Artillery and Assurance: How Guaranteed Contracts Could Bridge the Gap in the Ukraine Conflict
The ongoing conflict between Russia and Ukraine has brought to the forefront two distinct yet interconnected problems: the West’s inability to replace Ukraine’s artillery at the rate it’s being used, and the continued war due to divergent beliefs between Russia and Ukraine regarding the West’s long-term commitment to defending Ukraine. These issues may seem unrelated, but a closer examination reveals that they are, in fact, two sides of the same coin. In this opinion piece, we’ll explore the underlying causes of these problems and propose a solution that could potentially address both.
The Artillery Deficit
Ukraine’s need for artillery is immense, firing a significant number of shells each month. The West, however, has been unable to replace these at the required pace, leading to a slower Ukrainian offensive and even the controversial decision by the United States to ship cluster munitions to Kiev.
Why this shortfall? The answer lies in the post-Cold War era, where more than half of the world’s population was born after the Cold War ended. The United States bears some responsibility, but much of it falls on Europe’s failure to meet the NATO benchmark of spending at least 2% of GDP on defense annually.
Take the 155-millimeter shell, a common artillery munition for a Howitzer, as an example. Germany had only 20,000 in stock at the start of the war, and Europe’s annual production is estimated at only 300,000. To meet Ukraine’s needs, businesses must invest in R&D, factory creation, and hiring required for new production. However, this investment is so expensive that it cannot be recouped with only a year or two of production. If the war ends quickly and demand dries up, the investment becomes unprofitable.
A Solution from the Past: Guaranteed Contracts
The solution to this dilemma may lie in our recent past, during the COVID-19 pandemic. Governments offered guaranteed contracts to businesses for the production of masks and vaccines, shifting the risk onto the government. This ensured that businesses would get paid one way or another, encouraging them to invest in the necessary infrastructure.
Applying this strategy to the war, the West could guarantee artillery purchases for years to come. This quick fix would not only align the incentives for arms manufacturers but also help resolve the information asymmetry between Russia and Ukraine.
Costly Signals and Credibility Gap
The traditional solution to resolve a credibility gap is a costly signal, a price paid regardless of how the opponent responds. By guaranteeing contracts, the West conveys inherent sincerity in its commitment to Ukraine. The money becomes unrecoverable, eliminating the risk of bluffing.
This strategy would not even be an option in Russia, where the government’s flexibility comes back to haunt it. If the Kremlin reneges on a military contract, there’s no legal recourse. This has been an issue for Russia going into the war, with consequences on the battlefield.
Conclusion
Guaranteed contracts for artillery production do not guarantee the end of the war, but they could be a significant step towards resolving two major problems. By aligning the incentives for arms manufacturers and sending a clear, costly signal to Russia, the West could bridge the artillery gap and make progress toward ending the war.
This approach showcases the power of strategic thinking and the importance of understanding the interconnectedness of seemingly disparate issues. It also highlights the unique advantages of western-style governments with strong independent courts and the rule of law, where even the government can be held accountable.
