Europe’s defence exporters have never been busier. They have never faced a more complex web of financing and political rules to navigate, either.
Saudi Arabia, one of the world’s wealthiest states, is asking to borrow money to buy weapons. That is not a sentence that would have made sense a decade ago. Yet Carina Sutera Sardo, deputy CFO of the John Cockerill Group, a Belgian defence and industrial conglomerate with roughly €2bn in annual revenue, confirmed as much at a recent Paris roundtable on defence export financing.
“We are seeing a real search for medium to long-term financing in these countries,” she said, referring to Gulf states. “A clear decision was made at the beginning of the year regarding external debt of $56bn. It is absolutely mandatory to be eligible for an order.”
The event, organised by PLATUS, a French broker specialising in political and credit risk, brought together three senior finance executives from major European defence firms. Gaultier Monguillon, a political risk broker at the company moderated the panel. Alongside Ms Sutera Sardo sat Jean-Baptiste Pescheux, finance manager at KNDS France (its mother company, KNDS generated around €4.4bn in revenue last year), and Alban d’Herbes, head of sales finance at MBDA, Europe’s leading missile manufacturer (ca €5bn in planned investment through 2032).
Their discussion, ostensibly about risk management tools, revealed something broader. The financing of European defence exports has become as strategically complex as the weapons themselves.
Demand that no one can refuse
The starting point is simple: demand has exploded. Russia’s war on Ukraine triggered rearmament across Europe, turning modest buyers—Portugal, Ireland, the Baltic states—into active clients almost overnight. Tensions in the Gulf have accelerated procurement there. And rising pressure around Taiwan is reshaping risk calculations further east.
For MBDA, the problem is no longer selling. “Today there is no longer really a need to convince,” said Mr d’Herbes. “The demand is there in Europe, in the Gulf and in other destinations. It is durable. We are no longer in a temporary peak. We are clearly witnessing a paradigm shift, a change of era.”
We have had several cases involving letters of credit that were not providing the services they were supposed to provide for matters of a political nature.
— Jean-Baptiste Pescheux, KNDS France
MBDA doubled its missile production between 2023 and 2025 and expects output to grow by more than 40 per cent this year. Italy’s SACE, Germany’s Euler Hermes, France’s Bpifrance, and Sweden’s EKN together backed about $14bn of defence exports in 2025, double pre-war levels, according to a 2025 Export-Import Bank competitiveness report. Defence is forecast to overtake energy as the largest export-credit-agency-backed sector in 2026, a trend Deutsche Bank’s 2026 market update duly noted.
The real challenge, Mr d’Herbes explained, is industrial rather than commercial. “Increasing production rates is not simply about adding production lines. It also means securing supply chains, components, and critical materials upstream. That’s often where you see the real bottlenecks.”
An uneven regulatory playing field
Beneath the surge in demand lies a regulatory landscape that is fragmenting at precisely the moment it most needs coherence. Member states are racing to ease export controls unilaterally. Germany introduced a general licence removing case-by-case approval for air- and naval-defence items destined for Gulf states and Ukraine. Czechia and Norway waived re-export approvals for components integrated into Gulf-bound systems.
Each national shortcut widens the gap between member-state practice and the EU’s nominally common export-control framework, creating an uneven playing field that smaller exporters, without the lobbying resources to navigate multiple regimes, find particularly punishing.
Sanctions add a further variable. Chinese retaliatory measures imposed in April 2026 on seven European firms, including Hensoldt and Omnipol, over arms sales to Taiwan have forced export credit agencies to price in a new category of risk. ECAs now charge a 50 to 100 basis-point China-retaliation premium on Taiwanese defence contracts, and some guarantees explicitly exclude sanctions losses.
Russia-related restrictions meanwhile require banks and ECAs to analyse second-round effects as carefully as buyer creditworthiness. For financiers, portfolio diversification across regions and crisis drivers has become essential, since the three main geopolitical theatres rarely move in sync.
The anatomy of political risk
Export licences add another layer of complexity. In France, licences from the Interministerial Commission run for three years and are subject to renewal, or for five years. In Belgium, licensing is a regional competence of the Walloon government. Until recently, those licences could be suspended by the Council of State following NGO challenges, a risk that was simply uninsurable.
