‘Explaining the persistence of defense offsets in a supply-driven arms trade’

Historically, defense offsets have been viewed as a feature of buyer-driven markets, where surplus supply of weapons gives buyer states the leverage to demand additional industrial and technological benefits from foreign suppliers. However, in the wake of Russia’s invasion of Ukraine, the global arms trade has shifted to a supply-driven market, where demand outstrips supply. Despite this shift, countries in Central and Eastern Europe (CEE) have continued to prioritize offsets, even though their bargaining power has diminished. This paper seeks to explain this apparent paradox through an inductive research design and qualitative methods, ultimately proposing a new theoretical framework based on three key factors: the growing drive for self-sufficiency, the strategic importance of government-to-government relationships, and the long-term planning horizons associated with defense procurement in the region. By analyzing recent offset agreements in CEE, it demonstrates how these factors collectively sustain offset demands – even in a supply-constrained market – while also providing insights into broader dynamics in global defense trade as well as arms collaboration.