The Warsaw Pact Industrial Inheritance¶
Central and Eastern Europe’s defence industrial base is, in a meaningful sense, a Cold War fossil that has become a strategic asset. The Soviet Union’s military-industrial planning embedded substantial production capacity in its westernmost Warsaw Pact allies — not primarily to develop these countries’ independent industrial strength, but to extend Soviet production depth into territory that would be the first to suffer NATO strikes in a general European war. Factories in Czechoslovakia, Poland, and Romania produced artillery shells, small arms ammunition, armoured fighting vehicles, and aircraft components as integral nodes in a Soviet supply chain designed for sustained high-intensity warfare.
The post-1991 transition was brutal for this industrial base. Demand collapsed as Warsaw Pact armies shrank dramatically. Production of Soviet-calibre ammunition (7.62×39mm, 7.62×54mmR, 152mm) became structurally problematic as CEE armies transitioned to NATO standards. Factories were privatised, shuttered, or converted to civilian use. The workforce aged; new engineers chose careers in IT or finance. By 2010, the CEE defence industrial base was a shadow of its Warsaw Pact scale, surviving primarily through export to non-NATO markets and modest domestic procurement.
Russia’s invasion of Ukraine reversed this decline dramatically and suddenly. Within weeks of 24 February 2022, CEE defence factories received inquiries and contracts at volumes they had not seen in 30 years. The combination of NATO ally demand for Ukraine support, urgent national procurement by CEE governments, and EU collective financing mechanisms produced an industrial surge that is still building toward its peak.
Poland: The Largest CEE Industrial Base¶
Poland’s defence industry, consolidated under the Polska Grupa Zbrojeniowa (PGZ) holding company since 2014, is the largest and most capable in CEE. PGZ comprises over 55 companies employing approximately 17,000 people, producing armoured vehicles, artillery systems, ammunition, small arms, naval equipment, and electronics. Key subsidiaries include:
Huta Stalowa Wola (HSW): Poland’s primary heavy weapons manufacturer, producing the AHS Krab 155mm self-propelled howitzer, Rak 120mm self-propelled mortar, and serving as the licensed production site for the K9A1 howitzer and K2PL main battle tank. HSW’s production of Krab accelerated from approximately 24 per year in 2021 to a target of 40–48 per year under wartime contracts. The K2PL production line, requiring significant tooling investment, is expected to reach initial production capability by 2026–2027.
MESKO: Ammunition and rocket manufacturer producing 35mm anti-aircraft ammunition, 120mm tank rounds, and Piorun MANPADS missiles. MESKO has expanded production of Piorun — a modern infrared-homing MANPADS that has been effective against Russian helicopters in Ukraine — with Poland delivering several hundred to Ukraine and ordering additional stocks domestically.
PZL Świdnik: Helicopter manufacturer (a Leonardo subsidiary), producing AW149 and W-3 Sokół helicopters. Poland has ordered 32 AW149 military helicopters in a contract signed in 2023.
WB Electronics: Electronics and drone manufacturer producing the FlyEye reconnaissance UAV and Warmate loitering munition — both of which have been exported to Ukraine and demonstrated combat effectiveness.
The offset requirements in Poland’s major foreign procurement contracts (K2, K9, HIMARS) are building industrial capability beyond the PGZ structure: Hyundai Rotem and Hanwha Defence are funding production lines at HSW; Lockheed Martin is partnering with Polish companies for F-35 sustainment and component supply.
Czech Republic: Europe’s Underrated Arms Exporter¶
The Czech Republic is among Europe’s most significant arms exporters relative to GDP — defence exports exceeded $2 billion in 2022, driven by ammunition, wheeled vehicles, and small arms. The industrial base that produces this output is a direct descendant of Czechoslovak arms manufacturing that dates to the interwar period and supplied the Wehrmacht during occupation and the Warsaw Pact afterward.
CZ Group (Česká Zbrojovka): The world’s largest producer of handguns by volume, with customers including US law enforcement (the CZ P-10C has won several US contract bids) and militaries across NATO. CZ acquired Colt’s Manufacturing Company in 2021, creating a Czech-American small arms group with US production capacity. For CEE defence, CZ’s Bren 2 assault rifle in 5.56×45mm NATO calibre has been adopted by the Czech Armed Forces and exported to several allies.
