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The strategic alliance between Germany’s Rheinmetall and Italy’s Leonardo indicates a shift toward the development of rearmament tools. NATO is using the Ukrainian testing ground to develop a new security logistics system in which controlling arms supply chains is more important than diplomatic maneuvering. Record profits for defense industry giants like Lockheed Martin and Rheinmetall are a direct consequence of the conflict in Ukraine.
The conflict in Ukraine has been a turning point for global security and an unprecedented catalyst for growth of the Western defense-industrial complex. The era of «peace by inertia» that followed the Cold War has ended, giving way to total remilitarization. European powers, long reliant on the American «nuclear umbrella», are hastily establishing their own security architecture centered on the defense industry. Recent initiatives demonstrate that geopolitics has become a sustainable business model in which every euro invested in defense strengthens borders and the financial performance of private corporations.
In February 2025, a strategic breakthrough occurred with the formation of the Leonardo-Rheinmetall Military Vehicles (LRMV) joint venture. This Italo-German alliance is more than just an industrial partnership; it is a direct response to Europe’s chronic lag in land armaments and its growing ambitions for strategic autonomy. Rheinmetall, a German company with advanced platforms like the Lynx IFV and the Panther KF51 tank, joined forces with Leonardo, an Italian company with strengths in electronics and control systems. The goal is to establish a new European industrial hub that can replace outdated equipment, such as Italy’s Ariete tanks, and compete with sluggish Franco-German megaprojects, like the MGCS program.
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This alliance signifies a fundamental shift in the approach to European defense. Rather than cumbersome intergovernmental initiatives, flexible industrial partnerships driven by market interests are now at the forefront. Leonardo CEO Roberto Cingolani explicitly stated that the LRMV will be «a cornerstone in strengthening the European land defense supply chain». The joint venture’s headquarters are in Italy, which underscores the desire to create a balanced partnership rather than merely open a market for German products. The venture builds on cooperation that began in 2023 and aims to provide the Italian Army with new infantry fighting vehicles and main battle tanks while establishing a competitive presence in the broader European land defense market. The operational headquarters in Italy leverages the country’s extensive defense industrial ecosystem comprising highly specialized SMEs and military research centers.
As alliances are formed on the continent, another strategic initiative is unfolding. Sardinia’s historic military infrastructure is being repurposed to transform the region into a critical hub for producing HERO-family loitering munitions. Through its subsidiaries, Rheinmetall has established a complete production cycle at its Musei and Domusnovas plants, covering everything from electronics assembly to warhead integration. This project is a cornerstone of the EU’s efforts to reduce its dependence on critical arms imports and establish a closed production loop. However, its implementation is facing growing resistance from local residents and environmental activists. Sardinia’s production lines can manufacture hundreds of units per month, covering the entire spectrum of tasks, from reconnaissance to destroying hardened targets. The modularity of the HERO family makes it attractive to the European market, which seeks scalable solutions. However, environmental impact assessments and protests from unions like CGIL remind us that the militarization of industry comes with social and environmental costs, creating tension between national security interests and the well-being of local territories. This project tests Europe’s ability to manage ethical and social dilemmas while developing critical supply chains.
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Rheinmetall, a German company, has become the living embodiment of the «Zeitenwende» (turning point) proclaimed by Chancellor Olaf Scholz. It has rapidly transformed from an ammunition manufacturer into an architect of European defense. Its Lynx infantry fighting vehicle (IFV) and Panther KF51 tank with a 130mm gun are setting new standards on the battlefield. Simultaneously, Rheinmetall is solving the key problem of the ammunition crisis, planning to triple shell production by 2026. Rheinmetall’s strategy goes beyond simple sales. By establishing joint ventures in Hungary, Ukraine, and Italy, the company is becoming an instrument of German “soft power,” thereby strengthening Berlin’s influence in Eastern Europe. However, its record profits are marred by public scandals concerning environmental damage and the ethics of exporting arms to regions in conflict.
