Bolstering defence and deterrence

This report is part of our project Strategic innovation for European security. It identifies ten emerging technologies the EU should invest in to safeguard its security and uphold European values in the face of rapid technological change, geopolitical instability, and economic uncertainty.

Amongst the ten technologies we identify, two of them fall within defence and deterrence.

Introduction

The world has enjoyed a remarkable period of relative peace since the end of the Cold War^[1]. The average global annual mortality of inter-state conflict was six times lower than in the post-WWII period (1946-1990)^[2]. Accordingly, and over the past 30 years especially, Europe has underinvested in its defensive capabilities, becoming reliant on American security guarantees^[3]. Now, as the security architecture which Europe has relied upon for generations is in decline – putting an end to “the era of the peace dividend”, as the European Commission has put it – the EU is under pressure to renew its military capabilities and establish greater strategic autonomy^[4].

The urgency of rebuilding Europe’s hard power capabilities comes amidst intensifying threats, most notably from Russia. Whereas European policy makers rightly remain committed to supporting Ukraine and containing Russian aggression to that conflict, it is also necessary to prepare for further aggression elsewhere, a contingency underscored by its high relative military spending. Although Europe spent approximately €423 billion on defence in 2024 – nominally three times more than Russia’s €135 billion – when adjusted for purchasing power, Russia’s military expenditure comes to €427 billion, surpassing the entirety of the EU’s combined defence spending^[5]. As reported by both Danish and German intelligence services, Russia is preparing for “large-scale war” and may be ready to test NATO’s Article 5 within five years^[6]. Likewise, NATO’s Secretary General Mark Rutte sees Russia as “preparing for long-term confrontation” and has warned that, as things presently stand, Western powers “are not ready for what is coming our way in four to five years”^[7].

Revitalising Europe’s domestic defence industry is also an economic imperative. The Draghi report found that 78% of EU defence procurement spending went to non-EU suppliers between 2022 and 2023 – giving a total of €45.5 billion^[8]. In 2024, the EU and its member states spent €90 billion on defence procurement^[9]. If the rate of foreign procurement identified by Draghi remained stable, that means that more than €70 billion of that left the continent in 2024 – a number that will continue to rise if Europe does not urgently strengthen the production capacity of its military industry.

This annual capital flight in defence carries with it a high opportunity cost for the European economy, forgoing stimulus of European industries and employment, as well as tax recuperation. As defence budgets across Europe are expected to continue to rise^[10] over the next few years, reversing this trend becomes increasingly important as more domestic procurement helps ease the budgetary strain of increased military spending and can make it easier for European decision makers to commit to higher sustained defence spending – including providing military aid to allies like Ukraine.

As emphasised by President von der Leyen in April 2025: “if Europe wants to avoid war, Europe must get ready for war”^[11]. In recognition of its central role in deterring further war in Europe, the EU has embarked upon a historic transformation. With Commissioner Andrius Kubilius’ White Paper on European Defence and the Readiness 2030 plan, Europe is working towards substantially increased defence investment, streamlined procurement, and launch critical joint projects such as the European Sky Shield^[12].

Whereas the bulk of the effort to rearm Europe will concern traditional military assets, special attention must be paid to disruptive technologies that are reshaping modern warfare. In line with the EU Defence Innovation Scheme’s call for increased research into “disruptive technologies”^[13], CFG advocates for fostering breakthrough innovations which can improve the EU’s competitiveness within emerging technologies, and with an outsized potential to bolster its ability to deter aggression and defend civilians and critical infrastructure in the event of war.

Our insights are informed by interviews with military experts in combination with frontline soldiers and technology developers in Ukraine^[14]. Due to the accelerated rate of innovation in the war in Ukraine, the conflict has come to be known as a “war laboratory”^[15] for the future of military technologies, offering critical insights into how warfare is evolving – particularly through the proliferation of low-cost and advanced uncrewed vehicles and the integration of military AI. The high rate of innovation within this domain has drawn comparisons to the advent of aviation during the first world war^[16].

