EditGerman arms giant and Bulgarian state company to form billion-euro joint venture using EU loans
Bulgaria will borrow nearly €4 billion through SAFE for rearmament, the defence minister argued there is no cause for concern
German arms manufacturer Rheinmetall and Bulgaria’s state-owned military enterprise VMZ will establish a joint company to produce gunpowder and artillery shells, with a total investment expected to exceed €1 billion.
Bulgaria’s contribution to the joint company is estimated at €960 million, to be financed through the EU’s SAFE scheme (Strategic Technologies for Europe Platform), which supports defence investments. Bulgaria plans to borrow nearly €4 billion through this mechanism.
“In recent months, intensive negotiations were held with Rheinmetall for technology transfer and the establishment of a joint venture on Bulgarian territory,” said Economy Minister Petar Dilov during a cabinet meeting on 30 July.
The information became public following the release of the meeting transcript, seen by EUalive.
Dilov stated that the joint venture between VMZ and Rheinmetall is still at the project proposal stage, but confirmed an agreement has been reached for the construction of two military plants in Bulgaria. One facility will produce charges for artillery shells, while the other will manufacture 155mm NATO-standard ammunition.
Bulgaria views the project as a means to expand and modernise the production capacity of the state-owned military enterprise, generate economic benefits, and strengthen supply chains for the army.
“It is expected that new jobs will be created, and the financial participation of VMZ in the joint venture will generate additional revenues through local taxes and dividends,” said Dilov.
The government approved on 30 July the proposal to apply for financial support under the SAFE mechanism for up to €960 million to fund the construction of the two plants and the establishment of the joint enterprise between Rheinmetall and VMZ.
The idea for the joint company was initiated in April by GERB leader Boyko Borissov, who even visited Rheinmetall’s headquarters in Dortmund.
Since the additional €960 million will be added to the already approved €3 billion rearmament loan, Finance Minister Temenuzhka Petkova noted that external debt must remain below 60% of the country’s gross domestic product.
Defence Minister Atanas Zapryanov also expressed support for the investment. He reminded ministers that Bulgaria will borrow nearly €4 billion through SAFE for rearmament, but argued there is no cause for concern, noting that Greece plans to borrow €28 billion for the same purpose.
Bulgaria’s arms industry has become one of the most profitable in Southeast Europe since the beginning of the war in Ukraine. The state-owned company VMZ expects orders for 2025 to reach €500 million – nearly double compared to the previous year. Military revenues are particularly important for Bulgaria, which is trying to keep its deficit under 3% of GDP.
Bulgaria also profits from sending its old military equipment, manufactured to Soviet standards, to Ukraine. The funds received from NATO allies and the EU are being invested in purchasing new Western-made weapons. Through this scheme alone, the country expects nearly €500 million from its NATO partners.
The Balkan country is one of the largest producers of Soviet-style military equipment needed by the Ukrainian army.
While Bulgarian military factories are gradually shifting to NATO-standard ammunition, large parts of the industry still manufacture Soviet-style arms, which are exported to Asia, Africa, the Middle East, and primarily to Ukraine in the past three years.
Data for 2023 show that the country’s military factories and arms traders recorded a turnover of €3.2 billion, placing Bulgaria in the mid-range tier of global arms exporters, with revenues rising rapidly.
Despite the benefits to the Bulgarian armed forces and the economy in general from the defence industry, pro-Russian forces in the country remain opposed to military aid for Ukraine.
The most vocal opponents are President Rumen Radev, the pro-Russian Bulgarian Socialist Party (part of the ruling coalition), and the large pro-Kremlin party Vazrazhdane, which is allied with Germany’s far-right AfD in the European Parliament. They argue that more weapons for Ukraine only make the war last longer with more people killed.
Caption: A tank is on display at the area of German weapons maker Rheinmetall at the ILA Berlin Air Show 2024 in Schoenefeld near Berlin, Germany, 03 June 2024, EPA/HANNIBAL HANSCHKE
Updated: August 8, 2025 - 05:23
