EOS offers ITAR alternatives

By Max Blenkin, Australian Defence Magazine

Electro Optic Systems (EOS) is adjusting its business model to offshore some of its design and production capabilities to make its products acceptable to customers concerned about US ITAR restrictions.

That's the year-old Defence Trade Controls Amendment Act 2024. This legislation and accompanying regulations toughen up exports of Australian defence and strategic goods to protect Australian technology and information. They allow complete exemptions for exports to the US and UK under the AUKUS agreement.

ITAR is the US International Traffic in Arms Regulations which control exports of US defence technology and services. Enacted during the Cold War, ITAR aims to safeguard US technological superiority through a complex and lengthy regulation process.

EOS said this trend predominantly affects the world-leading remote weapon system (RWS) family as well as the High Energy Laser Weapon business line.

'Australian ITAR'

For lasers, EOS has set up an innovation centre in Singapore, which will complement the Australian-based laser activities.

The company said its strategic shift also reflected the increasing demand from customers for localisation and growing offset obligations.

“Australian ITAR isn’t good for exports by Australian defence companies,” said EOS Chief Executive Officer Dr Andreas Schwer.

“It is not only a problem for us, it’s a problem for all of the Australian defence industry exporting predominantly in non-AUKUS markets,” he told reporters at a briefing in Canberra.

Dr Schwer said EOS had conveyed their concerns to the Australian government.

"They said the benefit for Australia is still higher than the drawbacks so let's go that way," he said.

Dr Schwer said the new EOS R500 Remote Weapon Station is under development in Singapore, making it free of US ITAR regulations and a product available to the global market.

He said being ITAR-free was a requirement explicitly requested by several international customers. Instead, production of the R500 is planned to occur in Australia through back-licencing.

In contrast, the new R800 RWS was co-designed in Australia and the US, with production in the US, making it a perfect fit for the US military and wider AUKUS market.

However, because of the "ITAR taint" R800 would less acceptable to European customers which EOS sees as the next big market.

"With this kind of hybrid strategy, EOS will be able to satisfy most customer requirements and preferences," Dr Schwer said.

A range of products

EOS produces a range of RWS', from the smallest R150, equipped with a light machine gun and suitable for smaller crewed vehicles or uncrewed ground vehicles, through to the larger 30mm Bushmaster cannon-capable R400, Slinger, R500 and R800 systems, suitable for a wide range of armoured vehicles.

Slinger is configured for counter-drone warfare. Equipped with a US Echodyne radar and firing the new Northrop Grumman proximity-fused round, it can achieve one or two-shot kills on small drones at ranges beyond 1,500 metres.

Customer nations have fitted EOS RWS with a variety of weapons, including pods firing 70mm guided rockets, Mk.19 automatic grenade launchers, and Dillon Aero miniguns.

Though the Australian army has used Norwegian Kongsberg RWS', EOS systems are now the RWS of choice, fitted to Bushmaster vehicles and soon to be fitted to Hawkei, Boxer, and likely to Redback infantry fighting vehicles.

Increasingly, EOS says, its systems are preferred by other nations because of their outstanding accuracy.

“We are typically 30 per cent better in first-hit probability over longer ranges than any of our competitors. We haven’t lost a single competitive live-firing trial. Our superb accuracy has its origins in our space business,” Dr Schwer said.

“The roots of the company lie in tracking small objects in space. That’s where we started in the 1970s as a research institute.”

Once battlefield counter-UAS systems were based around radio frequency jamming of drone datalinks and GPS navigation but that's become increasingly less effective in the Ukraine conflict as both sides have begun employing drones commanded by long fibre-optic cables. That's created a renewed interest in precision gun and laser systems.

Looking to the future

EOS sees its future in two strategic domains  – integrated counter-drone systems based on RWS and high energy laser weapons, as well as space control.

The company operates an advanced capability for space domain awareness (SDA) through laser and optical tracking of space objects from its facilities at Mount Stromlo, Canberra, and Learmonth, Western Australia.