Whereas the first pilotless vehicles were developed during the early 20th century^[17], they bear a scant resemblance to the drones that have come to define contemporary conflicts. The war in Ukraine is now being described as “the world’s first drone war”^[18], with some experts arguing that the increased utilisation of robotics in place of human soldiers is likely to ultimately reduce risk and preserve human life in conflict^[19]. However, the advent of drone warfare may become a strategic vulnerability for the EU, as European powers do not hold a strong position in the global supply chain for low-cost drones and their components, and lack diversified counter-drone systems required for cost-effective neutralisation at scale^[20]. Adapting to the requirements of the next generation of drone warfare will be a challenge, requiring strategic investment and innovation.

The advent of military AI opens up a myriad of legal and ethical problems stemming from increased automated decision-making in warfare – potentially leading to the erosion of human oversight and judgment in lethal situations, and accountability vacuums^[21]. As such, the EU must uphold its commitment, made in 2021, not to fund the development of fully autonomous lethal weapons systems that do not allow for “meaningful human control” over engagement decisions against humans, and actively work towards a new international treaty detailing unambiguous and specific prohibitions and restrictions on lethal autonomous systems^[22].

In response to contemporary and anticipated developments within drone warfare and military AI, we discuss the European drone industry and counter-drone systems as technological areas which merit particular attention as the EU ramps up its efforts to bolster its defence industry. The war in Ukraine has seen the rapid proliferation of new uncrewed systems in the air, on the ground, and at sea which coupled with military AI are altering traditional combat dynamics. European defence investments – alongside civilian investment policy – must be receptive to these changes.

Whether these technologies ultimately become a strategic vulnerability inviting further aggression or a source of strength and stability depends on investments made today.

Next-gen drones

Whereas drones are not themselves new, the war in Ukraine has seen an extremely rapid rate of innovation within drone warfare. In the air, large, long-endurance UAVs – such as the MQ-9 Reaper^[23] and the upcoming Eurodrone^[24] – have been used in warfare for a long time for conducting reconnaissance and strikes. Today, a new generation of drones is being introduced in warfare, with new models and use-cases continuously developed, and low-cost UAVs bringing about a significant shift in battlefield economics. At a per unit cost ranging from a few hundred thousand Euros down to a few hundred, their relative affordability, versatility, and ability to integrate software to operate autonomously make them indispensable on the modern battlefield^[25].

Drones have also found important applications at sea and on the ground. USVs have been crucial for the Ukrainian defence against the Russian navy in the Black Sea^[26], and  UGVs have found important applications in logistics, mining and demining areas, and supporting operations by infantry on the front lines, actively utilised to keep soldiers safe by keeping them out of dangerous situations^[27].

The synergy between drones and military AI could usher in a new era of drone warfare, making them even more lethal and harder to defend against than at present. The prospect of autonomous drone swarms and AI-powered targeting systems increasingly enable drones to operate in GPS-denied environments, surpass current countermeasures like radio frequency jamming, and coordinate to overwhelm defenses. These developments are already glimpsed in Ukraine’s “battle of algorithms” as both sides race to deploy smarter and increasingly autonomous drones^[28]. Being globally competitive in this space can become crucial to deter aggression from foreign powers in the future.

The rapid expansion of drone production in Ukraine and Russia has also underscored the strategic importance of access to drone components. During the first quarter of 2024, Ukraine reportedly produced around 20,000 drones per month. In the early months of 2025, that figure “is about 200,000 per month and is on the rise” according to First Deputy Minister of Defence Ivan Havryliuk^[29], the great majority of which being low-cost UAVs. Likewise, Russia aimed to increase their production tenfold from 2023 to reach 1.4 million in 2024^[30], and has established new factories to produce long-range kamikaze drones like the Shahed-136^[31].

Given the sheer amount of batteries, motors, controllers, chips, and cameras required to sustain this level of production, Europe’s limited drone production capacity and dependence on foreign components, particularly from China, pose significant risks to its security and strategic autonomy. In recognition of this vulnerability, multiple Ukrainian companies are trying to reduce their reliance on Chinese parts. However, even as  companies like VYRIY have been reported as able to produce 1,000 “all-Ukrainian” UAVs as of 2025^[32], the company’s CEO has clarified that some components are still imported, mainly from China^[33].

