EU member-state funding of AI creation and use in defense

The main directions of this activity include:

Funding via the SAFE fund. The key financial instrument is the Security Action for Europe (SAFE) program. The European Commission is currently planning to accumulate up to €15 billion from unspent funds of the militarization fund. These resources are directed to large-scale projects for the community’s collective security, where AI technologies are a mandatory component of the procured equipment and software.

The mechanism works as follows - the EU provides concessional loans to member states, which are obliged to spend this money on orders from the European defense industry, stimulating demand for high-tech solutions.

Direct support for startups and R&D. The EU is shifting from purchasing ready-made solutions to building its own technological base. In February 2025, plans were announced to launch specialized support programs for European startups developing AI for the military sector. This includes European Innovation Council (EIC) grants and European Defence Agency (EDA) programs aimed at creating autonomous decision-making algorithms, machine learning for electronic warfare, and computer vision for guidance systems.

Institutional procurement reform. To accelerate AI adoption, the European Commission is reforming joint procurement rules. Traditional tenders take years, which is unacceptable for software and neural networks. New mechanisms allow framework contracts to be concluded directly with a pool of innovative companies, bypassing lengthy certification stages for each iteration of code, provided NATO cybersecurity standards are met (e.g., STANAG 4774/4778).

Dual-use and critical infrastructure protection. A significant portion of investment is directed toward developing dual-use technologies. AI systems financed from the defense budget are designed so that in peacetime they can protect undersea communications cables, gas pipelines, and power grids from sabotage, using the same acoustic analysis and object-recognition algorithms as those used to protect military bases.

It is worth noting that the implementation of some ambitious plans faces bureaucratic delays. Despite budget allocations, EU member-state leaders periodically postpone final approval of technical details of projects such as the “Drone Wall” for further discussion.

In addition to internal modernization, a significant share of allocated funds (for example, a €6.1 billion aid package to Ukraine) goes to pay contracts specifically with EU defense enterprises, which indirectly incentivizes them to implement AI to remain competitive in the arms market.

Author: Candidate of Economic Sciences, Associate Professor, Department of World Economy and World Finance, Financial University under the Government of the Russian Federation Valeriy Valeryevich Smirnov.