🔷 Build with Ukraine

In That Number

$106.8B

The EU approved a landmark $106B loan for Ukraine. Of that, $71B is earmarked for weapons procurement (presumably from EU nations).

This loan, coupled with Ukraine’s easing of drone exports to Europe, will generate interesting deals and partnerships between the defense industries (see below).

On the Radar

Build with Ukraine. Ukraine announced plans to open 10 weapons export centers across Europe in 2026, reinforcing the “Build with Ukraine” co-production arrangements announced at the end of last year. The initiative is designed to 1) integrate Ukraine’s defense industry into the European defense ecosystem, 2) increase security assistance to Ukraine, and 3) attract additional investment.

• The Merge’s Take: The establishment of these hubs in the Nordics-Baltic region—Europe’s most proactive defense spenders—suggests a future where Europe’s "Drone Wall" is built on a Ukrainian backbone (goal #1). OBTW, the first German-made Ukrainian drones were just delivered (also goal #1). This effort also addresses a fiscal paradox: Ukraine’s defense industrial base is currently capable of producing $35B in equipment annually, yet the nation can afford to purchase only about half of that, so this sets the conditions for a sustainable post-war future for the country’s 500+ drone companies (goal #3). Ukraine is evolving from a security consumer into a security provider, and the new $106B EU loan (goals #2 and #3) will certainly help fuel this rocket ship.

Marine Corps. The Marine Corps has released its 2026 Aviation Plan and revealed some insights from its 2025 Force Design update. Two things to note: 1) For the first time (we think), the Marine Corps explicitly stated that the mission package for MUX TACAIR is electronic warfare designed to increase the survivability and lethality of manned platforms (i.e., F-35); and 2) inside the first-island chain, the thinking has evolved from service-centric kill chains to prioritizing sensing and communication to support the other services.

• The Merge’s Take: For MUX TACAIR, the payload-first emphasis retains missionized optionality through experimentation, a markedly different approach than the Air Force’s CCA program. The Marine Corps had previously tapped Kratos XQ-58 to integrate the mission packages (developed by Northrop Grumman). This week, they also tapped General Atomics’ YFQ-42 for payload integration.

The Naughty List. The Pentagon has a list of who's naughty or nice, but at the advisement of strategic consultant Kris Kringle, it is checking it twice. The January 7th executive order mandated a 30-day review of underperformers and identified corrective actions via regulatory or legal actions. The Pentagon is now conducting an “extended review” to make “noncompliance determinations,” while the identified (but not named) companies have 2 weeks to submit board-approved remediation plans.

• The Merge’s Take: This has been interesting to see play out in public. CEOs of virtually all of the primes are walking a fine line between optics and fiduciary responsibility, while also striking unprecedented long-term deals with the Pentagon—deals that finally give them the justification to make the same production investments they are being criticized for not making…due to lack of Pentagon commitment.

• The Merge’s Spicy Take: One should not cast stones from a glass house, and the political appointees may be learning more about the complexities, dynamics…and culpabilities. Secretary of War, Pete Hegseth’s softer stance: “We’ve been impossible to deal with. A bad customer who, year after year, changes our mind about what we want and what we don’t want…we need to fix our own house first.” This is playing out like most of the administration’s negotiation tactics, so maybe the ‘list’ was just a means to an end. What are the odds that the naughty list will even be released, or that any companies will be listed? Someone start a polymarket.

TRIVIA

In 1898, a U.S. warship exploded in Cuba’s Havana Harbor, killing 268 sailors and shocking the American populace. Despite the lack of evidence, newspapers immediately ran dramatic headlines that blamed Spain and fueled the catalyst for the Spanish-American War.

What was the name of the ship?

A) USS Iowa
B) USS Maine
C) USS Missouri
D) USS Virginia

They Said It

“My house cost more than this. And I am just some guy, not a whole country.” 

— Palmer Luckey, Founder of Anduril Industries, ridiculing the scale of France's $35M "all-in" science and AI investment.

On the Pod

The untold origin story about the Fury unmanned fighter jet!

Check it out!

YouTube

Apple

Spotify

Knowledge Bombs

• The CIA announced a new acquisition framework to accelerate private sector technology

• Swarmbotics AI won an Army contract for autonomous ground robotics development

• Saronic was selected for DARPA’s Pulling Guard program to develop escort systems

• The Navy developed anti-drone ammo that uses standard rifles

• SOCOM is looking for vendors for small cruise missile production

• Northrop Grumman, General Atomics, & SNC teamed up for the Navy jet trainer competition

• Kodiak AI won a Marine Corps contract to integrate its autonomy into the ROGUE-Fires remote launch vehicles

• The Pentagon's JIATF-401 purchased $5.2M in Bumblebee counter-drone quadcopters (popular in Ukraine)

• HENSOLDT & Helsing partnered to develop an autonomous combat aircraft

• Collins & Shield AI were (finally) officially acknowledged as the autonomy developers for the Air Force’s CCA program

• The Navy is looking for a large, long-range drone whose attributes look a whole lot like Shield AI’s X-BAT

• Shield AI is in talks to raise $1B at a $12B valuation

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ANSWER
B. The sinking of the USS Maine led to the rallying cry, "Remember the Maine, to Hell with Spain!" Although a subsequent investigation concluded the blast was likely an internal accident involving the ammunition stocks, the incident pushed the U.S. into a war that resulted in the acquisition of Puerto Rico, Guam, and the Philippines.