Investing in the European drone industry can further have significant economic upsides, as the civilian drone industry is positioned for substantial growth. This growth is driven by the broad civilian applications of agile and cost-effective drones, including in last-mile delivery, infrastructure inspection, and geological surveying. In this space, Europe therefore has both strategic and economic concerns to address regarding the facilitation of the European drone industry.

Security benefits

Drones enhance European security through improved reconnaissance and precision strike capabilities. In Ukraine, small drones – including multicopters and fixed-wing aircrafts^[34] – have been instrumental in guiding artillery strikes and neutralizing high-value targets, becoming critical assets in both defensive and offensive operations. The striking capabilities of drones have made them relatively inexpensive methods of taking out high-value enemy targets, making aggression more costly for belligerents. First-person view (FPV) drones in the form of loitering munitions can neutralise targets and disrupt enemy operations at a fraction of the cost of traditional weapons. A few small aerial drones armed with explosives at a per unit cost ranging down to ~€500 have been documented neutralizing  €4.5 million Russian T-90M Proryv tanks^[35], and a variety of low-cost drones now account for 60-70% of destroyed Russian tanks and other military systems^[36].

In the Ukrainian conflict, drones now reportedly cause around 70% of battlefield deaths and injuries^[37].

Drones are also proving disruptive on the ground and at sea. In December 2024, Ukraine conducted their first ever attack using exclusively unmanned vehicles in place of infantry, successfully destroying Russian positions north of Kharkiv City^[38] – fielding a combination of First Person View (FPV) UAVs and UGVs mounted with remotely operated machine gun turrets. Described as the first-ever operation of its kind conducted entirely with uncrewed vehicles, it could signal a “seminal moment” in conflict evolution^[39]. If this use of UGVs and UAVs on the ground becomes prevalent, we may see future conflicts feature significantly fewer human soldiers in the most dangerous situations, preserving human life^[40].

USVs have further been instrumental in defending against the advance of the Russian fleet in the Black Sea, with the Magura V5 credited with destroying or damaging 15 Russian naval vessels^[41] and downing Russian military helicopters^[42]. The high utilisation of drones across the board have led to the formation of a host of new specialised forces like the Typhoon unit, with Ukraine becoming the first country in the world to establish an Unmanned Systems Force as an independent military branch.

Drones are positioned to become a critical defensive weapon in the era of military AI. AI integration is still under development, but drones are already being outfitted with AI software to navigate, share intelligence, recognise, track, and engage targets autonomously, making drones better able to share intelligence and limits human error as a factor^[43]. AI-enabled optical navigation and targeting further decreases drones’ reliance on radio frequencies and GPS-signals for navigation, and therefore impervious to commonly used counter-drone measures like radio frequency jamming and GPS denial^[44]. As highlighted by Ukrainian drone pilots and developers we interviewed, having the capability to produce large numbers of interceptor drones designed to take out enemy reconnaissance drones and loitering munitions kinetically and affordably is therefore a crucial defensive capability^[45].

AI integration also allows drones to overcome current limitations, making them even more effective. It is difficult to concentrate remotely operated FPV drones in large numbers, for example, as their radio signals can interfere with each others’ guidance systems^[46]. As AI enables drones to operate autonomously without reliance on radio or GPS signals, coordinated swarms of drones that are resistant to established electronic countermeasures may become prevalent, conducting sophisticated, simultaneous operations more efficiently without direct human oversight.

Deploying low-cost drones of all kinds requires scalable, cost-efficient production, as their expendable nature is a central element to their effectiveness. Their rapid attrition in combat demands sustained production that far exceeds production capacities in the US and EU^[47]. As they need to be continuously replenished, scale and affordability in production is essential for keeping pace with the requirements of modern drone warfare.

There is no guarantee, however, that the particular models used in Ukraine today will emerge to define future conflicts. The Ukrainian battlefield has demonstrated that drone warfare evolves rapidly, with systems that were dominant one year becoming far less useful the next as new countermeasures emerge. One example is the Bayraktar TB2 which was extensively used by the Ukrainians during the early stages of the war, but lost much of its utility in 2023 in the face of new Russian countermeasures^[48]. As noted last year by Ukrainian Vice General Oleksii Neizhpapa, commander of the Ukrainian Navy: “Some of our tricks and tactics that were worked out in 2022 and 2023 will not work in 2024. Therefore, you need to change tactics, change the technical characteristics of everything you do”^[49].

