Introduction
The closing weeks of 2025 have ushered in a fundamental reassessment of European economic strategy. The European Commission's release of the Joint Communication on the Strategic Use of Tools to Strengthen the EU's Economic Security on 3 December 2025 represents a watershed moment in the continent's geopolitical posture. For decades, the European Union relied on the "Brussels Effect" — the passive regulatory power of its market size to shape global standards — to exercise global influence. That paradigm has dissolved.
In its place has emerged an aggressively interventionist framework, exemplified most powerfully by the Security Action for Europe (SAFE) Regulation. The instrument, which mobilises €150 billion in subsidised financing for European defence procurement, represents the financialisation of national security. Yet the regulatory architecture of SAFE harbours a critical flaw: its "Buy European" provisions are fundamentally misaligned with the industrial ambitions and geoeconomic strategies of rising Middle Powers — a cohort of strategically located nations including Turkey, Pakistan, Brazil, and Indonesia that increasingly refuse to choose sides in the US-China rivalry.
This blog argues that SAFE's 35 percent non-EU component threshold, designed to insulate European defence supply chains from external shocks, inadvertently implements a geopolitical exclusion mechanism that contradicts the EU's strategic interests. By locking Middle Powers — particularly NATO ally Turkey and rising military producers like Pakistan — out of Europe's lucrative defence market, Brussels risks accelerating the very hedging behaviour it seeks to prevent. These nations will pivot toward China's Belt and Road Initiative and regional integration blocs not from ideological conviction, but from rational cost-benefit calculation. The irony is acute: SAFE, conceived as a tool to strengthen European strategic autonomy, may instead consolidate the technological and economic dependence of key allies on Beijing.
The Fortress Logic and Its Strategic Calculation
The SAFE Regulation must be understood within the broader context of European "defensive industrialisation". The regulation is, on its surface, analytically sound: Europe faces genuine security threats from Russia's conventional military, China's technological competition, and the potential withdrawal of American security guarantees. In response, Brussels has constructed a financial architecture that incentivises the development of European defence industrial capacity independent of external suppliers.
The mechanism is straightforward. Under SAFE, the European Commission and participating member states deploy €150 billion in low-interest loans to finance defence procurement across the continent. However, to access these preferential financing terms, defence contractors must meet stringent localisation requirements. The regulation — formally adopted by the Council on 27 May 2025 — stipulates that no more than 35 percent of component costs may originate from outside the EU and its formally designated closest partners: the EEA/EFTA states and Ukraine. This threshold functions as a de facto "Buy European" clause, establishing a non-tariff barrier that excludes third-country suppliers regardless of cost competitiveness or technological superiority.
The implicit assumption underlying this design is that European industrial consolidation will produce sufficient economies of scale to eventually render European suppliers cost-competitive and technologically advanced. In the medium to long term, the logic holds. Over a ten-to-fifteen-year horizon, protected European markets will likely generate the investment capital and research intensity required to close technological gaps with Asian competitors. This is the classical "infant industry" argument, and it has historical precedent: European aerospace, for instance, benefited from precisely this kind of market protection before Airbus achieved global competitiveness.
Yet this logic operates on a timeline incompatible with the strategic choices facing Middle Powers. Unlike infant industries in developed economies, which can absorb short-term inefficiencies because domestic demand is substantial and consumers possess high purchasing power, Middle Powers are engaged in a high-stakes competition for foreign exchange, technological acquisition, and geopolitical relevance. For Turkey and Pakistan in particular, the defence industrial sector is not a luxury but a necessity — a mechanism for generating revenues, building technological capacity, and securing the military modernisation required to maintain strategic autonomy in their respective regions.
The Turkish Precedent: NATO Ally as Strategic Outsider
Turkey's experience under SAFE illuminates the mechanism of exclusion with particular clarity. Turkey is a NATO member, a customs union partner of the EU, and the geographic hinge between Europe and Asia. By conventional alliance logic, Ankara should be treated as a privileged partner in European defence procurement. Instead, SAFE classifies Turkey as a "third country" — a status confirmed by the European Commission in August 2025 when it formally noted that Turkish firms are barred from SAFE procurement absent a security and defence agreement — subjecting it to the same 35 percent component restriction as Vietnam or Brazil.
