Fortifying the Eastern Flank: Poland’s Defense and Energy Sectors Poised to Thrive Amid Geopolitical Tensions

Poland stands at the crossroads of Europe’s escalating geopolitical tensions, with its 2025 presidential election amplifying calls for greater military preparedness and energy independence. As nationalist candidates like Rafał Trzaskowski and Karol Nawrocki vie for leadership, their hawkish rhetoric on Ukraine and defense spending has created a tailwind for domestic industries. For investors, this presents a clear strategy: overweight Polish defense contractors and renewable infrastructure plays while underweighting Russian utilities exposed to Poland’s pivot away from Russian energy. Here’s why.

The Defense Spending Boom: A Growth Engine for Aerospace and Cybersecurity

Poland’s defense budget is on a collision course with its 5% GDP target—a goal embraced by all major presidential candidates. Current spending already sits at 4.12% of GDP, outpacing NATO allies like the U.S. (3.38%). This trajectory is being driven by fears of Russian aggression, historical trauma from partitions, and the urgency of modernizing an aging military.

Key beneficiaries:
- PGZ (Polish Armaments Group): The state-owned conglomerate is Poland’s primary defense contractor, producing artillery systems, armored vehicles, and drones. Its stock has surged 40% since 2023 as orders for NATO-standard equipment soar.
- Hradek: A private aerospace firm specializing in drone technology and missile systems, Hradek is poised to capture contracts as Poland seeks to reduce reliance on U.S. imports.

The EU’s push for defense integration—including plans to share €50 billion in joint military projects by 2030—adds further momentum. Poland’s strategic location, bordering both Ukraine and Russia, makes it a hub for cybersecurity investments as NATO seeks to harden its digital defenses.

Energy Diversification: From Russian Gas to LNG and Renewables

Poland’s EU Council Presidency (January–June 2025) has prioritized ending reliance on Russian energy, a goal shared by leading presidential candidates. While Trzaskowski (pro-EU) and Nawrocki (conservative) disagree on climate policies, both agree on reducing Russian gas imports.

Opportunities:
- LNG Infrastructure: Poland aims to double LNG imports by 2030, with terminals like Świnoujście and Gdańsk set to expand. Companies like Grupa Lotos (a refiner with LNG ambitions) stand to benefit.
- Renewables: Trzaskowski’s support for the EU’s Clean Industrial Deal and Roadmap to End Russian Energy Imports positions Poland to accelerate wind and solar projects. Investors should watch Enea, a utility shifting toward green energy.

Risks to Russian Utilities:
- Inter RAO (IRAO.MM): A Russian power exporter, IRAO’s earnings are vulnerable to Poland’s shift away from Russian gas.
- Gazprom Neft (GAZP.MM): Sanctions and reduced demand from Poland could further pressure its valuation.

The Risks: Overheating Defense Bureaucracy and Trade Tensions

While the defense and energy sectors are booming, challenges lurk. Poland’s state-owned PGZ has struggled with delays in arms production, raising questions about its ability to scale. Meanwhile, public services like healthcare are being sidelined as budgets are diverted to military spending—a potential political liability.

Trade tensions with Ukraine also loom. Polish farmers protesting Ukrainian agricultural imports could strain bilateral ties, though defense cooperation remains a stabilizer.

Investment Recommendations

• Overweight: Polish defense contractors (PGZ, Hradek) and renewable infrastructure firms (Enea).
• Underweight: Russian utilities (Inter RAO, Gazprom Neft) exposed to Poland’s energy pivot.

The geopolitical calculus is clear: Poland’s candidates are united in their resolve to strengthen military and energy resilience. For investors, this is a multi-year growth story—provided they avoid the pitfalls of bureaucratic inefficiency and trade friction.

Act Now: The clock is ticking on Poland’s rise as Europe’s frontline fortress. Capitalize on this strategic realignment before the geopolitical winds shift further.