Aviation Week’s choice of Vladimir Putin as Person of the Year has been controversial, to say the least. Among the negative comments posted on AviationWeek.com, some readers said an aviation magazine should not mingle with politics. Yet one of the key features of the aerospace and defense (A&D) industry is its close link  to international politics. Trying to analyze and report on the industry while ignoring this dimension would be like missing the forest for the trees.

Selling airplanes, warships, satellites or weapon systems never has been only about price, product performance or technology, and it certainly does not happen in a political vacuum. 

The sale of helicopter carriers by France to Russia in 2011 in a $1 billion deal was controversial from the start. Complaints came from the U.S. as well as from NATO. The deal was the first sale of military technology to Russia from a NATO member-state. Yet the most surprising element was not that France sold to Russia—all defense-exporting countries are desperate for orders—but rather that Russia bought from a NATO country. It says something about the state of the Russian shipbuilding industry. 

It is therefore no shock that when the relationship between Russia and Europe went sour over Ukraine, the French government decided to suspend the delivery of the first warship, which was due in November last year. This is a major snub for Putin, and it is already rumored that in retaliation Russia is now trying hard to derail France’s long-standing effort to sell the Dassault Rafale to India, offering the Sukhoi Su-30 fighter jet as an alternative. 

But despite appearances, this is business as usual for A&D players. When it comes to major international defense contracts, politics often trump economics, which is why, for example, countries such as South Korea and Japan have always bought American when it came to strategic assets like fighter jets and antimissile defense, often in spite of the economics of the deal. 

This is also why European defense companies try hard to develop and market their products as “ITAR-free,” to avoid being subject to U.S. International Traffic in Arms Regulations, which govern exports of militarily sensitive technologies and give the U.S. administration a say in every sale of military systems that contain American components. As a case at hand, a French contract to sell spy satellites to the United Arab Emirates was stalled for more than a year because the spacecraft carried U.S. components subject to ITAR. It took several months of negotiation and a deal brokered by Presidents Barack Obama and Francois Hollande to resolve the issue. 

The takeaway for companies involved in exporting sensitive products is that they should consider politics not just an external factor over which they have no control but as an important input into contract negotiations as well as... their business strategy as a whole. 

I remember negotiating a major missile contract with an Asian government, for which the “force majeure” clause became a major stumbling block, as the client did not want to be at the mercy of a political embargo, even in disguise. When you consider the criteria for an event to be qualified as force majeure (under French law, there are three main criteria: externality, unpredictability and irresistibility), it was quite tricky to agree on what would be force majeure in that context.

Beyond specific contract negotiations, it is important for companies to incorporate the political factor into their overall business strategy. Scenario-building and “wargaming” are two efficient strategic tools to use. Although it is just simulation, it can lead to powerful insights into the likelihood of political situations and can influence a business strategy by laying out possible sequences of events leading to different outcomes. 

Ultimately, though, the best way to develop a strategy resilient to international politics is to create business interdependencies that will make political decisions by one country more difficult to implement. Be it through an industrial joint venture, a technology licensing agreement or other forms of partnership, the more balanced the stakes, the less likely it is that a deal-breaking political decision will occur.

In this environment of political instability, scarce resources and shrinking defense budgets, the best way to make one’s business more resilient is to get away from pure competitive situations that make it easy to tell the winners from the losers. A modern winning strategy is not only about sharing the pie, but about protecting it from political interference and—whenever possible—increasing its size. “Co-opetition,” not competition, is the new name of the game.

Antoine Gelain is the managing director of Paragon European Partners. He is based in London.