The regulation does provide a pathway for Turkish participation through Security and Defence Partnerships (SDPs) — bilateral arrangements that can negotiate higher localisation thresholds. However, the SDP process is deliberately political. For Turkey, which maintains independent relationships with Russia, China, and the Gulf states, and whose participation faces vetoes from Greece and Cyprus over longstanding bilateral disputes, meeting these criteria presents an impossible political calculation. As analysis from ELIAMEP confirms, Turkey's exclusion from SAFE appears certain in the near term.
The consequences are already visible in Turkish decision-making. Rather than accept the constraints imposed by SAFE, Turkey has accelerated the development of its indigenous defence industry and deepened partnerships with non-EU suppliers. Turkish drone manufacturer Baykar has expanded production toward Pakistan, Azerbaijan, and Poland — but has also strengthened supply chain relationships with Chinese component suppliers. The irony is stark: in attempting to exclude Turkish defence production from European markets, SAFE is incentivising exactly the kind of deepening of non-European supply chain integration it was designed to prevent.
Moreover, the political signal transmitted by SAFE's treatment of Turkey reverberates throughout the Middle Power cohort. If a NATO ally cannot access European defence financing on reasonable terms, what recourse exists for Pakistan, Brazil, or Indonesia? The regulation's design effectively communicates that European partnership is conditioned not merely on security alignment, but on a level of political subordination that Middle Powers guided by what scholars term "poly-alignment" strategies find increasingly unacceptable.
Pakistan's Defence Industry and the Brussels Barrier
Pakistan presents a parallel case with distinct economic stakes. Pakistan's defence industrial base, though less advanced than Turkey's, is strategically vital to Islamabad's economic future. The country produces small arms, ammunition, armoured vehicles, and increasingly, advanced electronics and aerospace components. For an economy facing persistent foreign exchange crises and chronic capital shortages, defence manufacturing represents a significant source of export revenue and a mechanism for acquiring foreign currency.
Pakistan's former National Security Advisor Dr. Moeed Yusuf has argued that Pakistan should leverage its military production capabilities as a central plank of its geoeconomic repositioning — transforming its defence sector from a purely domestically-focused institution into an export-oriented driver of capital formation. This vision is plausible: Pakistan possesses the engineering talent, the production capacity, and the regional market access to compete in global defence supply chains — provided it can access advanced component suppliers and capital-intensive production facilities.
SAFE, however, forecloses precisely this pathway. The regulation's component restrictions mean that Pakistani defence manufacturers cannot feasibly integrate European technology into products intended for export. European suppliers will not sell advanced components to Pakistani firms if those components risk triggering the 35 percent threshold and therefore disqualifying the final product from European procurement. The result is a form of technological quarantine: Pakistan cannot access European supply chains, and therefore cannot develop the technological sophistication necessary to compete in global defence markets where European standards increasingly predominate.
In response, Pakistan has little alternative but to deepen its technological and economic relationships with China. Islamabad's emerging partnerships in defence production with Beijing — encompassing drone technology, radar systems, and advanced avionics — are not products of ideological alignment with the People's Republic, but rational responses to exclusion from European technology ecosystems. As Yusuf has argued, Middle Powers are guided by agency and transactionalism, not ideology. When Europe erects barriers, China constructs bridges. The geoeconomic logic is inescapable.
The Poly-Alignment Framework and the Cost of Exclusion
To understand the full implications of SAFE's architecture, one must grasp the strategic logic animating the foreign policy of Middle Powers. O'Sullivan, Mitter, and Yusuf have articulated an intellectual framework — published through Harvard's Middle Powers Project at the Belfer Center in November 2025 — that reconceptualises the strategy of rising nations in the contemporary great power competition. Unlike the Non-Aligned Movement of the Cold War, which was defined by what it opposed, poly-alignment is a positive, transactional strategy. Middle Powers deliberately cultivate deep relationships with multiple great powers — the United States, China, and the EU — and extract concessions from each by credibly threatening to strengthen ties with rivals.
