India–EU SDP enables access to the €150 billion SAFE framework, supporting co-development and supply-chain entry, but constrained by EU design authority, content limits, and firm-preference rules
India and the European Union (EU) formalised a landmark Security and Defense Partnership (SDP). For the EU, the SDP with India marks the diversification of its security partnerships, being the third such agreement after those with Japan and South Korea in the Indo-Pacific region. For New Delhi, the SDP serves as a strategic instrument to advance shared strategic interests, particularly defence-industrial cooperation with EU member states. The SDP enables India, as a non-EU partner, to access the €150 billion Security Action for Europe (SAFE) fund. It offers opportunities for New Delhi’s ‘Atmanirbharta’ (self-reliance) programme, particularly through the co-development of defence (sub)systems, access to the EU’s €150 billion SAFE fund via the 35 percent third-country component ceiling, and entry into the European defence supply chain through the CERTIDER registration system.
The SDP enables India, as a non-EU partner, to access the €150 billion Security Action for Europe (SAFE) fund.
India’s existing bilateral defence-industrial cooperation with major European states lays the foundation for SAFE fund-based collaboration. Yet the partnership also presents structural challenges, including the EU’s mandatory Design clause (Article 16), sovereignty-related risks arising from export controls, and a market architecture that inherently favours domestic European firms over non-EU partners such as India.
Since Russia’s war against Ukraine, the EU’s threat perceptions vis-à-vis Moscow have transformed into an existential challenge. The EU, in turn, has adopted the ReArm Europe Plan/Readiness 2030, intended to build a long-term commitment to enhanced security. The five core pillars of the plan include: a SAFE financial instrument; boosting national defence funding for member states; creating greater flexibility in EU instruments to support increased investment in defence; contributions from the European Investment Bank; and mobilising private capital to support start-ups and defence-industrial players. Among these five elements, the €150 billion SAFE fund is a key driver of deeper integration among Europe’s defence industries and external strategic partners. The SAFE fund has been established for five years (2025–2030) under Article 122, utilising an emergency instrument to bypass the European Parliament and thereby vest decision-making authority in the European Council. Rising national-level defence spending among European states, along with the collaborative clause to onboard other member states to navigate EU financing rules, introduces a key limitation on the utilisation of SAFE funds.
By signing the SDP, India, as a non-EU member state, has effectively linked its ambitious defence-industrial base to the EU-based SAFE fund framework. SAFE fund support applies to at least two EU member states in collaboration with an SDP partner, with a strict clause that components produced outside the EU may constitute no more than 35 percent of the end product’s total cost. This provision ensures a minimum 65 percent share for EU defence-industrial stakeholders.
The SAFE fund has been established for five years (2025–2030) under Article 122, utilising an emergency instrument to bypass the European Parliament and thereby vest decision-making authority in the European Council.
As a third party, India’s private industry, MSMEs, and start-ups can unlock a range of defence contracts with Europe-based firms. Another equally important element is the Design Authority clause mentioned in Article 16 of the SAFE Regulation. The EU is careful to preserve its autonomy, ensuring that it does not rely on a non-EU country for permission to change, update, or replace its defence systems. Rather than viewing this as a hurdle, India could use this as a basis for co-development projects. The most effective approach would be a ‘Nested Intellectual Property’ model, in which Indian companies provide subsystems that remain Indian-owned and are integrated into a European platform to enable functionality. In this arrangement, the main European contractor retains the ‘Design Authority’ for the overall system, ensuring compliance with EU regulations, while the Indian partner retains ownership of the core technical knowledge within the sub-system. This ensures that India is not merely a provider of replaceable materials or simple hardware, but a custodian of high-value, state-of-the-art technology essential for the platforms to operate efficiently.
Table 1: Third-country involvement-related key provisions in SAFE
| Article | Provision | Implications/Challenges for non-EU countries |
| Article 1 | Establishes the financial framework and the critical distinction between product categories. | The European Defence Industrial Strategy (EDIS) and the EDIP Regulation create a structural advantage for domestic firms, creating a highly competitive market for non-EU firms and countries. Exclusion from direct support from the SAFE fund. |
| Article 3 | States that the SAFE fund is a step taken in order to support the steps taken by the Union and member states. | Imposes a 35 percent hard ceiling on foreign components and requires Indian/foreign firms to forfeit export controls concerning their advanced (dual-use) technologies. |
| Article 4.1(a) | Loans given to member states should be utilised to boost Europe’s defence manufacturing capacity | Supports Europe’s domestic manufacturing while retaining veto power to withdraw from a defence contract at any given moment if external dependency on a third country is deemed a national threat or liability. |
| Article 16.10 | Limit on Third-country Content of Products | Non-EU/NATO suppliers face a market barrier characterised by a cap on component volume and the constant risk of contract termination if their home country is unilaterally deemed a security risk to European strategic autonomy. |
| Article 16.11 | Requirement for EU-Based Design Rights | The SAFE mandate requires European contractors to maintain full design authority, thereby legally requiring them to substitute all foreign components to ensure that third-country governments cannot impose export controls, sovereign vetoes, or end-user restrictions on how integrated technology is modified or deployed. |
Source: SAFE Regulations
To improve industrial exchanges, Indian branch offices or partners based in Europe must use the CERTIDER system, the EU’s official register of approved defence companies, which controls access to supply chains within the EU. Registration in this system is mandatory for any company that wants to move sensitive goods across borders with ease (especially if they are European). For Indian companies, being CERTIDER-compliant allows hardware to be sent to EU member states and to partners such as Norway and Iceland under a general licence. This effectively places authorised Indian companies on a ‘white list’ of trusted groups, simplifying export and import procedures. This rule-based harmony is further strengthened by the value-added tax (VAT) exemption (Article 20 of the Council Regulations for SAFE) for shared purchases under the SAFE framework. Indian-made hardware exported through these channels is temporarily exempt from value-added tax (VAT), giving it an edge over traditional non-EU rivals and major defence exporters such as the United States and Israel. This price advantage could become a strong tool for India to replace existing suppliers and gain a larger market share.