Therefore, as opposed to mass procurement of specific models produced abroad, the EU should focus on fostering a dynamic drone industry capable of scaling production and rapidly iterating on designs. Modular, upgradeable systems with interchangeable components will be key to maintaining technological adaptability to evolving battlefield requirements^[50].

Building out Europe’s domestic manufacturing capabilities of drones and their components is therefore a strategic imperative, in order to deter aggression and keep pace with contemporary technological developments.

Economic benefits

The drone industry represents a significant economic opportunity for Europe. The global drone market, valued at €67.5 billion in 2024, is projected to grow substantially over the next five years, reaching €151 billion by 2030^[51]. This growth is driven by the integration of drones across various industries, including last-mile delivery^[52], infrastructure inspections and monitoring^[53], agriculture^[54], and emergency services^[55], offering faster, safer, and more cost-effective solutions compared to traditional methods^[56]. Investing in the European drone industry will allow EU firms to capture a larger share of this expanding market.

A strong domestic drone industry will also reduce capital outflows from EU defence budgets. Currently, many European countries procure drones from abroad, diverting much needed capital away from domestic industries^[57]. Developing a European supply chain for drone components – including batteries, cameras, and flight controllers – will keep defence spending within the EU, potentially stimulating job creation, and reinforce Europe’s technological competitiveness.

Europe’s position

Despite its strong aerospace industry, Europe lags behind geopolitical peers in the production of both high-end and low-cost drones. The Eurodrone project, led by Airbus, Dassault, and Leonardo, will provide a sovereign European alternative to the MQ-9 Reaper, but its development timeline – operational capabilities expected in 2030 – has meant that Member States still rely on foreign procurement, even for traditional long-range drones^[58].

With respect to the supply chain for low-cost drones, EU companies remain heavily reliant on Chinese suppliers of key components, including batteries, motors, magnets, electronic controllers, cameras, propellers, creating a strategic liability. Chinese firms have an estimated 90% share of the global commercial drone market and, according to our sources in Ukraine, around 70% of the parts used in drone manufacturing within Ukraine are sourced from China^[59]. Although European-made components generally surpass their Chinese counterparts in quality, their significantly higher costs – often up to ten times greater – limit their market competitiveness^[60].

This is a strategic liability, as it can leave the EU without access to critical components in a crisis. China has already imposed export restrictions on drones and parts for military use to the US, EU, and Ukraine, which led to large Western manufacturers like Skydio to ration batteries and temporarily halt production^[61]. Chinese restrictions are expected to intensify further in 2025, and could significantly hamper Western production capacities^[62]. Furthermore, Russia has reportedly been able to bypass the restrictions, leaving Europe at a strategic disadvantage^[63]. With the US’ ongoing foreign policy pivot away from Europe, building out a European drone industry that is not fundamentally reliant on either the US or China is therefore a strategic imperative.

Scaling the European drone industry will not happen on its own, as startups within this industry have to compete with established global players with greater access to capital. Global American companies are already establishing themselves in Europe, with Alphabet’s Wing already commercially active in Finland^[64] and in Ireland^[65] – standing in direct competition with the Irish company Manna^[66]. Without targeting funding mechanisms, European companies may struggle to compete, as evidenced by the Swedish Aerit’s bankruptcy after failing to secure the necessary funding to continue their operations – resulting in them having to sell off their proprietary technology and intellectual property in bankruptcy proceedings^[67].

Europe is at risk of losing out on a substantial share of the global and domestic drone industry, with significant strategic implications for its technological sovereignty. This highlights the importance of targeted policy interventions to enhance competitiveness, scale production, and secure sufficient capital to support European drone companies.

Counter-drone systems

As drones become ubiquitous on the battlefield and in civilian airspace, the ability to neutralise hostile drones has become a critical defensive capability. Both Ukraine and Russia have fielded a plethora of anti-drone tools, ranging from radio frequency jamming and GPS-denial^[68] to kinetic weapons including anti-aircraft guns^[69] and interceptor drones^[70]. It is a rapidly innovating environment where each new drone tactic prompts a counter-drone response in a continuous iterative cycle​.

