As allies scramble to supply Ukraine, Canada still has no deal to ramp up munitions production

In the fall of 2022, a little more than six months into the full-scale Russian invasion of Ukraine, two of Canada's major ammunition manufacturers submitted proposals to the Liberal government to drastically increase production of artillery shells.

Almost a year and a half later — with Canadian stockpiles drained by donations to dangerously low levels, and with Ukraine running out of ammo — a major agreement to ramp up production in this country still hasn't been signed.

And there doesn't appear to be one on the immediate horizon, despite pressure from allies who already have moved to increase their own munitions capacity.

Canada and the United States have held exploratory talks aimed at finding ways to resupply Ukraine, discussions that quickly turned to the question of how to replenish dwindling domestic inventories.

The Liberal government's hesitation stems in part from the fact that boosting production of the NATO-standard 155 millimetre shells that both Canada and Ukraine need requires a federal investment of as much as $400 million in the factories where they're made.

"There have been discussions. I've not yet signed a deal," Defence Minister Bill Blair said in a recent interview, adding that he spoke recently with the finance and innovation ministers about the issue.

"We're looking hard at making an investment in Canada to increase [munitions] production. The current ammunition situation is unacceptable in Ukraine. It's unacceptable for NATO. Unfortunately, it's something that we got to fix."

There are "significant supply chain issues," Blair said. Part of the problem is the defence industry's struggles to secure a supply of the mineral antimony (a critical component in everything from armour-piercing bullets and shells to night vision goggles) outside of China.

There are also research issues related to the development of a combustible cartridge for the 155 millimetre shells.

But more than anything else, the federal government seems stuck on the investment question. Sources say federal officials are skeptical and believe there won't be enough long-term demand to justify ramping up production of the M795 variant of the 155 millimetre shell known as the "operational round" — the NATO-standard ammunition needed by both Ukraine and the Canadian Army in Europe.

During the bilateral talks with the U.S., the idea was floated that Washington could invest in the Canadian production lines itself. But the United States has privately assured Canada that if it can open other production lines — notably the one at General Dynamics Ordnance and Tactical Systems (GDOT) in Valleyfield, Quebec — it will have no shortage of world-wide customers and will be able to recoup its investment.

At the moment, Canada is unable to manufacture the operational round, which provides greater accuracy and range. Munitions-makers in this country can only produce the M107 version of the 155 millimetre shell, known as the "training round."

Testifying before the House of Commons defence committee last fall, Deputy Defence Minister Bill Matthews said that the initial proposals from GDOT and IMT Defence in Ingersoll, Ont. called for an investment of only $200 million — an amount the federal cabinet seemed prepared to accept.

"We made a recommendation through the deputy minister and chief of the defence staff to the minister of national defence to proceed with that investment, and that was approved," Matthews said.