Excalibur Army: The Czech Republic’s primary heavy vehicle and ammunition producer, operating inherited Czechoslovak tank factory infrastructure. Excalibur Army has been critical to Ukraine support: the company has sourced, overhauled, and delivered hundreds of T-72 and T-55 tanks from former Warsaw Pact stocks across Europe, serving as a commercial intermediary for allied donations. In 2022–2023, Excalibur channelled approximately 200+ tanks to Ukraine from Czech, Polish, and third-country surplus. The company also produces 155mm artillery shells at significant scale.
STV Group and MSM Group: Czech ammunition manufacturers that together produce 155mm, 120mm, and smaller-calibre rounds. Czech ammunition output has been critical to NATO’s Ukraine support: the Czech government’s ammunition initiative, announced in February 2024, contracted for approximately 800,000 155mm shells from Czech and partner manufacturers, funded by a coalition of 15+ European countries (not including the EU collectively). This initiative delivered the first shells by mid-2024 and represents the largest single European ammunition procurement action of the war.
Slovakia: Tank Overhaul Capacity¶
Slovakia’s defence industrial base is smaller than Poland’s or the Czech Republic’s but has played a specific role in Ukraine support through its T-72 overhaul capability. The Slovak VOP (Vojenský opravovní podnik — Military Repair Enterprise) at Trenčín has overhauled Soviet-era armoured vehicles for decades, and this capacity has been applied to refurbishing T-72 variants from CEE stocks for transfer to Ukraine.
The Slovak firm ZTS, which produced T-72 variants under Soviet licence during the Cold War, retains engineering knowledge for these platforms despite no longer producing them at scale. This institutional knowledge — the ability to diagnose failures, machine replacement parts, and recertify vehicles to operational standards — is a strategic industrial asset in a war where T-72 operational rates determine Ukrainian armour capability.
Slovakia has faced domestic political complications in its Ukraine support under Prime Minister Fico’s government (elected 2023), but commercial contracts between Slovak firms and allied governments (or Ukrainian end-users) have continued, insulated to some degree from political direction.
Romania: Ammunition and ROMARM¶
Romania’s ROMARM state holding company oversees ten defence enterprises including ammunition plants, the Arsenalul Armatei (Army Arsenal), and the Fabrica de Arme Cugir small arms factory. Romanian ammunition production capacity includes 155mm artillery shells, 120mm mortar rounds, and small arms cartridges. The 155mm production line at Sadu has been operating extended shifts since 2022, contributing to NATO’s Ukraine support effort and to Romania’s own procurement.
Romania’s particular contribution to regional defence industry is its potential as a south-eastern anchor for NATO-standard ammunition supply. The country’s proximity to the Black Sea and to Ukraine’s southern logistics corridors gives Romanian production strategic positioning for Ukraine support that Polish or Czech factories — requiring longer road or rail transit — cannot replicate as quickly.
The ROMARM structure requires modernisation investment: ageing infrastructure, environmental compliance costs, and workforce replacement are all constraints. The EU’s EDIRPA mechanism has provided some co-financing for Romanian ammunition production expansion, and bilateral agreements with the US (under the EUCOM security cooperation framework) have funded facility upgrades.
The 155mm Shell Shortage: A Structural Crisis¶
The 155mm artillery shell shortage that became publicly visible in 2023 is the clearest demonstration of the gap between legacy production capacity and current requirement. NATO member states collectively donated or contracted for over one million 155mm shells to Ukraine in 2022–2023, drawing down inventories that had been maintained at peacetime consumption rates. European production of 155mm rounds prior to 2022 was approximately 300,000–400,000 rounds per year across all producers — a figure calibrated for peacetime training, not sustained combat.
Ukraine’s consumption rate in heavy combat phases reached 6,000–8,000 rounds per day — a figure that, annualised, would require over two million rounds per year for Ukraine alone. NATO’s total pre-war production capacity was thus approximately one-fifth of Ukraine’s sustained combat requirement.