Military AI in the form of information processing, decision-making and targeting assistance is seeing increased utilisation in contemporary conflict, as exemplified by the Ukrainian Griselda^[71] and the Israeli Lavender and the Gospel^[72]. Now, military AI in the form of AI-integrated drones may produce a further significant shift in the dynamics of warfare. Militaries around the world are working on developing and integrating software that will enable reconnaissance drones and loitering munitions to navigate, target, and strike targets autonomously. Because autonomous drones surpass the need for radio and GPS signals, they thereby circumvent radio frequency jamming and GPS-denial as reliable countermeasures. Today, semi-autonomous FPV drones are already operational in Ukraine. Drone developers we spoke to expect fully autonomous systems – from launch to strike – to be ready for battle testing before the end of 2025^[73].

The decreasing reliability of radio frequency jamming as a counter-drone strategy leaves a startling gap in defensive capabilities^[74]. As traditional air defence systems are too expensive to be used to counter waves of low-cost drones, the need for the next generation of counter-drone systems is pressing. Within this space, multiple technologies are currently being developed, with the promise of delivering scalable solutions for neutralising drones with a low cost per engagement.

European institutions and militaries have rapidly woken up to the threat of military AI and drone warfare. The European Defence Agency’s 2024 Capability Review^[75] flagged C-UAS as a critical gap, and reported that 18 Member States have expressed their intention to collectively address capability gaps in integrated air and missile defence, including opening for collective procurement of counter-drone systems and aiming “to develop technologies to counter swarms of drones”^[76]. But intent is far from enough, especially as European production capacity lacks both scale and coordination in comparison with international competitors.

Here, we consider two groups of technologies within counter-drone systems: kinetic systems and directed energy weapons (DEWs). In order to ensure that defensive capabilities are developed in time to defend against fully autonomous drones, a mix of traditional and emerging technologies constituting a layered aerial defence is likely to be required^[77].

Kinetic counter-drone systems

Kinetic countermeasures include missiles, anti-aircraft guns, and interceptor drones, all of which are used to physically destroy hostile drones. Surface-to-air missiles are a long established air defence technology, but traditional missile interceptors are far too expensive to be reliably deployed in defence against small drones. Even relatively affordable missile interceptors like the Stinger can cost more than €400,000 per interception, and have been a precious commodity for the Ukrainian military^[78].

The proliferation of drone warfare in Ukraine has also seen the resurgence of anti-aircraft guns for drone defence. German systems like the Gepard^[79] (developed in the 1960s) and the more modern Skynex^[80] have been effectively deployed against low-flying drones. Although anti-aircraft guns are not a new technology, some companies like the Ukrainian Roboneers are developing Shablya turrets which can be integrated with targeting systems to operate machine guns against aerial threats, remotely or autonomously^[81]. Although gunfire is far more affordable than missile interceptors, many anti-aircraft guns use ammunition that have a higher cost-per-engagement than the price of  many low-cost drones^[82].

Interceptor drones have proven to be a highly effective kinetic countermeasure. Since the summer of 2024, Ukrainian electronic warfare units have been increasing their use of interceptor drones to neutralise threats like Lancet kamikaze drones^[83] – as well as fiber-optic cable drones which are resistant to electronic countermeasures in virtue of being piloted through up to 20 kilometre long cables instead of radio or GPS signals^[84]. Although future AI-enabled coordinated drone swarms would be able to execute simultaneous attacks much more efficiently than at present – possibly overwhelming the number of available interceptor drones in a given area – innovation within this domain can make the next generation of interceptor drones even more effective and scalable defensive systems.

Today, interceptor drones are operated in largely the same way as any other expendable FPV drones, however, defence companies are today working on developing automated interceptors that can take out multiple drones in a single flight, or return to base and be launched again if it misses its target. Innovation in this space includes models like the Roadrunner^[85] and Anvil^[86] – developed by the American company Andruil – and the Interceptor-MR developed by the European MARSS^[87].

