Vasilis Palmas on how Cyprus is creating a stable and conducive environment for defence companies

"By institutionalising the high-tech defence industry and formalising legislation to support it, Cyprus will create a stable and conducive environment for defence companies. This will not only enhance national defence but also encourage innovation and attract investment," Defence Minister Vasilis Palmas notes.

He was speaking to GOLD magazine about the opportunities for the country’s defence cluster and the country’s future as it forges deeper defence relations with major players like the US, which are paving the way for an even bigger upgrade of the sector.

The Minister, in addition, suggests that, "Through increased funding, Cyprus will be able to actively participate in regional security initiatives and contribute to peacekeeping missions." This, Palmas explains, is anticipated to enhance Cyprus' reputation and influence in the region while fostering stronger ties its allies.

Among other things, Palmas also discusses why a strong local defence cluster can help reduce dependency in key areas, enhance self-sufficiency and contribute to national security and EU strategic autonomy.

In 2023, President Christodoulides pledged to allocate 2% of the country’s gross domestic product for spending on the armed forces. What specific areas of the armed forces will benefit most from this increased investment?

This increased investment is likely to focus on several key areas, including the modernisation of military equipment, cybersecurity, defence training and readiness, intelligence and surveillance, and regional cooperation and alliances.

A significant portion of the funds will be allocated to upgrading Cyprus’ military hardware, such as naval vessels and ground forces equipment. This will ensure that the armed forces are equipped with state-of-the-art technology to respond to evolving threats.

Also, given the growing importance of cyber threats, a portion of the budget is likely to be directed toward enhancing cybersecurity capabilities. This includes investing in advanced cyber defence systems, training personnel and developing strategies to protect critical infrastructure.

Increased spending will also focus on improving the training and readiness of military personnel. This includes joint exercises with allied nations, specialised training programmes, and simulations to prepare for various conflict scenarios.

Enhancing intelligence-gathering capabilities, including satellite technology, drones and other surveillance systems, will provide Cyprus with better situational awareness and the ability to pre-empt potential threats.

Part of the investment can be used to strengthen regional partnerships and alliances, such as with Greece and other EU nations. This will bolster Cyprus’ influence in the region and contribute to collective security efforts.

How will you ensure that the increased investment delivers measurable improvements to both national security and Cyprus’ regional influence?

To ensure that this increased investment delivers tangible improvements to national security and regional influence, we will implement performance metrics, transparency and accountability, strategic planning, regional engagement and more. By establishing clear performance metrics and benchmarks, the country will be in a position to evaluate the effectiveness of its defence spending. This includes tracking improvements in military readiness, response times and the successful mitigation of threats.

Transparent budgeting and procurement processes will ensure that funds are used efficiently and effectively. Regular audits and oversight by government bodies can help prevent misuse of resources. Increased investment will allow the country to develop a long-term defence strategy that aligns spending with national security priorities. This strategy should be regularly reviewed and updated to adapt to changing geopolitical dynamics.

Through increased funding, Cyprus will be able to actively participate in regional security initiatives and contribute to peacekeeping missions. This will enhance our reputation and influence in the region while fostering stronger ties with allies.

By focusing on these areas and implementing robust oversight mechanisms, Cyprus can ensure that its increased defence spending translates into measurable improvements in national security and a stronger position in the regional geopolitical landscape.

In addition, Cyprus will remain aligned with EU policies as regards strengthening our defence capabilities.

President Christodoulides recently outlined six targeted actions to help support Cyprus’ defence industry. How will these actions help companies working in the sector?

By institutionalising the high-tech defence industry and formalising legislation to support it, Cyprus will create a stable and conducive environment for defence companies. This will not only enhance national defence but also encourage innovation and attract investment.

Also, by making defence collaboration programmes an institution, we will ensure that local firms are integral to large defence projects, providing them with direct opportunities for technology transfer and the chance to work on high-profile national contracts offering financial returns to the local economy.

The establishment of the Defence Research & Technology Council will offer consultation on strategic direction and ensure that defence research, innovation and industrial participation are prioritised. By fostering closer cooperation between the Ministry of Defence and local defence companies, the industry can be aligned with national defence priorities.

The creation of a National Registry of Manufacturers will offer a centralised platform for Cypriot manufacturers, which will enhance transparency and credibility in the defence sector. By complying with established standards and being officially recognised, companies will gain more trust from both domestic and international partners, thus creating new business opportunities.

By increasing funding for R&D, the Ministry will enable Cypriot companies to develop new technologies, improve existing products and participate in European defence programmes. This funding will help companies reduce development costs and increase their ability to compete for contracts at a European level, fostering growth through innovation and greater participation in high-value international projects.

Supporting the presence of Cypriot companies at international defence exhibitions will increase visibility and open doors for partnerships and contracts. By showcasing Cypriot defence technologies to a global audience, companies will have the chance to establish themselves in international markets, potentially attracting foreign investment and collaborations that would otherwise be difficult to achieve.

The recent formalisation of defence ties with the United States marks a significant step for Cyprus. How do you see this partnership shaping the country’s defence capabilities, particularly in terms of training, technology transfer and regional security?

The recent formalisation of our defence ties with the United States marks a pivotal and strategically significant development for Cyprus. These relations are founded on shared fundamental goals and serve our mutual interests in ensuring peace, stability and security in the region.

This cooperation is the result of a process that has been evolving for several years, with key milestones such as the 2018 Statement of Intent, which laid the groundwork for enhanced collaboration. This partnership not only reflects the strengthening of our bilateral relationship but also represents a crucial step in enhancing Cyprus’ defence capabilities and improving our role in regional security.