The reshoring of production is becoming a prerequisite rather than a preference. Joint ventures in Poland, the Baltic states, and the UK are in increasing demand from buyers and financiers alike. Ms Sutera Sardo noted that European sourcing is not merely a commercial choice. “When we have funding, whether Belgian or French, we will also try to maximise obviously the European supply chain so that we can be in line with the support of the states as well.”
Before discussing tools, the panel took time to define what they are actually insuring against. Mr d’Herbes offered a precise taxonomy. Political risk covers everything that can disrupt a contract for reasons outside either party’s control: an embargo, a currency blockage, a unilateral termination. “It’s a risk that we don’t control and that’s why we ensure it,” he said. “In the defence sector, these are obviously eminently political contracts between states. The political risk is greater. It’s not just one risk among others. It’s really the core risk of the contract.”
Today there is no longer really a need to convince. The demand (…) is durable. We are no longer in a temporary peak. We are clearly witnessing a paradigm shift, a change of era.
— Alban d’Herbes, MBDA
He identified three main categories. The first is manufacturing risk: costs accumulated between contract signature and delivery that no one can recover if a political event voids the contract. The second is non-payment, which in state-to-state contracts can arise not from bad faith but from currency restrictions or budget-calendar failures.
Letters of credit offer less protection than they appear to. “We have had several cases involving letters of credit that were not providing the services they should have provided for matters of a political nature,” said Mr Pescheux. “Even though we have this tool, even if the letter of credit is confirmed, it requires us to solicit the market for coverage of the risk of non-payment for events of a political nature.”
Licences and legal fragility
The third risk is the calling of bank guarantees — first-demand instruments that oblige a bank to pay before the resolution of any dispute. Ms Sutera Sardo described the cumulative pressure this creates as defence orderbooks lengthen. “The acceleration of the defence business also represents an acceleration in the need for bank guarantees,” she said. ” I am making a plea to insurers and to bankers to be able to accept outstanding amounts which are important in this field.”
A 2024 regulatory overhaul has made the framework more robust and aligned licence durations with programme timelines. “The current government has decided to amend the decree to make the framework much more solid and therefore to be able to find ourselves with something that is less fragile and more comparable to what we know in France,” Ms Sutera Sardo said.
The private market now comprises around 50 insurers, including Lloyd’s syndicates, capable of assembling up to €1-2bn in capacity for a single operation. Bpifrance has relaxed its longstanding requirement that exporter coverage and bank-financing security be bundled together, allowing manufacturers to seek private-market cover independently.
The insurance toolkit
Against this backdrop, the panel described a financing architecture that has evolved rapidly. Export credit agencies remain the backbone for large, long-term, or politically sensitive contracts. It is not always enough. For instance, Credendo’s €300m per-debtor ceiling forces Belgian exporters to seek complementary private-market capacity for major programmes. “What we appreciate in this exercise with our private insurers is really the speed of decision-making and being able to have pricing when you need to prepare quotes quickly,” Ms Sutera Sardo said.
When we have funding, whether Belgian or French, we will also try to maximise the European supply chain so that we can be in line with the support of the states as well.
— Carina Sutera Sardo, John Cockerill Group
Brokers play a structurally important role, not least because of confidentiality. Mr Pescheux explained that sensitive contract details are centralised with the broker and never appear in the insurance policy itself. “We fill out a questionnaire that specifies the case. This questionnaire is shown, but remains kept at the broker’s level. None of the elements appearing in this questionnaire are included in the police report.”
Perhaps the most striking shift is attitudinal. Banks that refused to touch defence five years ago are now competing for it. “There were banks, barely five years ago, who refused our defence sector,” Ms Sutera Sardo said. “Today we see that most banks not only have entered the defence sector, but they also actively want to have defence operations.”
The paradox facing European defence exporters is real. Demand has never been stronger; financing has never been more available. But the risks, political, regulatory, and sanctions-related, have never been more numerous, or more difficult to price.
