The military industry in Latvia has developed hand-in-hand with the Latvian defense sector. Following years of austerity, Russia’s aggression against Ukraine in 2014 reinvigorated the sector, with defense spending nearly tripling in the period between 2014 and 2018. Indeed, in 2018 Latvia joined the “2% club,” meeting NATO’s guideline of a minimum of 2 percent of GDP spending on defense. Defense spending increased from a mere 223 million euros or 0.94 percent of GDP in 2014 to 590 million euros or 2.02 percent of GDP in just four years. Russia’s full-scale war against Ukraine was another catalyst for Latvian defense progress. In 2023, Latvia will spend 987 million euros or 2.25 percent of its GDP, an almost quadrupling spending over a decade. Furthermore, by 2027, Latvia aims to spend at least 3 percent of its GDP on defense.
The notable increase in defense spending gradually expanded space for the domestic defense industry. In 2016, a governmental report on cooperation with the Latvian military industry—essentially Latvia’s military-industrial strategy—was approved. It called for several activities to involve the domestic military industry in defense-resource planning and implementation, as well as to help the industry better reach out to foreign markets. The 2016 State Defense Concept was the first to dedicate a specific section to the domestic military industry, and the current 2020 concept continues this approach.
Among the most visible activities arising from state and private sector engagement are annual Industry Days, organized by the industry and the government since 2014. Narrower bilateral industry matchmaking events have also been held over the past few years (e.g., the first United States-Baltic Defense Industry Day in 2022). Other notable activities include the grant program for developing military or dual-use products, which provides seed money for promising innovations (since 2018), as well as the defense innovation research program (since 2021). The grant and the innovation research program are likely to produce practical results in the upcoming years.
The military industry in Latvia predates the Federation of Security and Defense Industries. Among many other examples, Skrunda class patrol boats for the Latvian Armed Forces were built by the Riga Shipyard, military clothing was produced by Brasa Defence Systems, and ammunition was manufactured by D Dupleks.
In recent years, probably the most publicized military industry project in Latvia has been the localization of production of the Finnish Patria six-wheel armored personnel carriers. Latvia agreed to purchase these vehicles back in 2021. From 2023, armored personnel carriers are being assembled in Cesis, Latvia. Although not a home-grown product, it strengthens the local civilian and military industry and lays the groundwork for the further growth of the Latvian military industry. The new production line could also be used to make armored personnel carriers for other clients abroad.
There are also notable success stories in the digital sector. For example, LMT, whose main business is mobile communications, has become one of the most visible companies in the domestic military industry. It was one of the first globally to launch a 5G military test site. Another company, Exonicus, developed the Trauma Simulator, a virtual training system for civilian and military medicine needs.
A further increase in Latvia’s defense spending will benefit the local military defense industry, as the National Armed Forces will need more resources and support from both the domestic and foreign industries. Russia’s war in Ukraine has underlined the fact that a capable and agile local defense industry is a necessity, not a matter of choice. The war and the COVID-19 pandemic also underscored the importance of supply chain security, which will likely benefit localized production and service solutions.
At the same time, the doors will remain wide open to foreign defense industry companies as Latvia will continue to increase the size of its armed forces (conscription is being reinstated starting this summer), as well as its armament, with air defense and indirect fire support capabilities among the current priorities. The Latvian Federation of Security and Defense Industries has also become a platform for foreign military industry companies (e.g., it has concluded a memorandum of understanding with the National Defense Industrial Association, and associated members of the federation include Lockheed Martin Corporation, among others).
Russia’s aggression in Ukraine in 2014 and since 2022 has been a game changer for Latvia’s defense sector and its military industry. The aggression led to a significant increase in defense spending and the creation of a structured support system for the defense industry. It is likely that this opportunity will not be missed and that Latvia’s defense industry will evolve at a much faster rate over the next decade.
The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.