With the support of the United States, Cyprus is reinforcing its strategic position in the Eastern Mediterranean and playing an active role in promoting regional security. In terms of training, the cooperation with the United States offers invaluable opportunities for our armed forces.

Through increased interaction, joint exercises, exchange programmes and the sharing of knowledge, experiences and best practices, we will be able to enhance our readiness and operational effectiveness. These joint training initiatives will help us further integrate with NATO-aligned forces and ensure that our troops are prepared to face any challenges in a rapidly evolving security landscape.

In terms of regional security, Cyprus has always been a key and reliable player in ensuring stability in this critical and sensitive region. In this context, our enhanced cooperation with the United States will undoubtedly contribute to the broader goal of regional peace and security.

Joint operations, information sharing and coordination in the areas of maritime security, counterterrorism and addressing transnational threats will be high priorities for us. Moreover, strengthening our relationships with neighbouring countries through this cooperation will further contribute to the creation of a collective security framework for the region.

This new partnership with the United States represents not only a strategic defence alignment but also a shared commitment to peace, stability and prosperity in the region. We are determined to prioritise these areas in our joint programmes, to modernise our forces and ensure that Cyprus continues to play a vital role in regional and global security.

Following the lifting of the US arms embargo, which specific areas do you aim to prioritise in joint projects or procurement?

Regarding equipment procurement, the lifting of the US arms embargo, combined with Cyprus’ recent inclusion in the FMS, EDA and Title 10 programmes, has paved the way for Cyprus to acquire advanced military technologies and cutting-edge equipment that were previously inaccessible to us.

This is a crucial step in modernising our defence capabilities, which will contribute to securing a technological advantage in addressing both conventional and hybrid security threats.

Our priority will be the acquisition of systems that not only strengthen our defensive posture but also complement our strategic role in the broader Eastern Mediterranean region.

Can you elaborate on further defence cooperation that Cyprus has struck with other countries and what it entails?

Cyprus engages in defence cooperation with EU member states to enhance security and strengthen military capabilities. Several such partnerships are currently active, taking various forms, with a primary focus on collaborative defence research and development, particularly through the European Defence Fund and the European Defence Agency.

These collaborations can involve joint projects or other actions which target common threats while also promoting diplomatic relations. In this way, the Ministry of Defence aims to improve interoperability between our companies with SMEs and research entities across the EU, contributing to the development of defence capabilities through strategic investments.

How does the ongoing geopolitical instability in Europe and the Middle East shape the defence strategy of Cyprus?

Cyprus’ defence strategy is shaped by both national and regional threats, as well as broader geopolitical shifts. By strengthening its defence capabilities, enhancing EU cooperation and building strategic partnerships, Cyprus is able to ensure its national security while contributing to European and regional stability. The ongoing geopolitical instability in Europe and the Middle East significantly shapes Cyprus’ defence strategy, reinforcing its focus on deterrence, national sovereignty and international security cooperation. First and foremost, our aim is to safeguard our territorial integrity and ensure the protection of Cypriot citizens from external threats, given the continued occupation of part of the island by Turkey and persistent threats to our sovereignty.

However, recent global developments, particularly Russia’s war against Ukraine, have demonstrated the importance of international defence cooperation. In this framework, Cyprus supports the EU’s Common Security and Defence Policy (CSDP), as well as EU defence initiatives that highlight the need for an EU-led rapid deployment capacity to respond to crises within and beyond the Union’s borders.

On the other hand, due to our geographical location, Cyprus plays a crucial role in fostering regional security cooperation and can thus act as a bridge between the EU and the countries of the Eastern Mediterranean region. Partnerships with key regional actors such as Israel, Egypt and Jordan are essential for enhancing operational resilience, securing maritime routes and addressing regional crises.

By leveraging its strong bilateral ties, Cyprus is contributing to the broader EU effort to maintain stability in the Eastern Mediterranean and North Africa.

Can the local defence cluster help reduce Cyprus’ armed forces’ dependency on foreign suppliers?

The local defence cluster in Cyprus can certainly help reduce our reliance on foreign suppliers for the armed forces but a full transition would require significant investment, time and strategic planning. We are still at the beginning and our aim is to provide all the necessary means and incentives to take measured steps in this direction.

The local cluster currently, focuses on producing high-tech technologies, dual-use products and software systems. A few local companies are collaborators or suppliers to big industry players, something which promotes cross-border collaboration at the highest level. In view of the current development that all member states are working towards – a Single EU Market for Defence – we are promoting collaborations that will help Cyprus increase its technological edge in Research, Technology Development and Innovation.

A Single EU Market for Defence means removing barriers to cross-border trade in defence; better market access for companies of all sizes from all member states; smoother cross-border cooperation, including for SMEs and startups; encouraging collaborative research, development and procurement, as well as increasing security of supply. Cyprus is seizing this opportunity, in order to maximise its dual-use potential and enable public and private funding, so as to build a local network of reliable suppliers, not only for Cyprus but for the EU as a whole.

This will, in turn, mean that we will increase our security of supply and create a clear regulatory framework to promote the stability and transparency of these supply chains.

To conclude, while Cyprus may not fully eliminate foreign defence suppliers in the short term, a strong local defence cluster can help reduce dependency in key areas, enhance self-sufficiency and contribute to national security and EU strategic autonomy.

This interview first appeared in the February of GOLD magazine. Click here to view it.