The industrial response has been significant but time-lagged. Rheinmetall in Germany has announced expansion of its Unterlüß 155mm production facility to 700,000 shells per year by 2025, up from 70,000. Czech producers have expanded. Polish manufacturers at MESKO and affiliated primes have accelerated. The aggregate European 155mm production target by 2025–2026 is approximately 1.2–1.5 million rounds per year — an improvement but still below the combination of Ukrainian operational consumption and NATO restocking requirements.
The shortage is not merely a production problem; it is a supply chain problem. 155mm shells require propellant (nitrocellulose production is a bottleneck), fuzes (precision electronic fuze production is consolidated in few factories globally), and shell bodies (requiring steel of specific grades). Each component has its own production constraint and its own lead time for capacity expansion.
Rheinmetall’s Lithuanian Factory: German Industrial Reach into CEE¶
The announcement by Rheinmetall in 2023 of a planned ammunition factory in Lithuania represents a qualitative shift in how Western European defence primes are approaching CEE industrial presence. The plant, expected to produce 155mm shells and potentially other munitions, would provide NATO-aligned ammunition production capacity in the Baltic theatre — reducing dependence on supply chains running from Germany or the United States through the Suwałki corridor.
The Lithuanian factory is one element of Rheinmetall’s broader CEE industrial expansion: the company has also announced a Ukrainian factory (in a joint venture with the Ukrainian government), a Hungarian armoured vehicle production partnership, and investment in Polish production. These commitments reflect the commercial logic that the largest NATO market growth of the coming decade is in CEE, and that local production partnerships reduce political friction and satisfy offset requirements.
The strategic implication is significant: if Rheinmetall’s Lithuanian plant is operational by 2026–2027, it provides production capacity that survives the closure of the Suwałki corridor — the critical Baltic logistics vulnerability. A factory in Lithuania producing shells for Lithuanian and Estonian K9 howitzers does not depend on the Suwałki corridor remaining open. It is a logistics resilience measure as much as a commercial investment.
South Korean Competition¶
South Korea’s penetration of CEE’s defence market represents a structural competitive challenge for European defence primes. Korean success with K2 tanks, K9 howitzers, K239 MLRS, and FA-50 jets — all winning CEE contracts against European competition — reflects genuine capability at competitive price points combined with willingness to offer licensed production offsets that European primes have historically been reluctant to provide.
The K9 versus PzH 2000 competition illustrates the dynamic. The German Panzerhaubitze 2000 is widely assessed as the higher-capability platform — longer range, greater automation, superior environmental conditioning — but at $8–10 million per unit versus the K9’s $5–7 million, and with German export policy complications that add uncertainty. Poland chose K9 in part because the price, the offset package (HSW licensed production), and the delivery timeline all favoured the Korean option.
The competitive dynamic has already driven European industrial responses: KMW/Nexter (KNDS) has accelerated Leopard 2A7 production expansion, Rheinmetall has invested in CEE factory presence, and BAE Systems has promoted the CV90 IFV actively across the region. The Korean competitive pressure is functioning as the market forcing mechanism that NATO procurement consolidation alone could not.
The European Defence Industrial Renaissance¶
The aggregate picture — Polish factories expanding, Czech ammunition plants running 24/7, Romanian production lines upgraded, Rheinmetall building in Lithuania, Korean firms setting up licensed production in Poland — represents something that did not exist before 2022: an eastern flank defence industrial base that produces weapons and ammunition at scale.
The strategic significance extends beyond the immediate procurement cycle. A defence industrial base generates knowledge, skills, and institutional capacity that persists. Polish engineers trained on K2PL production lines know how to build tanks — knowledge that survives delivery of the current contract. Czech fuze manufacturers who expanded capacity for the Ukraine initiative will retain that production knowledge. This is the defence industrial resilience that NATO planners identify as necessary for sustained deterrence: the ability not just to buy capability once, but to produce and replace it continuously.
The EDIRPA and European Defence Fund mechanisms, if maintained and expanded as the Draghi Report’s recommendations suggested, could provide the co-financing architecture to sustain and grow this industrial renaissance beyond the current procurement cycle. The defence-spending commitment and the industrial capacity to absorb it are, for the first time since the Cold War, pointing in the same direction across CEE.