Lithuania eyes state defense holding to steer all weapons needs

WARSAW, Poland — Lithuania is gearing towards record-high defense spending next year, and with major procurements of tanks, infantry fighting vehicles and other gear in the pipeline, the country is advancing plans to establish a state-owned defense holding for coordinating the manufacturing activities for weapons, equipment and ammunition.

Vilnius is currently positioning local energy company EPSO-G as the backbone of Lithuania’s future defense industry, involving it in partnerships with foreign suppliers of technology.

The company is to take over a 25.1% stake in Lithuania Defense Services, a joint venture established by KNDS Deutschland and Rheinmetall Landsysteme to assemble 44 Leopard 2A8 tanks for the country’s land forces. The facility where the tanks will be assembled is to be constructed in Kaunas, in the country’s central part, under an investment worth an estimated €50 million ($59 million). The plant will also handle their maintenance, repairs and servicing in the future.

As Lithuania is readying to acquire 100 CV90 infantry fighting vehicles, it is likely EPSO-G will also take part in the procurement of BAE Systems Hägglunds’ product.

On Dec. 15 the Lithuanian Ministry of National Defence said the decision to purchase 100 CV90s “was approved by the State Defence Council with a particular focus on commitment to production of technical components and CV90 MkIV maintenance service here in Lithuania to be included in subsequent acquisition contracts.”

The Baltic State is advancing the acquisition alongside Estonia, Finland, the Netherlands, Norway and Sweden.

A spokesperson for the National Defence Ministry told Defense News: “Lithuania aims to integrate domestic enterprises into the CV90 supply chain and assembly process, including plans for a significant portion of the vehicles to be assembled in Lithuania as part of the broader joint procurement. This industrial involvement is intended to create sustainable local participation in production and support services.”

Under the plan, CV90 deliveries to Lithuania and other program participants are to begin in 2028, according to the ministry. The purchased Leopard 2A8 tanks are to be supplied to Vilnius between 2028 and 2030.

The two types of tracked vehicles are set to become part of the Lithuanian Army’s new Infantry Division consisting of two battalions.

Through its subsidiary EPSO-G Invest, the energy group is also involved in the project to launch a 155mm artillery ammunition factory in the Baltic State. The plant will be jointly owned by Rheinmetall, EPSO-G and Lithuanian state-owned ammunition producer AB Giraitės Ginkluotės Gamykla. The investment is expected to be worth at least €260 million.

Giedrimas Jeglinskas, an opposition lawmaker and a member of the Foreign Affairs Committee of the Lithuanian parliament, told Defense News that increasing the country’s military expenditure to almost 5.4% of its GDP in 2026, or close to €4.8 billion, represents a cross-party consensus.

The need to establish a state-owned defense holding that will represent the state in major procurements such as the Leopard 2A8 and CV90 purchases is also acknowledged across Lithuania’s political spectrum, he said.

“One way is to use EPSO-G as a core bone of this new structure behind the state holding, and then put further elements around it. For strategic defense investments, we require state funds, but also private capital,” said Jeglinskas, who represents the Union of Democrats for Lithuania. “We need the defense holding to be part of a system that works, acting as a co-owner of defense assets, factories that will produce both for Lithuania and for international sales.”

Last month, the Lithuanian Ministry of Finance set up a working group that is to coordinate strategic defense industry projects. In addition to a number of government entities, representatives of EPSO-G and AB Giraitės Ginkluotės Gamykla were also invited to the panel.

The finance ministry said in a statement the group’s formation represents “the first step in the implementation of paragraph 322 of the Government Programme which provides for the establishment of a state-controlled defense industry holding company.”

However, the country’s opposition believes that, as Lithuania’s neighbor Russia continues its invasion of Ukraine, the Baltic state has little time to lose in developing its defense industry, and the incumbent Cabinet should accelerate its efforts.

“One of the disappointing actions of the current government is that they announced they want to execute the creation of the state holding by the end of 2028, which is too late,” Jeglinskas said. “Defense and security must remain the top priority for both the government and the opposition of which I’m part of.”