CTO Newsletter
News and analysis of offset and countertrade, twice a month, 24 times a year. Log in and search our archives to find the trade intelligence you need.
Our online database provides 24 months’ worth of issues. Researchers and long-term subscribers who would like to access older issues are welcome to reach out at subs@cto-offset.com.
Please note that the search bar does NOT recognise spaces. Please use _ instead. For instance, Saudi Arabia may be searched as Saudi_Arabia.
Volume 2026
Main headlines from this issue
Ukraine adopts laws to advance access to EU funding
Ukraine’s parliament adopted two laws on 16 September which ratified separate agreements with the EU: Law No. 4989-IX (Bill No. 0390) on Ukraine’s participation in the European Defence Fund (EDF), and Law No. 4990-IX (Bill No. 0391) on financing measures under the European Defence Industry Programme (EDIP). These laws are designed to help ensure access to EU defence funding for Ukrainian companies.
Latvia reverses decision on artillery system contract award
Latvia has selected Czechoslovak Group (CSG) subsidiary Excalibur Army’s Morana platform for its 155mm wheeled artillery system requirement, despite having previously selected Swedish company BAE Systems Bofors’ Archer. Upon reviewing the final offer, Latvia concluded that procuring the Swedish platform would exceed available funding and fall outside approved delivery schedules. However, BAE Systems has disputed this assessment.
Navantia, HHI sign cooperation agreements for Croatian corvette programme
Spain’s Navantia has signed MoUs with Croatian firms Iskra Shipyard and AITAC to explore industrial cooperation under Croatia’s Multi Role Corvette (MRC) programme. Meanwhile, South Korea’s HD Hyundai Heavy Industries (HHI) has also signed a teaming agreement with Iskra Shipyard to explore cooperation related to the same programme.
Hanwha, Milrem expand UGV cooperation in Australia, South Korea
South Korea’s Hanwha Aerospace and Estonia’s Milem Robotics are pursuing local capability development for unmanned systems in Australia and New Zealand, as well as in Korea. The two parties announced on 7 October that they would expand cooperation in the unmanned ground vehicle (UGV) sector. The partnership focuses on joint development, technology transfer and export promotion.
Indian firm to set up UAV production in Portugal
Indian AI warfare company Flying Wedge Defence & Aerospace (FWDA) has signed a partnership agreement with Portugal’s Keydef to manufacture autonomous unmanned aerial vehicle (UAVs) and swarm interceptors in Portugal. In parallel, FWDA and Keydef are working with the University of Minho on a research programme to develop an unmanned platform.
Saudi Arabia to manufacture and assemble Rolls-Royce engines
The UK’s Rolls-Royce Power Systems and Saudi Engines Manufacturing Company (Makeen) have signed an individual licence agreement for the local part-production and assembly of mtu Series 2000 marine engines in Saudi Arabia. According to Rolls-Royce, the agreement signed on 21 September will make it the first company to licence the production of high-speed engines in the country.
Main headlines from this issue
Shipment of F-35 parts diverted to Hongkong, seized by Chinese government
The Australian Department of Defence is currently investigating how F-35 components bound for the US in late May were diverted to Hong Kong. The incident could make Western suppliers more cautious about transferring technology or including distant companies in their supply chains. At the same time, it could incentivise them to double down on MRO localisation to minimise cross-borders movements of parts and components.
GCAP makes headway with contract to develop aircraft sending and communication systems
Edgewing, the joint venture established to design and develop a fighter aircraft under the Global Combat Air Programme (GCAP), has awarded an 18-month contract to the GCAP Electronics Evolution (G2E) consortium to further develop the aircraft’s integrated sensing and communications systems.
Canada attends MSPO as lead nation, expands bilateral cooperation
Poland and Canada deepened their existing defence-industrial cooperation at MSPO, where Canada served as the exhibition's lead nation. Poland’s WB GROUP signed four agreements with Canadian companies CAE, Robotics Centre, WESCAM, and Rosborough Boats, covering the production of unmanned systems, electro-optical integration, maritime platforms, and training and simulation.
Turkish defence firm sets up subsidiary in Egypt for local production
Mechanical and Chemical Industry Corporation (MKE), the Turkish state-owned defence manufacturer, has established Zafer, a wholly owned subsidiary in Cairo, to facilitate local joint production with Egyptian defence industry partners.
