Russian assassination plot highlights risks for western arms makers in Ukraine

An alleged Russian plot to assassinate the head of Europe’s largest ammunition manufacturer has highlighted the growing risks facing western defence companies as they begin to set up operations inside Ukraine.

Nato officials believe Moscow is behind the alleged plan to kill Armin Papperger, chief executive of Düsseldorf-based Rheinmetall, a leading supplier of military equipment to Ukraine.

“High-level assassinations against, particularly, non-Russian nationals — that’s definitely an escalation,” said Lauren O’Loughlin, an analyst for Dragonfly, the security intelligence company.

As Russia’s war grinds into its third year, there has been a push to move some production of arms into Ukraine itself. While several western defence groups have announced their intention to shift maintenance operations to Ukraine, Rheinmetall has gone further than many rivals by publicly committing to setting up local factories.

Speaking to the Financial Times after the allegations of the assassination attempt became public, Papperger said he felt “safe”, and confirmed the commitment to shift some weapons production to Ukraine. He said Rheinmetall would begin producing 155mm shells in the safer west of the country “very soon”.

Kremlin spokesman Dmitry Peskov on Friday denied the existence of a plot, which was first reported by CNN. “This is all being served up in the style of yet more fakes, so you can’t take this news seriously,” Peskov said.

But the possibility of western CEOs being on Russian hit lists underlines the reason why many western companies have been hesitant to commit to a significant manufacturing presence in Ukraine.

“Real industrial presence at the moment is limited; at most it is helping Ukraine maintain products on the ground,” said Chloe Lemaire, a defence industries analyst at investment bank Jefferies. “But there are a lot of ongoing discussions with Ukraine in terms of potentially helping after the high intensity phase of the war is over.”

Defence contractors note that the current thinking was around “light touch” involvement on the ground and building relationships, with a hefty presence inside the country seen as too dangerous.

“We want to support them and help rebuild their industrial base,” an executive at one European defence company said.

Russia’s full-scale invasion of Ukraine in 2022 heralded a boom for defence companies, particularly in Europe, where defence spending has risen to levels not seen since the end of the cold war. Corporations have been pressed into manufacturing new supplies of hardware including vehicles, munitions to radars.

But western governments want to reduce Ukraine’s dependence on Nato allies for military supplies and cut the time it takes for equipment to reach the front lines, as the Ukrainian army struggles with acute shortages of ammunition and artillery in particular.

Russia has reacted with anger each time a western defence group announced it would set up local production in Ukraine. Moscow threatened to destroy Rheinmetall’s Panther tank factory in Ukraine after Papperger unveiled plans to build a factory there.

The Kremlin also threatened the UK’s BAE Systems last September after it announced it would shift some work into Ukraine, with Peskov saying at the time that any facility producing weaponry used against Russia could “become an object of special attention for our military”.

Trevor Taylor, a research fellow at the Royal United Services Institute, a London-based defence think-tank, said building a production facility inside Ukraine would be fraught with complications, from security to guaranteeing an effective supply chain of components.

“A weapons factory would be a primary target,” he said. Expensive insurance and finding a secure location would be a major headache, he added.

Still, Ukrainian officials have pushed to establish joint-ventures with western defence companies.

The UK companies BAE and Babcock this year both pledged to begin establishing some maintenance and repair work inside Ukraine, promising to get assets back on to the frontline more quickly.

KNDS, a joint-venture of France’s state-owned Nexteer and Germany’s Krauss-Maffei Wegmann, which makes munitions, armoured vehicles and the Caesar howitzer, in early June also signed a series of contracts formalising its next steps in Ukraine when President Volodymyr Zelenskyy visited Paris.

The group currently has a basic presence on the ground making spare parts for vehicles with Ukrainian partners, and is still looking for local groups to take other operations forward. By the end of the year it plans to have inaugurated a maintenance centre in Ukraine, a spokesperson for the group said.

The company also has a joint venture with Ukraine’s state-owned conglomerate Ukroboronprom, which is already up and running and repairing military vehicles locally.

Separately, Czechoslovak Group, which makes ammunition and other military equipment, is also looking to sign some production joint venture agreements in Ukraine.

Taylor, from the Royal United Services Institute, said Ukraine’s ambitions to tap western companies to help develop its defence industry have been heightened by uncertainty over future American money and commitment, after a multibillion-dollar aid package spent months stuck in a political logjam in Washington until it was finally approved in April.

“Although US support eventually came through this year, it gave them a greater sense of insecurity about what the future might hold,” he said.

“We are a creative and reliable partner you want to have in your gang during hard times,” Oleksandr Kamyshin, Ukraine’s strategic industries minister who has been leading talks with western companies, told the Financial Times earlier this year. “We don’t want to keep asking for [aid] money.”

Additional reporting by Max Seddon in Riga