Drop in Global Arms Sales

Sales of arms and military services by world's largest arms manufacturers totaled $395 billion in 2012, showing a 4.2 percent decrease in real terms compared to 2011

Posted on 02/2/14
By Jay Rover | Via ViewsWeek
Global arms exporters infographic. Data: Taken from the US Congressional Research Service report, 'Conventional Arms Transfers to Developing Nations 2001-2008, Table 39', 4 September 2009. (Photo by by net_efekt, Creative Commons License)
Global arms exporters infographic. Data: Taken from the US Congressional Research Service report, ‘Conventional Arms Transfers to Developing Nations 2001-2008, Table 39’, 4 September 2009. (Photo by by net_efekt, Creative Commons License)

Sales of arms and military services by the largest arms-producing companies totaled $395 billion in 2012, showing a 4.2 percent decrease in real terms compared to the companies in the Top 100 for 2011. The new data on international arms production launched January 31 by Stockholm International Peace Research Institute (SIPRI), Sweden’s  at the Munich Security Conference.

 

Arms sales are defined by SIPRI as sales of military goods and services to military customers, including sales for domestic procurement and sales for export.

 

The decrease in global arms and military services sales is part of a trend that started emerging in 2011 when it registered a 6.6 percent decrease. Arms sales by the Top 100 – also called SIPRI Top 100 — have nevertheless increased by 29 percent in real terms since 2003.

 

However, the decrease in arms sales in 2012 was not uniform: while sales by companies in the United States, Canada and most West European countries continued to fall, arms sales by Russian companies increased sharply, by 28 per cent in real terms.

 

SIPRI says the share for companies outside North America and Western Europe has also been increasing since 2005 and, at 13.5 per cent, is at its highest point in the history of the Top 100, which does not include China-based companies due to lack of available data.

 

SIPRI researchers have been studying international arms transfers since 1968. Research is divided into three areas: Measuring international arms transfers; Transparency in international arms transfers; and Controlling international arms transfers.

Russian Arms Sales Boom

Russian companies, SIPRI says, saw a particularly large increase in estimated arms sales in 2012. Of the six Russian companies in the Top 100, all except United Aircraft Corporation saw increases in excess of 20 percent, and Almaz Antei — with a 41 percent rise — now stands in 14th place in the Top 100, the highest position taken by a Russian company since data became available in 2002.

 

Even though Russian arms companies continue to maintain high export levels, but the increase in overall estimated arms sales in 2012 mainly reflects large and growing domestic sales, as part of Russia’s $700 billion 2011–20 State Armaments Plan. “While there remains widespread skepticism as to whether the aims of the plan can be fully achieved, it is clear that a major increase in Russian military equipment procurement is taking place,” says a SIPRI media release.

 

“The Russian arms industry is gradually re-emerging from the ruins of the Soviet industry,” said Dr Sam Perlo-Freeman, Director of SIPRI’s Military Expenditure and Arms Production Program. “Nonetheless, the industry is still plagued by outdated equipment, inefficient organization and widespread corruption, which will continue to limit Russia’s ability to compete technologically with the West.”

US-based companies’ arms sales affected by Iraq withdrawal

SIPRI says sales by the 42 US-based arms producers amounted to 58 percent of the total arms sales of the Top 100, with 30 companies based in Western Europe making up another 28 percent of the total. While these companies still accounted for 87 percent of the total arms sales, the decline in arms sales in these traditional producer regions echoes the decline in military spending, which began clearly in 2011. In particular, the withdrawal of US forces from Iraq at the end of 2011 had a significant effect on a number of companies.

 

The largest percentage fall in arms sales in the Top 100 in 2012 — by 60 percent in real terms — was by KBR, which provided logistic support to US forces in Iraq. Sales by companies providing armored vehicles to US forces in Iraq and Afghanistan, including Navistar and AM General, also decreased.

 

“The US arms industry has fallen back somewhat from the heights it reached before the Budget Control Act, when the USA was still embroiled in two wars. But it still enjoys sales and profits that are very high by historic standards,” said Dr Perlo-Freeman.

 

The wars in Iraq and Afghanistan cost $1.5 trillion, about twice the cost of the Vietnam War when adjusted for inflation.

 

Other emerging and re-emerging producers

  • This year, for the first time, the SIPRI Top 100 includes data for Ukraine. The consolidation of much of the Ukrainian arms industry into a single holding company, Ukroboronprom—whose arms sales increased by 14 percent in 2012, reaching $1.44 billion—puts that company clearly in the Top 100 for both 2011 and 2012.
  • Brazilian aircraft manufacturer Embraer entered the Top 100 in 2010 and was one of the largest risers in 2012, by 36 percent in real terms, climbing from 83rd to 66th position in the Top 100 with arms sales of $1.06 billion.
  • The growth of the South Korean arms industry continued in 2012 with a 4.2 percent real increase in arms sales by companies in the Top 100. The total arms sales of Korean companies in the Top 100 have more than doubled in real terms since 2002.

 

The SIPRI Arms Industry Database was created in 1989. It contains financial and employment data on arms producing companies worldwide. Since 1990, SIPRI has published data on the arms sales and employment of the 100 largest of these arms-producing companies in the SIPRI Yearbook.

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