Safran, SIATT explore rocket motors production in Brazil
France’s Safran Electronics & Defense has signed an MoU with Brazilian missile systems company Sistemas Integrados de Alto Teor Tecnológico (SIATT) to explore cooperation on missile systems, loitering munitions, coastal defence, and related technologies.
US software to be locally integrated onto Taiwanese naval vessels
Havoc, a US company specialising in unmanned systems, and Taiwanese shipbuilder CSBC Corporation announced on 10 September that they were pursuing a partnership to pursue the licensed co-production of autonomous unmanned surface vessels (USVs) in Taiwan.
Main headlines from this issue
Proposed Korean fund could require higher domestic contribution fo export contracts with offset
South Korea is seeking to establish a Strategic Export Finance Fund by 2027 to provide loans and guarantees to foreign buyers purchasing from Korean companies. However, the fund would also require the Korean supplier to contribute a percentage of the approved loan amount in exchange for securing the export contract. Notably, this contribution would be higher for financing that supports “export-industry cooperation”, including offset activities.
Finland to produce Ukrainian drones under Build with Ukraine
Ukrainian defence companies Tencore and Center of Unmanned Technologies LLC (General Cherry) have signed agreements with Finland’s Insta and Patria, respectively, to produce drones in Finland. The agreements, signed on 23 August, aim to expand the production of unmanned systems in Finland as part of the Build with Ukraine initiative.
Belgium, India deepen defence industrial cooperation
Belgian primes are expanding cooperation with the Indian defence industry. FN Herstal and Thales Belgium have separately signed MoUs with India’s Kalyani Strategic Systems Ltd (KSSL) to explore cooperation in small arms, counter-unmanned aerial systems (C-UAS), and 70mm rockets. Meanwhile, New Lachaussée has signed an MoU with Tembo Classic Engineering Pvt Ltd to establish ammunition production in India.
Lockheed announces USD1.8bn offset package for Peru F-16 procurement
Lockheed Martin has announced a USD1.8bn industrial cooperation package for Peru as part of the country’s F-16 Block 70 acquisition. The announcement follows a protracted and politically contested fighter jet competition in which the US solution outbid Saab’s Gripen, despite reports suggesting that the Swedish jet was the leading contender.
Nigeria seeks tech transfer, local production partnership with Egypt
Nigeria’s Defence Industries Corporation of Nigeria-D7G (DICON-D7G) aims to develop a partnership with Egypt's Eagles International for Defence Systems to help establish production lines for armoured vehicles, anti-drone platforms, and other specialised military equipment in Nigeria through a transfer of technology.
Kazakh manufacturer to produce wiring systems in the UAE
Kazakhstani harness manufacturer Wiretech has formed a strategic manufacturing partnership with Emirati firm Advanced Armour Engineering (AAE) to produce wiring harnesses, cabling looms, and accessories in the UAE.
Main headlines from this issue
US permits naval construction abroad if production is eventually localised
A Presidential Memorandum signed by US President Donald Trump on 13 August, directs the US Department of War to develop a new procurement approach to allow foreign shipbuilders to participate in the future procurement of three classes of US naval vessels, provided they invest in US shipbuilding capacity, transfer technology, train US workers, and establish domestic supply chains.
Turkey shifts KAAN engine strategy from licensed production to IP
Turkey has revised its industrial strategy for the General Electric Aerospace (GE Aerospace) F110 engines intended for use on its KAAN combat aircraft. The country is moving away from demanding licensed production in favour of industrial participation and access to new technologies.
Boeing signs Apache sustainment agreements to fulfil Polish offsets
Boeing has signed agreements with Poland’s WZL-1 and the Central Military Bureau of Design and Technology to implement its offset commitments as part of Poland’s AH-64E Apache helicopter procurement. The agreements establish long-term industrial cooperation for the sustainment, maintenance and ground support of the country’s Apache fleet.
Rolls-Royce enhances AMCA engines localisation offer to India
UK prime Rolls-Royce and India's Reliance Industries have announced their intent to jointly design, develop, manufacture and deliver a sovereign indigenous combat engine for India's Advanced Medium Combat Aircraft (AMCA) programme. The two parties would combine Rolls-Royce’s expertise in advanced propulsion with Reliance’s technology, manufacturing, scale, and execution capabilities.
