green light from Berlin.

Dr Tallis told Euronews that all of this “helps position Poland as a leader and as a power in Europe”

He argued that while many in Germany want to see Poland become a power, they are less keen on seeing the country become a leader, a position traditionally filled within Europe by France and Germany.

Dr Tallis added that while: “Many in Berlin who would rely on their reputation and the problematic nature of the Law and Justice (PiS) Polish Government to prevent this [Poland becoming a leader] and ensure they retain a degree of control, haven’t realised how far their stock has fallen”.

How join ventures could circumvent German re-export rules

Despite the possibility of German weapon exporters losing market share, it is not all doom and gloom.

Germany’s €100 billion overhaul of its military and the ongoing war will provide a strong base for German producers in the short term while demand is pent up.

Joint ventures between nations may also provide a route for NATO countries to buy German arms without fear of falling foul of re-export rules again.

An Elysée source said that "the basis is that for common equipment, built-in common, there is a freedom of export except in exceptional circumstances which are internationally binding."

Pressure grows on Switzerland to follow suit

The move by Germany will also increase the pressure on Switzerland to approve the re-export certificates for equipment destined for Ukraine which it has been withholding, citing its infamous neutrality.

Last year the country refused to grant Germany re-export certificates for Swiss ammunition, it also blocked moves by Denmark to transfer Swiss-made Piranha III armoured vehicles and is currently examining a request from Spain to allow the transfer of two anti-aircraft guns, but has said approval is probably not possible.

Alberque argued that a reversal in the Swiss stance could not come at a better time, citing the fact that “its ‘neutral’ stance was undermined when Russia refused to meet with the United States in Geneva last year for talks because they no longer saw Switzerland as neutral."

The fact that Switzerland also supplied weapons to Saudi Arabia, despite its involvement and use of arms in Yemen has further undermined the stance of the Swiss Government.