That's sensitive to discern two objects in close proximity, around a kilometre apart, in geostationary orbit. This could be for legitimate reasons, such as transfer of data between commercial satellites.

In this case, it was a pair of Chinese satellites. US Space Command called this "practising dogfighting" for a future conflict in which an opening act could be to destroy or deny an opponent's critical space assets.

Dr Schwer said EOS' high energy laser weapon product portfolio ranged from 30 to 150kW, world-leading outside the US.

High energy lasers would act principally as a deterrent to hostile actor satellites overflying Australian territory. Lasers could be used to dazzle or damage satellite sensors. That's a last resort as their owners would not view this as anything but a hostile act.

High energy lasers could be used for a useful peaceful purpose - slowing space debris to speed de-orbiting through proton pressure.

EOS has developed a deployable counter-UAS laser system with power output around 35 kilowatts. This a highly promising capability which as been trialled in Australia.

Though the initial system is expensive, cost per shot is a few dollars at most, against hundreds of thousands of dollars or more for a missile.

Space communications

Once EOS saw a bright future in space communications as a service - laser communications between satellites and hubs in Medium Earth Orbit (MEO) and then to and from ground stations.

That would have delivered an alternative to increasingly congested Low Earth Orbit radio frequency communications. In 2019 it founded SpaceLink in the US, acquiring Australian company EM Solutions to develop ground terminals.

That was visionary and ambitious - too ambitious as in mid-2022 it drove EOS perilously close to insolvency.

EOS shut down SpaceLink in 2022 and recently sold EM Solutions for a healthy profit, using proceeds to repay its remaining debt, incurred during its financial crisis.

Dr Schwer said with a strong balance sheet and significant short-term liquidity, the company is now focused on reinvesting in future innovations and acquiring businesses that strengthen its strategic position, particularly in the areas of command and control, and artificial intelligence.

“We want to invest those funds in future innovations and in the acquisition of other companies to complement our strategic portfolio, which is predominantly in two domains,” Dr Schwer said.

Growing markets

Despite the fact that the high energy laser and space control businesses will provide most of the strategic growth, the RWS business remains EOS’ bread and butter for the next few years. And whilst ADF is a solid customer, more than 80 percent of the business is export related.

Dr Schwer said that most of the growth is expected to happen in Europe.

“That is our core growth area for the next five to ten years. What has happened particularly over the last two to three months has given us even more push to do more things in Europe,” he said.

“The other growth area is definitely the Middle East because of the long-lasting and trusted relationships the company has built up over the last decade.”

Ukraine is a big user of EOS products with more than 190 RWS in service, donated by Australia, Netherlands, Germany and the US.

The Australian defence organisation and the Capability Acquisition and Sustainment Group (CASG) usually doesn’t get much kudos for either speed of response or magnanimity but its unpublicised deal to ship 120 R400 RWS to Ukraine tells a different story.

Defence had acquired those RWS from EOS to equip Army Bushmaster PMVs. They had remained in storage pending installation.

The initial approach came to EOS from the Netherlands, a big supporter of Ukraine. It urgently needed RWS to install on armoured vehicles destined for Ukraine.

Those were duly shipped to the Netherlands in tranches of 80 and later 40, equipped with Mk.19 grenade launchers, fitted to upgraded Dutch M113 armoured personnel carriers and transported to Ukraine.

That gave Ukraine a fully equipped assault battalion ready to go in less than 12 months.

Dr Schwer said CASG agreed to a deal with EOS that proved a win-win for all involved parties.

“EOS bought back the systems, reconfigured them within a few weeks, and sold them to donating countries. In return, ADF received new systems to replenish the depleted stocks at no cost - delivered within a year with advanced features and renewed warranty,” he said.

“From contract signature in May 2023 to then departure of the first 80 systems from Australia, the deal took just six weeks,

“The Ukrainian and Dutch governments were delighted with this deal structure, as it delivered highly desired military capability to the battlefield in record time.

 “It stands as a perfect model of cooperation between government and industry.”