Pakistan's strategic positioning exemplifies this logic. Islamabad maintains security partnerships with Washington, geoeconomic partnerships with Beijing, and aspirations for deepened engagement with Europe. Yet this trilateral balancing act is only sustainable if each pole offers tangible benefits. When the EU uses SAFE to exclude Pakistan and similar nations from defence industrial opportunities, it eliminates one category of benefit without proposing alternatives. The cost of maintaining Western alignment increases, while the benefits of Chinese partnership become more concentrated and valuable.
The logic extends beyond Pakistan to the broader cohort of Middle Powers. The EU's signal through SAFE is that inclusion in European ecosystems is conditional on subordination across multiple domains. This is precisely the outcome that poly-alignment strategies are designed to avoid. When faced with such conditionality, rational Middle Powers will hedge by deepening relationships with less restrictive partners. In this context, "less restrictive partner" means China — which characteristically offers capital, technology transfer, and market access without explicit political conditionality.
Conclusion: Reconceiving Partnership with Middle Powers
SAFE represents a strategic miscalculation rooted in a fundamental misreading of contemporary geopolitics. Brussels has designed the regulation as if the world still operates within a binary Cold War logic where nations must choose camps. The EU assumes that Middle Powers, when pressed, will choose Western alignment because of shared values, institutional preferences, or threat perception. This assumption is empirically unfounded.
The evidence from Turkey and Pakistan suggests instead that Middle Powers respond to material incentives, cost-benefit calculations, and the relative availability of alternatives. When Europe constructs barriers to participation in its defence industrial ecosystem, it does not coerce alignment; rather, it incentivises the very outcome it seeks to prevent — the deepening of Middle Power dependence on Chinese technology, capital, and supply chains.
To succeed in a world of poly-aligned Middle Powers, the EU must fundamentally reconceive its approach to strategic partnerships. This requires abandoning the Fortress Europe mindset that views Middle Powers primarily as security threats to be managed. Instead, Brussels must construct a positive value proposition: meaningful participation in European defence supply chains, technology transfer partnerships, and long-term capital commitment that competes on substance with Chinese offers, not merely on normative appeals to Western values.
The SAFE Regulation, as currently structured, fails this test. By excluding precisely the Middle Powers whose stability and alignment are most strategically vital, the regulation may secure Europe's garden while leaving it increasingly isolated in the global jungle. For Brussels to achieve genuine strategic autonomy, it must first recognise that autonomy is impossible without the voluntary partnership of the nations that stand between Europe and Asia.
References
- European Commission. (2025). SAFE | Security Action for Europe. Directorate-General for Defence Industry and Space.
- European Commission. (2025). Joint Communication on Economic Security. 3 December 2025.
- Council of the EU. (2025). SAFE: Council adopts €150 billion boost for joint procurement on European security and defence. 27 May 2025.
- European Parliament. (2025). The EU's new bilateral security and defence partnerships. EPRS Briefing.
- Greek City Times. (2025). EU Commissioner Confirms Turkish Firms Excluded from SAFE Defence Program. 16 August 2025.
- ELIAMEP. (2025). Turkey's Defence Industry and the EU SAFE Regulation.
- IEP Bocconi. (2025). Safeguarding the Effectiveness of the Security Action for Europe through Soft Law. 7 October 2025.
- O'Sullivan, M., Mitter, R., & Yusuf, M. (2025). Middle Powers: An Intellectual Framework. Belfer Center, Harvard Kennedy School. 20 November 2025.
- Yusuf, M. (2025). Pakistan Geoeconomic Pivot: Conversation with Dr. Moeed Yusuf. FES Asia.
- Yusuf, M., & Akhtar, R. (2023). Pakistan's Geo-economics Pivot: Strategies, Opportunities, and Challenges. Friedrich-Ebert-Stiftung.