Elbit Systems to set up drone JV in Serbia
Israel’s Elbit Systems and Serbia’s state-owned Jugoimport SDPR are set to establish a joint combat drone factory in Serbia. Serbian President Aleksandar Vučić announced on 8 August that the facility could be inaugurated between 15 and 20 September.
Airbus and Thales expand defence cooperation with Danish firms
Airbus Helicopters has signed an MoU with local defence-tech company Terma to establish a framework to cooperate on upcoming helicopter campaigns, while advancing operational sovereignty and high-tech manufacturing in Denmark. Meanwhile, Thales announced a strategic partnership with Denmark’s Systematic to develop integrated air defence capabilities.
Main headlines from this issue
Annual defence white paper prioritises Japanese industrial base, expands foreign cooperation
In Defense of Japan 2026, its annual white paper published on 4 August, the Japanese MoD has set out measures to strengthen the country’s domestic defence industrial base, expand international co-production and technology cooperation, and improve defence procurement.
Peru’s tank programme stalled over funding constraints
The Peruvian Army’s Technical Operational Study Committee has reportedly identified the South Korean prime Hyundai Rotem’s K2 Black Panther as the preferred option for its main battle tank requirement. However, a formal contract has yet to be awarded, as domestic funding constraints have stalled the planned procurement.
Embraer signs Colombian KC-390 contract with offsets
Colombia has ordered two KC-390 Millennium multi-mission aircraft from Brazil’s Embraer. While the order was placed on 30 March, Embraer signed the contract with the Colombian Air Force on 4 August. Valued at USD366.4m, the contract reportedly includes a comprehensive offset programme designed to meet Colombian requirements.
Lockheed to build combat systems integration capacity in Australia
Lockheed Martin has secured a two-year AUD29.3m (USD20.7m) contract from the Australian Submarine Agency (ASA) to establish a sovereign combat systems integration capability to support Australia’s future Virginia-class submarine procurement under AUKUS, the trilateral Australia-UK-US security partnership.
Estonian firm to develop missile technologies with UK partners
Estonian missile manufacturer Frankenburg Technologies has signed agreements with British firms BAE Systems and Roxel UK to develop key technologies for its Mark I missile platform. The agreements cover missile technology, including warheads and rocket propulsion, and they are aimed at boosting the UK’s missile production base.
Romania to procure Thales radars under SAFE
France’s Thales will supply Romania with 12 Ground Master 200 Multi Mission All-in-one radars, worth approximately EUR247m (USD284m), under a government-to-government contract signed on 17 July. The procurement is being funded under the European Union’s Security Action for Europe (SAFE) programme.
Main headlines from this issue
Government committee calls for offset regime revival in India
India’s Public Accounts Committee (PAC) has called for another substantial overhaul of the country’s defence offset regime, including expanding the policy’s coverage and calling for better implementation. This puts the PAC’s recommendations at odds with the MoD’s draft Defence Acquisition Procedure (DAP) of 2026, which removes the dedicated offset framework altogether.
Bulgaria keen to set up JV with Rheinmetall despite problems
Bulgaria has decided to continue negotiations with Germany's Rheinmetall over a proposed domestic joint venture with state-owned arms manufacturer Vazovski Mashinostroitelni Zavodi (VMZ) Sopot, despite the Bulgarian government having identified “a number of problems” in the project.
UK awards Project Corvus to TEKEVER after failed tendering process
The UK’s MoD selected Portuguese prime TEKEVER’s AR5 platform on 25 July under Project Corvus to replace the British Army’s legacy Watchkeeper drone systems. On 22 July, just days ahead of the selection, TEKEVER had established an industrial partnership with British advanced composites manufacturer iCOMAT to support local production of the drones.
Portugal to procure Italian frigates with tech transfer
Portugal has signed a government-to-government agreement with Italy to acquire three FREMM EVO multi-purpose frigates from Italy’s Fincantieri through a transfer of technology. According to official Portuguese documents, the agreement, signed on 20 July and valued at EUR3–3.9bn, is being financed through the EU’s Security Action for Europe (SAFE) instrument.