Multiple EU countries are now investing in the development of kinetic counter-drone systems in various forms, including the aforementioned Skynex system from Rheinmetall and the Interceptor-MR from MARSS. The Estonian manufacturer Frankenberg Technologies is also aiming at developing “mini-missiles” that are more affordable and faster to produce than conventional surface-to-air missiles, making them a more viable option for defending against low-cost drones^[88].

Directed energy weapons

DEWs are a family of technologies that use electromagnetic energy instead of bullets or other physical ammunition^[89]. Within DEWs, there are two weapons systems which hold particular promise: high-energy lasers and high-power microwaves. Both kinds are today extensively researched by major defence companies around the world.

High-energy lasers can rapidly neutralize drones at a range up to 2km by delivering a highly concentrated 50-150kW photon beam to a drone’s wing, sensors, or propulsion system. They are accurate and cost-effective, exemplified by the British Dragonfire which is able to melt a coin from a 1km distance and only requires about €13 of energy per shot^[90]. Israel’s Iron Beam was successfully tested in 2022, and has a claimed cost per engagement just shy of €3^[91]. Although current prototypes are heavy and large, they fit on top of a range of already in-use military vehicles in addition to buildings and ships, while more agile systems are currently under development^[92].

High-power microwaves use radio frequency waves instead of photons. By delivering a concentrated electromagnetic pulse – around 150,000 times more powerful than household microwaves – these systems disrupt the electronic circuits of drones, disabling their guidance and control systems^[93]. This capability can neutralize multiple drones simultaneously, providing a broader area-of-effect compared to highly focused laser beams^[94]. High-power microwaves are also exceedingly cost effective, with a reported cost per engagement of around ten cents^[95].

Although DEWs hold promise as affordable and accurate counter-drone systems, their operational effectiveness is currently constrained by factors such as limited range, the need for stable platforms due to their heavy hardware, and overheating with extensive use. High-energy lasers also face certain operational limitations, as atmospheric absorption, thermal blooming, and reflection via rain or clouds can disperse the beam and reduce its efficacy^[96]. DEWs also require significant amounts of power and the wide beams of high-power microwaves can cause collateral damage to nearby assets, making them less applicable in high-density areas and in areas with critical infrastructure or friendly military assets which depend on electrical circuits^[97]. For these reasons, although DEWs hold considerable potential in an age of autonomous drones, they are unlikely to fully replace kinetic systems in and of themselves^[98].

What makes DEWs attractive is their unparalleled cost-efficiency and unlimited ammunition – as long as they have access to an energy source^[99]. They can complement more expensive counter-drone and broader air defence systems, allowing defenders to prioritise kinetic systems for the threats they are most needed for^[100]. For reference, the US reportedly spent around $1 billion in air defence munitions in the Red Sea in 2024 alone, depleting stocks which will take a long time to replenish^[101]. The near elimination of per-engagement costs offered by DEW systems can make air defence systems far more reliable, and ensure Europe’s ability to protect its critical infrastructure, civilians, and military assets more effectively against new aerial threats.

There are notable European efforts to expand capabilities within DEWs, but they lag behind international leaders. The French HELMA-P laser system was successfully tested in 2023, but only had a power of 2kW – significantly less than its British, Israeli, and American counterparts^[102]. The European Defence Fund funded TALOS-TWO project began in 2025 and further aims to develop a fully European 100kW high-energy laser system, however the project does not aim to deliver systems until 2030, and its budget of €25 million is substantially less than its international counterparts^[103].

Israel’s 100 kW Iron Beam is expected to be operational by October 2025^[104] and the UK Royal Navy expects to install the 50 kW Dragonfire on ships in 2027^[105]. After having developed 300 kW high-energy laser in 2022, the US has begun development of a 500 kW system through Lockheed Martin, which is expected to be sufficiently powerful to disable a broader range of aerial threats, including artillery, mortars, helicopters, and rockets – in addition to drones^[106]. Consequently, the lower funding levels and extended timeframe of European systems may limit Europe’s competitiveness in the rapidly evolving field of directed energy countermeasures. As for high-power microwaves, there is currently no EU alternative to the UK and the US made systems.

Read part 2 of this series: “Supporting climate security“.

Endnotes