The UK was a big miss from the beginning. At least now we have some intel on where the brake is on this. The UK has a crisis that is different, but similar to Canada before the 51st state crap started. Excellent author too.
Signing on a fifth of NATO membership to a new initiative is definitely a good start, even if it is primarily small and mid-sized alliance members at this time. Including Ukraine is excellent and I am very pleased to see the DRSB as an avenue to continue the integration of Ukraine into the architecture of the alliance, even if membership is, regrettably, not on the table for the time being.
My hunch is that most NATO countries are in a wait and see position on the DRSB. SAFE is up and running and the EU has additional established quasi-joint debt platforms. Germany also changed its constitution to allow for greater defense spending and concomitant borrowing.
For the DRSB, I would imagine there is an appetite on the part of many potential participants to see whether the bank will choose to act primarily as a source of low-cost liquidity for government defense procurement or potentially focus more on enabling growth of the industry side of the defense industrial base. I could imagine a scenario where it does both:
A) Provide a government-facing lending facility primarily catering to small- to medium-sized NATO and NATO-adjacent countries to enable high-yield defense procurement and partnership programs, which in the absence of the DRSB may be out of reach or necessitate a drawn-out acquisition process that would undermine the program's (and the Alliance's) effectiveness.
B) Provide an industry-facing lending facility that is laser focused on enabling new industry entrants and existing small-scale companies to join the supply chain of existing prime contractors. I would imagine a scenario with the new entrants and small companies would effectively pre-qualify for funding with the DRSB as one pre-qualifies for a home mortgage. Approved firms would use this to demonstrate to primes that they would be able to access the capital needed to immediately begin scaling up to fulfil their responsibilities to the prime upon the prime being awarded the government contract.
The pre-qualification process would act as a filter to provide the DRSB with reasonable assurance of the credit-worthiness of the industry partner while essentially restricting the actual issuance of capital to parties under contract with a prime that has been awarded a government contract, thereby de-risking the loan. Things could get fancy, too, with the prime potentially being able to access capital on an equal basis to what the DSRB has lent to the prime's supply chain for that program.
The UK was a big miss from the beginning. At least now we have some intel on where the brake is on this. The UK has a crisis that is different, but similar to Canada before the 51st state crap started. Excellent author too.
https://substack.com/@james1940/note/c-288485395?r=x56vk
That was a good read! And also a bit discouraging. I hadn't realized quite how bad it was in the UK...
Signing on a fifth of NATO membership to a new initiative is definitely a good start, even if it is primarily small and mid-sized alliance members at this time. Including Ukraine is excellent and I am very pleased to see the DRSB as an avenue to continue the integration of Ukraine into the architecture of the alliance, even if membership is, regrettably, not on the table for the time being.
Seems odd that with the CSPS win Germany has still been one of the most opposed to this. At the same time possibly setting up their own IB?
My hunch is that most NATO countries are in a wait and see position on the DRSB. SAFE is up and running and the EU has additional established quasi-joint debt platforms. Germany also changed its constitution to allow for greater defense spending and concomitant borrowing.
For the DRSB, I would imagine there is an appetite on the part of many potential participants to see whether the bank will choose to act primarily as a source of low-cost liquidity for government defense procurement or potentially focus more on enabling growth of the industry side of the defense industrial base. I could imagine a scenario where it does both:
A) Provide a government-facing lending facility primarily catering to small- to medium-sized NATO and NATO-adjacent countries to enable high-yield defense procurement and partnership programs, which in the absence of the DRSB may be out of reach or necessitate a drawn-out acquisition process that would undermine the program's (and the Alliance's) effectiveness.
B) Provide an industry-facing lending facility that is laser focused on enabling new industry entrants and existing small-scale companies to join the supply chain of existing prime contractors. I would imagine a scenario with the new entrants and small companies would effectively pre-qualify for funding with the DRSB as one pre-qualifies for a home mortgage. Approved firms would use this to demonstrate to primes that they would be able to access the capital needed to immediately begin scaling up to fulfil their responsibilities to the prime upon the prime being awarded the government contract.
The pre-qualification process would act as a filter to provide the DRSB with reasonable assurance of the credit-worthiness of the industry partner while essentially restricting the actual issuance of capital to parties under contract with a prime that has been awarded a government contract, thereby de-risking the loan. Things could get fancy, too, with the prime potentially being able to access capital on an equal basis to what the DSRB has lent to the prime's supply chain for that program.