Dominic F | 26 July 2024

Summary

• US and German intelligence services reportedly foiled a Russian plot to assassinate Armin Papperger, the CEO of Rheinmetall.

• The plot highlights Russia's ongoing hybrid warfare tactics against Western entities supporting Ukraine.

• Increased security measures have been introduced across the German defence industry without operational disruptions.

• Further collaboration and intelligence-sharing among NATO allies and private affiliates is likely.

• The European defence industry’s financial growth is highly likely to continue in an upward trajectory, parallel to escalating and continuing geopolitical conflicts.

Last week, news emerged of a Russian plot to assassinate the CEO of Rheinmetall, Armin Papperger, who has led the defence contractor since 2013. Furthermore, several defence industry executives may have been targeted, according to CNN, who reported all the above on 08 July, citing five unidentified Western sources. Whilst authorities have cautiously withheld details, German Foreign Minister Annalena Baerbock accused Russia in the same week of waging a "hybrid war of aggression" against the West, involving sabotage, cyber-attacks, and attacks on people and factories. 

Rheinmetall has supported Ukraine, often directly, by supplying military equipment, including artillery shells and armoured vehicles. In December 2023, Rheinmetall secured a €140 million order to supply 155mm artillery shells (expected delivery c. 2025). Thereafter, in February 2024, Rheinmetall and a Ukrainian partner signed a MoU to produce 155mm ammunition locally rather than in Spain. Recently, in mid-2024, Rheinmetall expanded its cooperation with Ukraine, including producing Lynx infantry fighting vehicles and opening a maintenance hub in western Ukraine. 

This increase in production, collaboration, and relevance in Ukraine has made Rheinmetall a strategic target for Russia, whether against production facilities or people. This has been highlighted by the Russian Foreign Ministry explicitly stating in July 2023 that the company's new plant in Ukraine would be considered a "legitimate target" for military action. On the other hand, Kremlin spokesperson Dmitry Peskov dismissed CNN's reporting and criticised it for lacking serious arguments and relying on anonymous sources. Nevertheless, Russia's ongoing history of covertly operating abroad, including assassination attempts, has been increasingly concerning to the West. 

The implications of this foiled plot reflect a broader trend of escalating Russian tactics to undermine Western support for Ukraine. This began with the annexation of Ukrainian territories through sham referendums, continued with widespread cyber-attacks on European infrastructure, and has led to targeted assassination, including the latest plot(s) on defence industry executives. Despite these threats, Rheinmetall continues to support Ukraine, therefore keeping its affiliates and employees firmly in Russian crosshairs. According to Interior Ministry spokesperson Maximilian Kall, German officials have taken these threats seriously. However, despite their ongoing support for Ukraine, the latest approved draft budget halves military aid to Ukraine.

Forecast

• Short-term

  • German authorities have increased security measures for Rheinmetall’s operations and personnel. Similar efforts will almost certainly be made for other organisations and their executives; for example, Hensoldt, which produces radar technology, announced it is reassessing safety measures.

  • Defence industries abroad involved in the war are highly likely to review and assess their own protection and vigilance. However, an industry executive told Reuters that US intelligence agencies did not“believe there was any threat to U.S.-based CEOs”.

• Medium-term

  • Increased collaboration and intelligence-sharing among NATO allies will likely play a role in protecting defence industry figures and assets. This may involve enhancing interoperability through advanced technologies like AI and 5G, as highlighted by Lockheed Martin's commitment to NATO deterrence and integration on 9th July.

• Long-term

  • It is almost certain that Russia will continue covert operations outside the conflict zone. Additionally, there is a realistic possibility that this is not the last we hear of such attempts, either before or after the fact. If this is the case, the brazenness and range of targets are likely to grow as the conflict persists, fuelled by continued, although wavering, Western support.

  • Following Russia's invasion of Ukraine, European defence stocks surged significantly, with Rheinmetall up 78% this year. Despite a recent dip due to the reporting on this subject, it projected, on 11 July, €60-70 billion in backlog. Other companies like Poland's Lubawa (up 75%), Sweden's Saab (up 73%), Italy's Leonardo (up 54%), and the UK's QinetiQ (up 52%) and Avon Protection (up 50%) have also seen substantial gains. Defence industries' stocks are highly likely to continue long-term growth trends, outperforming "local'' market indices such as the Stoxx Europe 600 (up 9% YTD), driven by current geopolitical dynamics.