00:00Becca, great to see you. And it wasn't just Germany. We got a host of announcements
00:03throughout NATO of potential spending on American-made weapons from the Netherlands to Poland
00:08and others. Coming out of this NATO meeting, what does it mean for this American defense
00:14ecosystem? Are there about to be a lot more purchases coming from Europe?
00:18I think right now we're seeing a little bit of a balance where Europe is still going all in on
00:24strategic defense autonomy, trying to build up capabilities so that they can stand on their
00:29own two feet, particularly in light of what they see as perceived weakness in U.S. security
00:36commitments to the European continent. But at the same time, they're trying to incentivize
00:42America to still care about Europe and European security. And part of how they're doing that
00:47is continuing to buy American military equipment to get buy-in from President Donald Trump to still
00:54care about their security priorities and remain a member of NATO. So we're seeing that very
00:59interesting balance. But I think we're seeing that certain companies like Raytheon, RTX, Lockheed Martin
01:05are going to be the winners out of some of these announcements.
01:08Becca, in this pretty precarious moment, have we restocked? Where are our inventories right now?
01:14And how about Iran's? Do we know?
01:17Well, right now, I think things are looking a little bit stretched for the United States,
01:22particularly for some of its high-end missiles and munitions, including for tomahawks, which is
01:28what Germany just purchased. Already, the United States has told other countries like Japan to get
01:34to the back of the line and to expect long delays on deliveries. So the U.S. is going to
01:39focus more
01:40on replenishing its own stockpiles based on what it's expended during the Iran war, at the same time
01:46that it continues to try and sell American equipment worldwide. On top of that, Iran is also firing
01:53missiles and drones at a very high rate. But these are more simple systems, so it's easier for them
01:59to regenerate these capabilities on a faster timeline. They're also relying on China for some
02:06core components and potentially Russia for some of its Shahed variant drones as well.
02:11Sorry, the Europe, who's relying on those? Sorry, Becca, I didn't quite catch that on the Russia.
02:17Oh, I'm sorry. Iran is. Iran is relying on Russia for some of its, essentially,
02:22Iran gave Russia some of its Shahed drones, and Russia was able to perfect them and essentially
02:28add additional capability to them. And now that is reaping dividends for Iran as they are receiving
02:34some of that technology back and using it against the United States.
02:37Right. So if this is a United States that is, one, trying to prioritize its own objectives
02:42in battles with Iran, for example, replenishing its own stockpiles, it already has less of a
02:48commitment to Europe. How far away is Europe from being able to produce at something at a level that
02:53can make up for the gap that it's now facing where America once was?
02:58There are still some significant gaps in capabilities, particularly because the U.S.
03:03has reduced its contributions to NATO's force model, so essentially what NATO could bring to bear
03:09in case of a crisis. And those capabilities extend to things like long-range strike, but also less sexy
03:16items like strategic enablers, airlift, command and control assets, space-based ISR, things that are
03:24needed to be able to prosecute a potential conflict. And so Europe is trying to develop its own systems
03:31to try and make up for those gaps, but they are years in the making. So for now, there might
03:37be a
03:37temporal gap that Russia could try and seek to exploit. And that's one of the reasons why you do
03:42see Europe continuing to buy American equipment as well.
03:46Becca, what do we know about what China is doing, where it's buying from, how much it's manufacturing at
03:51home, and how ready it is for anything that might be coming down the pike?
03:55Well, China is trying to increase its own readiness. And a lot of what China does is rely on its
04:00own
04:01ecosystem. It can tap into civilian industry to try and use that for defense production. So they're
04:08able to produce equipment at a very, very high rate and essentially surge production in a way that the
04:14United States cannot. But at the same time, there are divisions within the Chinese military.
04:19Xi Jinping has purged a number of top military leaders, which suggests that there's a chance
04:26that the military might not be as ready as he would like for some of the future challenges that
04:33he might face.
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