The momentum of the India–EU defence-industrial partnership is boosted by Article 28 of the SAFE Regulation, which addresses ‘Emergency Urgency’ and fosters faster defence hardware procurement. In a crisis, shared purchases are rushed through, allowing private negotiations and bypassing the long process of publicly announcing contract bids. This creates a ‘closed’ environment to foster agile bureaucratic processes, which are paramount in times of crisis. Indian companies that have already built strong partnerships with major European contractors can move through these faster channels more easily than they could through the standard open bidding route.
India and the EU have officially launched negotiations for a Security of Information Agreement (SoIA), which would serve as the ‘legal safeguards’ for the exchange of sensitive and classified information, including defence-industrial secrets.
India and the EU have officially launched negotiations for a Security of Information Agreement (SoIA), which would serve as the ‘legal safeguards’ for the exchange of sensitive and classified information, including defence-industrial secrets. The SoIA will support the materialisation of the India–EU Defence Industry Forum within the SDP-based framework. The mechanism is relevant for ‘Category 1’ products, as explained in Article 1 of the SAFE Council Regulations, such as ammunition, drones, and artillery. At present, the EU’s internal production capacity is lagging in meeting the ‘emergency’ needs to support military readiness. The Indian defence industry could help fill these capability gaps in defence production.
Table 2: Categories of defence products for procurement supported by SAFE (per Article 1)
| Category | Items classified |
| Category 1 | ammunition and missiles; artillery systems, including deep precision strike capabilities; ground combat capabilities and their support systems, including soldier equipment and infantry weapons; small drones (NATO class 1) and related anti-drone systems; critical infrastructure protection; cyber; and military mobility, including counter-mobility |
| Category 2 | air and missile defence systems; maritime surface and underwater capabilities; drones other than small drones (NATO class 2 and 3) and related anti-drone systems; strategic enablers such as, but not limited to, strategic airlift, air-to-air refuelling, C4ISTAR systems as well as space assets and services; space assets protection; artificial intelligence and electronic warfare. |
Source: SAFE Regulations
In the short term, Category 1 listed items could provide a kickstart for both sides. In the medium-to-long term, the partnership must shift toward a joint venture (JV)-based model for Category 2 technologies, including guided missiles, anti-drone systems, space asset protection, AI-driven systems, and electronic warfare (EW). In these domains, exporting finished products is a suboptimal strategy for India, as EU design-control rules are likely to result in rejection. A more effective approach is to supply ‘critical inputs’—subsystems accounting for at least 15 percent of contract value. By providing core software code for AI or signal-processing chips for EW, India becomes embedded in the EU’s SAFE framework. These components form the ‘brains’ of modern defence systems; once integrated, they generate long-term dependence and ensure Indian firms remain part of the system lifecycle. This cooperation also enables defence exports. Joint production with European partners can support the export of ‘hybrid’ systems to Africa and the Indo-Pacific, allowing India to offer high-end European technology at lower cost, backed by domestic manufacturing and service support.
Indian defence companies under the ‘Atmanirbharta Mission’ have developed expertise in supplying high-value parts, from advanced sensors and software algorithms to specialised AI modules, while remaining based in India. By aiming to be the main non-EU supplier, India can embed its industry at the core of major European contracts, addressing the challenge of scale-based production.
India, as a non-EU, non-NATO partner, would be subject to a 35 percent hard ceiling on component volume and would have to compete against heavily subsidised European rivals.
India’s signing of the SDP agreement with the EU has opened opportunities, alongside challenges, for India and other non-EU/NATO countries to tap into the SAFE framework and export defence hardware to EU member states. While this pact is a vital enabler, the biggest challenge remains India’s ability to penetrate the inward-looking SAFE (Security Action for Europe) mandate. India should prioritise the signing of the Security of Information Agreement (SoIA) with the EU to facilitate the exchange of industrial blueprints, improve IPR protection, and (possibly) even access to CERTIDER. To move from the periphery of European R&D to the centre of high-level initiatives such as the HEDI 2.0 ‘Innovators Forge,’ Indian firms must secure ‘EU Secret’-level clearances, yet they face a market structurally designed to favour domestic entities.
The EU’s internal cohesion, amid geopolitical alignment with India, remains a challenge for the penetration of the SAFE framework across two or more member states. India, as a non-EU, non-NATO partner, would be subject to a 35 percent hard ceiling on component volume and would have to compete against heavily subsidised European rivals. Furthermore, the EU’s requirement for unrestricted design autonomy creates a ‘sovereignty conflict,’ in which Indian firms may have to forfeit national export controls and align them with the EU’s to remain in the supply chain. This creates a persistent ‘security veto’ risk, whereby dependencies can be terminated if unilaterally deemed a strategic vulnerability. Ultimately, India must navigate a hard-edged market in which the legal requirement to substitute foreign components with European ones makes long-term supply chain stability inherently uncertain.
Rahul Rawat is a Research Assistant, Defence and National Security with the Strategic Studies Programme at the Observer Research Foundation.
Suryansh Tripathi is a Research Intern with the Strategic Studies Programme at the Observer Research Foundation.
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Rahul Rawat is a Research Assistant with ORF’s Strategic Studies Programme (SSP). He also coordinates the SSP activities. His work focuses on strategic issues in the ...
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Suryansh Tripathi is a Research Intern with the Strategic Studies Programme at the Observer Research Foundation. ...
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