Autonomy, drones, real-time data. The modern battlefield has changed fast. Yet much of NATO’s defense setup has not kept up. It is stuck with slow buying cycles, long development processes, and old kit. Recent wars in Ukraine and the Middle East have exposed key gaps. For those reasons, the alliance struggles to build and field weapons at scale. Fixing those gaps starts with the foundation on which all armed power rests: the defense industrial base.
What is a Defense Industrial Base?
A defense industrial base is the web of firms that equips a country’s military. It includes plants, supply chains, and skilled workers. These build, fix, and upgrade the gear that forces fight with. For instance, it spans factories for shells, missiles, and rockets. It also covers shipyards, chips, software, and raw inputs like rare earths and fuel.
As CEPA’s International Leadership Council argues in the report Unleashing Defense Innovation, this base is no longer just about old platforms. Safety and deterrence in the next decade will rest on new defense tech. That means drones, artificial intelligence (AI), and resilient networks. It also means cyber and electronic warfare, plus fast output at scale. In short, a base built for the 20th century cannot supply a 21st-century war.
Why Does This Matter for NATO?
Europe is waging a significant effort to revitalize its inadequate industrial base under external pressure from Russia and other malign actors. Ukraine’s defense against Russia, and thus Europe’s own security, needs far more scale and speed. While many NATO members have their own defense industrial bases, they are working to different priorities and directives. The result is a strategic mismatch. Shortfalls cluster in precisely the areas the war exposed: air defense missiles, guided shells, and rockets. Meanwhile, about half of European NATO equipment spending now goes to the US, up from a quarter before 2022.
As Washington steps back from Europe, that reliance is a weak point. Europe’s safety now rests on reforming the European Defence Technological and Industrial Base (EDTIB). Only then can the alliance build and field capabilities and forces at scale. The good news is that the will and the cash are at last lined up. Still, the question is no longer whether European states will spend more. It is whether they will spend wisely and in step[HP1] with each other.
How Can NATO Allies Use Drones?
Drone war has become a defining feature of 21st-century conflict, and allied kit reflects it. Ukraine, for example, is now Europe’s most battle-proven defense builder. It fields masses of low-cost first-person view (FPV) drones for frontline and deep-strike missions. Its drones hit Russian airbases almost 3,000 miles away in the “Spider’s Web” raid. Moreover, its sea drones have challenged Russian naval control in the Black Sea.
Other allies field their own kit, like Turkey’s TB3, made to fly from ships. A busy Ukrainian market now sells battle-tested systems to foreign buyers. Just as vital are the cheap drones built to shoot others down. Some cost as little as $1,000 to $3,000, far less than the missiles they replace. However, the bigger problem is that NATO allies struggle to prioritize a balance between lower cost attritable systems and exquisite technology.. As a result, old buying cycles have struggled to keep pace.
How Does NATO Confront Cyberwarfare?
Cyberspace is a permanent front. Russia’s spy agencies have run long campaigns to watch allied defense and supply lines and breach NATO-linked firms. At the alliance’s 2023 Vilnius summit, leaders agreed a major cyberattack could trigger Article 5 on a case-by-case basis. In turn, that opens the door to a joint response.
Yet the alliance’s stance stays stuck on passive defense. Currently, most members guard their home networks, not act first. A few states carry the load of offensive ops. Work on data resilience urges NATO to copy data to the cloud, as Ukraine did to blunt Russian cyberattacks. Defense plants are now a prime target. Hardening their networks and supply chains comes first.
What Technology Does NATO Use to Command Troops?
Running a modern force is increasingly a data task. Above all, the goal is a single command hub. It fuses inputs from satellites, cyber networks, radar, and ground sensors into one AI-driven picture. To get there, systems must work together. Therefore, allied buys must share common tech standards and data frameworks. That lets gear bought by each nation talk, share data, and plug into joint command systems from day one.
That fit must reach past hardware into software, tracking, targeting data, logistics, and battle management. It must also work under denied, degraded, or patchy comms. Without it, a growing force becomes a patchwork of national parts, not one linked whole.
What Should NATO Allies Invest In?
At their June 2025 summit, allies agreed to spend 5 percent of GDP on defense. First, the target splits into 3.5 percent for hard defense and 1.5 percent for broader security needs. The latter funds critical-infrastructure protection, cyber defense, and IT upgrades. In short, this rare chance must buy a real fighting edge, not lock in old force designs.
The aims are clear. They cover joint cross-domain systems, surge output, and shared digital nets. They also cover air, sea, and land drones, plus undersea and home-front defense. Private cash is key, won through looser export rules, joint research teams, and faster deals with firms. Allies should also back Ukraine’s defense sector hard. It has done more for NATO’s safety than any one member’s budget hike could.
Can Europe Build Its Own Defense Industry?
Europe’s core problem is not a lack of ideas. It is scale. The continent has world-class research, talent, and founders. But they work inside 27 separate buying regimes, each with its own red tape. For instance, less than 20 percent of EU defense buying is done jointly. For every one US weapon type, Europe builds more than five. In Ukraine, EU states sent more than 10 howitzer models, which is a logistics nightmare. More joint buying could save tens of billions of euros each year.
Private money is rushing in. European defense tech funding jumped from about €200m ($226m) in 2021 to €2.6bn ($2.9bn) in 2025. US investors now supply 40 to 50 percent of that cash. The network, in short, spans both sides of the Atlantic. CEPA Senior Fellow Wendy Anderson and former US Permanent Representative to NATO Ambassador Julianne Smith warn against Buy European rules. Such rules could make the splintering worse. They potentially limit US capital and parts they already rely on. Therefore, NATO has become the best fix – for example, its DIANA program picked 150 firms from 24 countries for 2026. The goal should be shared standards and mutual reliance, not a split between the two industries.
The Opportunities and Challenges of Data-Centric Unmanned Warfare
Low-cost drones and robots can pile lopsided costs on enemies. They give steady watch and precise strikes without putting troops at constant frontline risk. That is the upside. However, the catch is that the same math cuts both ways. For example, Iran and its proxies have shown they can field cheap drones at scale. As a result, defenders must presently answer with far costlier missiles in reply. The trade is not viable, even for the strongest armies.
For the defense industrial base, the stakes are high. The edge will not go to whoever owns these drones. It will go to whoever can scale them, adapt fastest, and build tough defenses against mass and speed. That needs quick design, secure data and links, and supply chains free of reliance on foes to enhance interoperability. China supplies about 80 percent of the critical electronics in Russia’s drones, Ukraine reports. Ultimately, the future of allied warfare will favor one kind of force. It will be the one that best blends data, drones, and fast industry.
Michael Newton is the Director for Communications and Information Systems at the Center for European Policy Analysis (CEPA).
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