Saab, Embraer to expand Gripen production in Brazil
Sweden’s Saab and Brazil's Embraer have signed a Heads of Agreement to establish a framework to expand local manufacturing capacity established under their existing industrial cooperation programme and to potentially produce 20 additional Saab Gripen fighter aircraft in Brazil.
Chinese firm to localise communications equipment in Egypt through tech transfer
China’s CETC International signed a contract with Egypt’s Arab Organization for Industrialization (AOI) on 19 July to locally manufacture communications equipment, transfer associated technology to Egypt, and expand domestic production in the electronics sector.
Main headlines from this issue
UK releases anticipated Defence Investment Plan
The UK government has published its Defence Investment Plan, setting out how it intends to invest GBP298bn in defence over the next four years while using defence procurement reform to strengthen the country’s industrial base and expand domestic production capacity. The Plan is expected to impact industrial participation in the UK.
Australia releases updated Defence Industry Strategy
Australia has released its second Defence Industry Development Strategy, which includes an enhanced Sovereign Defence Industrial Priorities framework, shifting the country's defence industrial policy from strategy development to implementation.
Canada selects TKMS for its submarine project contract
Canada has selected Team 212CD, led by Germany's TKMS, as the preferred supplier for the long-awaited Canadian Patrol Submarine Project (CPSP). Consequently, South Korea’s Hanwha Aerospace reportedly shelved plans for a Canadian armoured vehicle manufacturing joint venture after sister company Hanwha Ocean’s CPSP bid was unsuccessful.
Lockheed Martin to set up missile JV with Rheinmetall
US prime Lockheed Martin and Germany’s Rheinmetall have signed an MoU to establish in Europe the first overseas production hub for the Army Tactical Missile System (ATACMS). Signed on 7 July during the NATO Summit Defence Industry Forum in Ankara, the agreement sets out plans to establish a joint venture to manufacture the missiles in Germany.
Fincantieri expands cooperation for Croatian corvette programme bid
Italy’s Fincantieri has signed MoUs with Croatian shipbuilders Brodotrogir Cruise and Iskra Shipyard to strengthen its domestic industrial partnerships for Croatia’s Multi Role Corvette programme. The estimated EUR660m–1.6bn programme is expected to involve offsets and local industrial participation.
Poland to become first producer of Barracuda missiles in Europe
US defence company Anduril Industries has partnered with Poland’s Polska Grupa Zbrojeniowa (PGZ) and its subsidiary Military Aviation Works No 2 (WZL 2) to establish production of Barracuda-500M cruise missiles in Poland, making it the first country in Europe to manufacture them.
Main headlines from this issue
Switzerland anchors offsets in law for the first time
The revised Swiss Military Act, which came into force on 1 June 2026, establishes for the first time in Switzerland a legal basis for offset obligations in their defence procurement. The Swiss Federal Council will release a dedicated ordinance in 2027 to also define the detailed implementation of offsets.
Japan reviews defence industrial policy, considers FMS-like framework
Japan is considering introducing a government-backed defence export framework modelled on the US’s Foreign Military Sales (FMS) programme. Under the proposed framework, the Japanese government would become the primary contracting authority for overseas sales of Japanese defence equipment.
KNDS wins long overdue Malaysian howitzer contract
Malaysia has contracted KNDS and its Malaysian partner Advanced Defence Systems (ADS) to supply 18 Caesar 155mm self-propelled howitzer systems for its Armed Forces. The deal, announced on 16 June, includes know-how transfer, a production licence, and long-term industrial capability development in Malaysia.
India’s MKU to develop and localise electro-optics systems in Indonesia
India’s MKU Limited has signed an agreement with Indonesia’s PT Republikorp to jointly develop and localise electro-optic systems in Indonesia. The partnership is centred around technology transfer, joint manufacturing, local certification, and the integration of MKU’s optronics portfolio into Indonesia’s defence ecosystem.
Latvia’s Origin Robotics wins French drone contract
France has awarded Latvian company Origin Robotics a contract to supply its Blaze autonomous interceptor drone system to the French defence forces. Origin Robotics will partner with local company DSV to establish assembly and manufacturing capabilities for the system in France through a transfer of technology.