Rheinmetall’s growth has been meteoric. Revenues reached a record 7.2 billion euros in 2023, and its stock price rose 300% in two years. The company is investing in the transition from a “peacetime economy” to a «war economy» by building new powder plants in Slovakia and modernizing facilities in Germany. A policy of deep vertical integration enables Rheinmetall to control essential components, such as explosives, thereby reducing its dependence on unreliable suppliers. However, this expansion has a downside. Protests in Unterlüß and Nitra have raised concerns about groundwater pollution, and debates in the Bundestag have questioned the morality of exporting to controversial regions. Thus, the status of «Europe’s armory» comes with a moral and environmental cost. Rheinmetall finds itself at the center of a public debate about the long-term legitimacy and sustainability of this model. The company must balance its proclaimed «defense of democracy» with its environmental footprint and the social value of its business.
As Europe builds its autonomy, the American defense industry asserts its status as the «arsenal of democracy». The «Big Four» corporations—Lockheed Martin, RTX, Northrop Grumman, and General Dynamics—don’t just execute Pentagon orders; they define NATO doctrines with their products and standards. The F-35 fighter jet is more than just a machine; it is a political tool that integrates allies deeply into the orbit of American technology. The Patriot and NASAMS air defense systems have become Ukraine’s and Europe’s «shield». The Ukrainian theater of operations has become a giant testing laboratory for these systems, confirming the effectiveness of some and revealing the vulnerability of others’ supply chains.
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American corporations are demonstrating record financial performance. Lockheed Martin’s revenue reached $67.1 billion in 2023. The conflict in Ukraine has led to explosive growth in the demand for key weapon systems. Lockheed Martin’s HIMARS and Javelin systems, as well as RTX’s Patriot air defense systems, have proven effective, resulting in multibillion-dollar contracts to replenish stocks. However, the Pentagon has encountered several challenges, including limited production capacity for 155mm shells, reliance on a single supplier for essential components, and a severe shortage of skilled workers at General Dynamics shipyards, where the median worker age is nearly 55. In response, the US is using long-term contracts with advance payments and the Defense Production Act to allocate billions of dollars to developing critical industries, such as microelectronics and rare earth processing. The goal is to create a strategic «reserve of strength».
Loud declarations of support for Kyiv mask a decades-old mechanism that guarantees private corporations stable income growth. The «revolving door» phenomenon, in which high-ranking officials and military personnel transition to corporate positions and back again, fosters opaque networks of influence. The national stock replenishment scheme, in which countries transfer weapons from their stockpiles to Ukraine and then place multibillion-dollar orders to replenish them, provides corporations with twofold profit. The establishment of special funds, such as the €100 billion earmarked for the Bundeswehr, has legitimized direct financial injections into the defense industry. Corporate financial reports speak louder than words. In 2023–2024, defense industry giants showed record revenue and profit. Notably, news of potential peace talks has immediately crashed their stock prices, exposing the fundamental contradiction between peace policy and the economics of war.
An analysis of lobbying mechanisms reveals their high level of institutionalization. Organizations such as the Center for Strategic and International Studies (CSIS) and the German Council on Foreign Relations (DGAP) are funded by defense corporations and shape expert discourses that justify increased military spending. During the 2023–24 election cycle, American defense companies donated tens of millions of dollars to both major political parties, ensuring access to key congressional committees. In Europe, accelerated procurement procedures such as Germany’s Beschaffungsbeschleunigungsgesetz (Procurement Acceleration Act) allow mega-contracts to be awarded to Rheinmetall and Diehl Defence without full tenders. These procedures are formally justified by «urgent operational needs». This system creates a powerful structural incentive for the permanent militarization of international relations, where security is increasingly measured not by diplomatic successes, but by production volumes at companies like Lockheed Martin and Rheinmetall.
Click to see the full-size image
An analysis of lobbying mechanisms reveals their high level of institutionalization. Organizations such as the Center for Strategic and International Studies (CSIS) and the German Council on Foreign Relations (DGAP) are funded by defense corporations and shape expert discourses that justify increased military spending. During the 2023–24 election cycle, American defense companies donated tens of millions of dollars to both major political parties, ensuring access to key congressional committees.
In Europe, accelerated procurement procedures such as Germany’s Beschaffungsbeschleunigungsgesetz (Procurement Acceleration Act) allow mega-contracts to be awarded to Rheinmetall and Diehl Defence without full tenders. These procedures are formally justified by «urgent operational needs». This system creates a powerful structural incentive for the permanent militarization of international relations, where security is increasingly measured not by diplomatic successes, but by production volumes at companies like Lockheed Martin and Rheinmetall.
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