Opinion: KMW-Nexter merger creates European arms giant

Deutsche Welle
3 Min Read

The German tank manufacturer Krauss-Maffei Wegmann has merged with its French competitor Nexter. DW’s Sven Pöhle fears that the alliance could weaken German guidelines on arms exports.
Last November, Frank Haun, CEO of German tank manufacturer Krauss-Maffei Wegmann (KMW), openly complained about being treated like a mistress. “Everyone needs what we have to offer, but no one wants to be seen with us in public,” he said. Now, the mistress is getting married – to a French partner.

The merger between the German family corporation and its French competitor Nexter is the most spectacular deal in the European arms sector in years. The result will be a European tank giant with about 2 billion euros ($2.2 billion) in turnover, 6,000 employees, and significantly more power and market influence.

From an economic perspective, the merger makes sense. But, politically, it could prove to be explosive. That’s because KMW is bringing some serious baggage to the relationship – the tight regulations that Germany has placed on arms exports.

Watch for loopholes!

The man in charge of export licenses for weapons, Economy Minister Sigmar Gabriel, announced tighter restrictions on arms exports at the start of his term in 2013, and he has kept his word. Last year, a billion-euro deal between KMW and Saudi Arabia fell through because the German government would not approve the sale of hundreds of tanks. France, on the other hand, has been much more liberal when it comes to weapons exports to countries that do not belong to NATO or the European Union. According to the Economics Ministry, checks on German arms exports will not be affected by the merger. And, yet, concern remains that the companies could find ways to skirt German regulations.

This concern springs from an accord signed in 1972. German Defense Minister Helmut Schmidt and his French counterpart, Michel Debre, signed an agreement that both states would leave each other free rein when it came to common arms projects.

There are no joint products from both companies on the assembly line; that will take a while. Until then, it is up to German politicians to ensure that the Schmidt-Debre agreement of 1972 is no longer of any relevance. If that is not the case, then the German government will no longer have sole control over the export of German-made weapons. This would set a precedent for the arms industry that could result in an avalanche of mergers. Many smaller German arms manufacturers have long been looking for partners to reduce their dependence on the national defense budget. And, given the numerous existing and emerging crisis regions in the world, global demand for weapons will certainly not decrease in the coming years – just the opposite.

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