Lithuania to join CAVS programme; Patria signs first local partnership
In 2027, Lithuania will join the Common Armoured Vehicle System (CAVS) programme led by Finland’s Patria. Lithuania selected the Finnish prime’s 6×6 platform for its future armoured vehicle fleet on 27 May. Subsequently, in June, Patria launched its first industrial partnership in Lithuania to support local production.
Main headlines from this issue
Canada revises ITB Policy to enhance industrial cooperation
Canadian Prime Minister Mark Carney announced changes to Canada’s Industrial and Technological Benefits (ITB) Policy during CANSEC on 27 May. The updated policy, which governs industrial cooperation in Canada and is now in effect, is aimed at directing defence-related investments towards areas considered critical for Canada’s competitiveness and industrial resilience.
UK offset policy still underway
At the GICA conference held in Washington D.C. last month, Nick Ridgway, assistant head of strategy development, and Joe Royce, senior strategy and policy advisor, both of the UK’s MoD, made a presentation outlining the progress that was being made towards introducing a new offset policy for the United Kingdom.
Israel adopts new incentive-based cooperation model
At the GICA Conference, Daria Kravtsov, director of Israel’s Industrial Cooperation Authority for North America, announced a new incentive-based industrial cooperation model to align offset obligations more closely with national economic and technological priorities.
Aircraft development under European FCAS programme cancelled
France and Germany have discontinued the Next Generation Fighter development under the Future Combat Air System (FCAS) programme, following years of disagreements between industry partners Dassault Aviation and Airbus over programme governance, industrial workshare, and intellectual property.
Ukraine and Lithuania launch “Brave Lithuania” grant programme
Ukraine and Lithuania have launched Brave Lithuania, a bilateral defence innovation grant programme aimed at accelerating the development of new military technologies while embedding Ukrainian combat-driven innovation within Lithuania’s defence-industrial ecosystem.
Italy-India JV to explore aerospace and defence opportunities
On 4 June, Italy’s ALA Group announced the establishment of a local joint venture with India’s TVS Supply Chain Solutions (TVS SCS) to address opportunities in India’s aerospace and defence sectors.
Main headlines from this issue
GICA Spring 2026 Conference : US Arms Transfer Strategy and FMS
At GICA, Government officials elaborated on the approach that the US is taking on arms transfers, offsets, and industrial cooperation, noting that the country is undergoing its most significant transformation in the sector in decades. The US is focusing on working out in real time, the strategy launched by the 6 February Executive Order Establishing An America First Arms Transfer Strategy.
Estonia to release Industrial Cooperation guidelines 13 years after halting offsets
Estonia is moving towards a formal industrial cooperation policy that will embed domestic industrial participation into large-scale defence procurements. Although the framework has yet to be finalised, the MoD has already begun applying the principles of its upcoming policy on a case-by-case basis to gain practical experience.
Switzerland considers alternative air defence solutions with local production, amid Patriot delivery delays
Switzerland’s Federal Office for Defence Procurement (armasuisse) has received submissions from five manufacturers across four countries as part of an assessment related to the potential acquisition of an additional long-range air defence system. Switzerland is undertaking this exercise amid prolonged delays in delivering systems under the US-supplied Swiss Patriot programme.
Australia strengthens AUKUS partnerships
Australia has taken further steps to embed sovereign industrial capability into its AUKUS submarine programme. On 15 May, Australia selected Lockheed Martin as the preferred Combat System Integration Partner for its future fleet of Virginia-class submarines. In parallel, UK firms Babcock International and Truflo Marine have launched a pilot programme to qualify Australian industry members for submarine sustainment work, also under AUKUS.
Norway to produce and export Leopard tanks
KNDS, a consortium of Germany's KMW and France’s Nexter, together with Norway’s vehicle service and maintenance specialist RITEK, has opened a new Leopard 2 production facility in Levanger, Norway. Announced at the end of April, the facility is scheduled to begin production for the Norwegian Army in autumn 2026.
Naval Group wins Swedish frigate contract
Sweden has selected France’s Naval Group to supply four of its FDI frigates for the Royal Swedish Navy under Sweden’s Luleå-class surface combatant programme. Announced on 19 May following a multi-year evaluation process, the contract award initiated a phase of exclusive discussions between the Swedish authorities and Naval Group.
