VARO CEO: Defense Spending Halts European Refinery Closures

Rising European defense spending is reversing a long-term trend of refinery closures. This shift creates demand for traditional fuels that current alternative energy sources cannot replace. The industry spent the last decade focused on contraction, but that focus has now changed.

"Every conversation I’m having with European governments today is all about how do you maintain resilience, how do you maintain continuity of supply? I would say that period between 2015 and 2022 the entire focus was how could you shut refineries down," said Dev Sanyal, CEO of VAROPreem.

The Shift in Refining Capacity

For years, the European refining sector faced steady decline as the continent pushed toward decarbonization. Since 2009, 30 of approximately 100 European refineries have been closed or converted, according to data cited by Global Banking and Finance. This consolidation reduced the region's total refining capacity from 17.5 million barrels per day (bpd) to 14.4 million bpd.

However, the geopolitical environment has forced a reevaluation of energy security. European Union member states' defense spending reached €418 billion ($472 billion) in 2025, marking a 75% increase since 2021 and the 11th consecutive annual increase, according to an Investing.com report.

Why Defense Hardware Requires Traditional Fuels

The pivot back to fossil fuel reliance is rooted in the technical limitations of military hardware. While civilian transport and energy grids are increasingly electrified or adapted for biofuels, heavy military equipment remains tethered to high-density, liquid hydrocarbon fuels.

"Now, with defence spending, you realise that whether you have F-35s (US-made fighter jets), you have Leopard tanks, they don't run on biogas," said Sanyal.

Implications for Energy Security

The requirement for combat-ready fuel supplies has placed refinery infrastructure at the center of national security discussions. Because military platforms like jet fighters and main battle tanks require specific fuel specifications to ensure performance in extreme conditions, governments are prioritizing the maintenance of domestic refining capacity. They aim to avoid the risks associated with long, potentially vulnerable supply chains. This represents a structural change in how European policymakers view the role of legacy energy assets within the defense industrial base.