Sofia will finance its stake with a loan under Europe’s SAFE borrowing mechanism to boost defence investment. Bulgaria will become a center of competence in the defence industry for the whole of Europe, Rheinmetall’s Armin Papperger said at the signing.
Bulgaria and European defence giant Rheinmetall on Tuesday (28 October) sealed a deal worth more than 1 billion euros to build a plant that will produce gunpowder and 155-mm artillery shells.
Officials said the project was important for Bulgaria and Europe as a whole, as the region looks to upgrade its defence capabilities following Russia’s invasion of Ukraine. Rheinmetall is a major beneficiary of the surge in military spending.
The project will be a joint venture between Rheinmetall and Bulgaria’s VMZ (Vazov machine-building plant in the town of Sopot), in which the German company will hold a 51% stake and VMZ 49%. Bulgaria will finance its stake with a loan under Europe’s SAFE borrowing mechanism to boost defence investment.
The contract was signed by Rheinmetall’s CEO Armin Papperger and VMZ director Ivan Getsov at a ceremony at the Council of Ministers in the capital Sofia.
This will reportedly be one of the most significant foreign investments in recent years and is a key step in the modernisation of the Bulgarian defence industry.
“It is also part of the efforts of the European Union and NATO to strengthen the defence capabilities and strategic autonomy of Europe in the context of the changed geopolitical environment,” announced Prime Minister Rossen Zhelyazkov, who hosted the signing at the Council of Ministers. The ceremony was also attended by Deputy Prime Minister Tomislav Donchev, GERB leader Boyko Borissov and German Ambassador Irene Maria Plank.
Bulgaria will become a center of competence in the defence industry for the whole of Europe, announced Rheinmetall’s Papperger said at the signing. “I have never seen such a speed with which Bulgaria is acting. It is incredible how much effort your team has put into this cooperation,” Papperger said, recalling that the cooperation began in February at the Munich Security Conference.
According to him, the implementation of the project will create one of the most modern factories in the world for the production of gunpowder and ammunition. According to him, the plant could be ready within 14 months.
“We will build a huge production potential – 100 thousand 155-mm shells per year, which will be exported over the next ten years. The European Union and NATO need millions of such shells, and according to our calculations, the alliance will need about 50 million,” said Paperger.
The CEO of Rheinmetall emphasized that the company values the trust of the Bulgarian government. “We are not here just to be business partners, but also to find friends,” said Papperger. He added that the joint project with Bulgaria is just the beginning and Rheinmetall is planning additional investments in the country. According to him, Bulgaria has highly qualified specialists, which makes it suitable for the development of industrial and technological capacity in the defense sector.
The investment will create 1,000 new high qualifty jobs. With the construction of the plant, Bulgaria will restore a key element of its defence capacity and strengthen its position in the European defence industry.
The plant for the production of gunpowder and 155-mm artillery shells and modular charging systems will be implemented through a joint venture between Rheinmetall and VMZ-Sopot. The structure of the investment and the exact contribution VMZ-Sopot will make to the joint venture are not yet clear. The Bulgarian company was expected to hold 49% of the joint venture, with the funds from the Bulgarian side to be attracted under the SAFE loan mechanism. First, an ammunition plant will be built, and subsequently a gunpowder plant.
Rheinmetall is expected to transfer technologies with the construction of the joint venture in Bulgaria, especially for 155-mm ammunition, which is the NATO standard. They will also be needed for the new CEASAR cannons that Bulgaria will buy from France. 155 mm shells are also used for the war in Ukraine.
Commission President Ursula Von der Leyen has praised Bulgaria’s important defence industry, highlighting its significant contribution to Ukraine’s defence efforts. On a visit to VMZ-Sopot last month she publicly acknowledged that approximately one-third of the weapons supplied to Ukraine since the onset of the war originate from Bulgaria.