Main headlines from this issue
DKF Spring conference 2026
The DKF Spring 2026 conference was held in Gorinchem in the Netherlands on 21–22 April. The focus of the conference, hosted by Dutch prime Damen Shipyards and attended by 150 participants, was industrial cooperation not only in the Netherlands but also in Europe.
Brazil advances critical minerals policy with localisation incentives
Brazil’s Chamber of Deputies approved proposed Bill No. 2780/2024 on 6 May, establishing the National Policy for Critical and Strategic Minerals. The policy aims to attract investment and expand domestic supply chains in Brazil’s critical minerals sector through fiscal incentives and investment support measures, while also introducing some mandatory localisation requirements.
UAE orders Embraer C-390 jets, a first in the Middle East
The UAE’s Tawazun Council for Defense Enablement awarded Embraer a contract on 4 May for the supply of C-390 Millennium military transport aircraft, marking the platform’s first confirmed order in the Middle East, and the largest single-country international order for the aircraft to date.
Australian firm wins export contract under AUKUS
Australian defence company Century Engineering has secured a contract with US-based Huntington Ingalls Industries’ (HHI) Newport News Shipbuilding division to export precision-engineered cranks to the US Navy. The agreement marks the first time an Australian company has secured an export contract within the US naval nuclear supply chain.
Romania awards IFV contract to Rheinmetall
Romania has awarded Germany’s Rheinmetall the contract to supply 232 KF41 Lynx infantry fighting vehicles (IFV) under a EUR3.4bn (USD4bn) deal financed through the EU’s Security Action for Europe (SAFE) instrument. The acquisition, which is being carried out under the Mașina de Luptă a Infanteriei programme, launched in July 2025, places strong emphasis on domestic production, technology transfer, and industrial participation.
Fincantieri to set up naval JV in Albania
Italy’s Fincantieri and Albania’s state-owned defence company KAYO, under the control of the Albanian MoD, signed an agreement on 29 April to establish a joint venture for the construction and maintenance of naval vessels in Albania.
Main headlines from this issue
Japan revises defence export framework
Japan has revised its defence export framework, Three Principles on Transfer of Defence Equipment and Technology, to permit the transfer of lethal systems to partner countries and the export of non-lethal equipment without restriction. Previously, exports from Japan had been limited to five non-combat categories.
Thales expands defence industrial footprint in Malaysia
France’s Thales has announced defence initiatives with Malaysian industry partners to expand local assembly, technology transfer, and in-country sustainment capabilities for communications and surveillance systems for the Malaysian Armed Forces.
Final CPSP contenders expand Canadian cooperation
South Korea’s Hanwha Ocean and Germany’s TKMS are increasing efforts to secure the Canadian Patrol Submarine Project contract through deeper engagement with Canadian industry and expanded local partnership networks. As part of this push, TKMS announced a strategic collaboration with Canada’s QNX, while Hanwha held discussions with Irving Shipbuilding in Halifax to strengthen industrial partnerships.
Lockheed wins Australian long-range weapon system contract
The Australian government has selected Lockheed Martin’s High Mobility Artillery Rocket System (HIMARS) and the Precision Strike Missile (PrSM) as the winner of its Project LAND 8113 Phase 2. Their bid beat Thales’s and Kongsberg’s joint offer to sell the StrikeMaster.
Italian design wins Spanish combat vehicle contract
The Spanish MoD has awarded IDV, a subsidiary of Italy’s Leonardo, and Spain’s Indra Land Vehicles a contract to supply 34 IDV SuperAV 8x8 platforms for its new Marine Infantry Amphibious Combat Vehicle (VACIM) requirement. Under the EUR370m contract, signed on 17 April, IDV will supply the base vehicle platforms, while Indra will act as the prime integrator.
CSG to set up JV in Azerbaijan for vehicle repair and modernisation
The Czechoslovak Group (CSG) has signed a JV agreement in Azerbaijan focusing on lifecycle support activities, including repair, servicing, and modernisation of Azerbaijan’s existing fleet of armoured vehicles and selected land systems. The agreement, announced on 27 April, establishes a new joint venture in Azerbaijan called VEXA DS.