Will Europe surrender to Putin and Trump in Ukraine?

February 24, 2025

Will Europe surrender to Putin and Trump in Ukraine?

Probably. European nations are at a critical juncture regarding their support for Ukraine amidst the ongoing conflict with Russia. The Trump administration has initiated direct negotiations with Russia, excluding both European allies and Ukraine from these discussions. Trump's loyalty to Putin--likely in return of assistance in an upcoming coup--and his surrendering to Russia have raised concerns about the future of European involvement in Ukraine's defense and the broader security architecture of the continent.

European Commitment to Ukraine:

Despite the shifting U.S. stance, European leaders are currently stating that they will continue supporting Ukraine.

• Increased Defense Spending: The European Union (EU) has convened an extraordinary summit scheduled for March 6, 2025, to address enhanced support for Ukraine and to discuss bolstering European defense capabilities. The European Commission estimates that an additional €500 billion will be required over the next decade to meet defense investment needs. 

• Financial and Military Aid: Collectively, European countries have surpassed the United States in total aid to Ukraine, allocating approximately €70 billion in financial and humanitarian assistance and €62 billion in military aid over the past three years. 

Challenges and External Pressures:

The Trump administration's current policy emphasizes a reduced U.S. role in European security, urging Europe to assume greater responsibility:

• Diplomatic Exclusion: President Donald Trump's direct communications with Russian President Vladimir Putin, without consulting European allies or Ukraine, have led to feelings of marginalization if not a full betrayal among European leaders. This approach has prompted urgent discussions within Europe about the necessity of an autonomous security strategy. 

• Strategic Autonomy: European leaders, including Germany's Friedrich Merz, have questioned the future stability of NATO in its current form, suggesting that Europe may need to reassess its reliance on U.S. military support and consider strengthening its own defense capabilities. It will not be surprising that Trump pulls the U.S. out of Nato within upcoming months. 

Expert Perspectives:

Analysts and policymakers highlight the imperative for Europe to maintain its support for Ukraine:

• Security Imperatives: Experts argue that Europe's security is intrinsically linked to Ukraine's sovereignty. Allowing Russia to prevail could embolden further aggression, destabilizing the region and undermining international norms. 

• Economic Considerations: While increased defense spending poses economic challenges, the potential costs of a destabilized Europe are far greater. Investing in Ukraine's defense is viewed as a strategic necessity to preserve peace and economic stability on the continent. 

Investment Opportunities

If Europe begins to spend more on defense and in its support of Ukraine, the stocks and equities of European companies in the defense sector can be expected to do well. For example, Thales S.A., the French multinational company specializing in aerospace, defense, and digital security can be expected to continue increasing in value. The stock has already appreciated approximately 31.45% since the beginning of 2025. 

Company Profile:

• Industry Sectors: Thales operates in multiple domains:

  • Defense & Security: Developing military systems, radars, and communication solutions.
  • Aerospace: Supplying avionics, air traffic management systems, and in-flight entertainment.
  • Digital Identity & Security: Offering cybersecurity solutions, data protection, and identity management. 

• Financial Highlights (2023):

  • Revenue: €18.4 billion
  • Operating Income: €1.77 billion
  • Net Income: €1.02 billion 

Stock Performance:

• Ticker Symbol: HO (Euronext Paris)
• Recent Price: As of February 21, 2025, Thales shares closed at €182.25.
• 52-Week Range: €133.65 - €185.85
• Year-to-Date Performance: Up 31.45%

Recent Developments:

• Increased Production: In response to the ongoing conflict in Ukraine, Thales has significantly ramped up its European production of missiles and ammunition, with some facilities increasing output by up to five times.

• Financial Outlook: The company has set ambitious targets, aiming to surpass €25 billion in revenue by 2028, driven by its investments in cybersecurity and defense sectors. 

• Legal Matters: In November 2024, Thales became the subject of a joint investigation by the UK's Serious Fraud Office and France's Parquet National Financier concerning allegations of bribery and corruption. 

Thales continues to strengthen its position in the global defense and technology markets, leveraging its diverse portfolio and strategic investments to address emerging challenges and opportunities.

Another way to invest in the European defense sector is via the Select STOXX Europe Aerospace & Defense ETF (EUAD). This ETF offers investors exposure to European companies in the aerospace and defense sectors. Below is an overview of its profile, performance, outlook, costs, and fees.

EUAD Fund Profile:

• Objective: The ETF seeks to replicate the performance of the STOXX Europe Total Market Aerospace & Defense Index, focusing on European firms primarily engaged in civil and military aerospace and defense activities. citeturn0search0

• Inception Date: October 22, 2024. citeturn0search16

• Top Holdings: As of February 21, 2025, the top five holdings are:

  1. Airbus SE – 24.27%

  2. Safran SA – 21.59%

  3. Rolls-Royce Holdings plc – 11.92%

  4. BAE Systems plc – 11.73%

  5. Rheinmetall AG – 11.57%

  These five holdings constitute approximately 81.08% of the ETF's total assets. 

Past Performance:

Since its launch, EUAD has shown notable performance:

• Year-to-Date (YTD): As of February 21, 2025, the ETF has gained approximately 18.03%. 

• 1-Month Return: The ETF has increased by about 12.45% over the past month. 

Of course, the future has not been created yet. Past performance does not guarantee future results.

Costs and Fees:

• Expense Ratio: The ETF has an expense ratio of 0.50%, which is the annual fee expressed as a percentage of total assets under management. citeturn0search0

• Assets Under Management (AUM): As of January 31, 2025, EUAD manages approximately $1.86 million in assets. citeturn0search7

Future Outlook:

The European aerospace and defense sectors are poised for growth due to increased defense spending by European nations in response to evolving geopolitical tensions. Specifically, Trump's alliance with Putin is putting Europe in the defensive no pun intended. Companies within the EUAD ETF, such as Airbus SE and Rheinmetall AG, are expected to benefit from heightened demand for defense equipment and technology. Nonetheless, investors should consider potential risks, including regulatory changes and market volatility. Investors should also weigh the ETF costs and fees against their investment goals and consider the ETF's alignment with their portfolio strategy.

In summary, the Select STOXX Europe Aerospace & Defense ETF (EUAD) provides targeted exposure to Europe's aerospace and defense industries. While the sector shows growth potential amid increased defense expenditures, investors should conduct thorough research and consider their risk tolerance before investing.

Conclusion:

In light of the Trump administration's pressure and the evolving geopolitical landscape, experts widely advocate for Europe to continue financing Ukraine's defense. This commitment is deemed essential not only for Ukraine's sovereignty but also for the broader security and stability of Europe. The situation underscores the need for Europe to develop a more autonomous defense posture, ensuring resilience against external pressures and safeguarding its strategic interests.

Now you know it. 

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