Image credit: SIPRI. - Photo: 2022

Global Arms Trade Survives the Pandemic Lockdown

By Thalif Deen

UNITED NATIONS (IDN) — As the global economy came to a virtual standstill during the height of the 2020-2021 Covid-19 pandemic, the world’s arms trade remained relatively unscathed.

Sales of arms and military services by the 100 largest companies in the industry reached $592 billion in 2021, a 1.9 per cent increase compared with 2020 in real terms, according to new data released December 5, by the Stockholm International Peace Research Institute (SIPRI).

The increase marked the seventh consecutive year of rising global arms sales. However, while the rate of growth in 2020–21 was higher than in 2019–20 (1.1 per cent), it was still below the average for the four years leading up to the Covid-19 pandemic (3.7 per cent).

Many parts of the arms industry were still affected by pandemic-related disruptions in global supply chains in 2021, which included delays in global shipping and shortages of vital components, according to SIPRI.

“We might have expected even greater growth in arms sales in 2021 without persistent supply chain issues,” said Dr Lucie Béraud-Sudreau, Director of the SIPRI Military Expenditure and Arms Production Programme.

“Both larger and smaller arms companies said that their sales had been affected during the year. Some companies, such as Airbus and General Dynamics, also reported labour shortages.”

Still, there could be a significant increase in arms sales in 2022, judging by the uninterrupted flow of weapons from the US and Western Europe to Ukraine in its ongoing 10-month-old military conflict with Russia.

US Secretary of State Antony Blinken said on November 23 that he was authorizing “our twenty-sixth drawdown of U.S. arms and equipment for Ukraine since August 2021”.

This $400 million drawdown, he said, includes additional arms, munitions, and air defence equipment from US Department of Defense inventories.

This drawdown will bring the total US military assistance for Ukraine to an unprecedented level of approximately $19.7 billion, since the beginning of the Biden Administration.

“The United States will continue to stand with more than 40 allies and partners in support of the people of Ukraine as they defend their freedom and independence with extraordinary courage and boundless determination,” Blinken said.

“The artillery ammunition, precision fires, air defense missiles, and tactical vehicles that we are providing will best serve Ukraine on the battlefield,” he added.

“We are joined in our efforts by France and the UK, including the £50 million in air defense systems offered by UK Prime Minister Sunak during his recent visit to Kyiv, and we note Sweden’s recent air defense commitment valued at nearly $300 million,” Blinken declared.

Meanwhile, in 2021, there were 27 Top 100 companies headquartered in Europe. Their combined arms sales increased by 4.2 per cent compared with 2020, reaching $123 billion.

“Most of the European companies that specialize in military aerospace reported losses for 2021, which they blamed on supply chain disruptions,” said Lorenzo Scarazzato, a researcher with the SIPRI Military Expenditure and Arms Production Programme.

“In contrast, European shipbuilders seem to have been less affected by the pandemic fallout and were able to increase their sales in 2021.”

Dassault Aviation Group bucked the trend in the military aerospace sector. The company’s arms sales saw a sharp 59 per cent increase to $6.3 billion in 2021, driven by deliveries of a total of 25 Rafale combat aircraft.

Still, one lingering question remains: Will there be a dramatic rise in arms supplies in 2022—considering the fact that billions of dollars in weapons are being supplied to Ukraine mostly by the US and European nations?

In an interview with IDN, Diego Lopes da Silva, Senior Researcher Military Expenditure and Arms Production Programme at SIPRI, said: “We will most likely see a rise in 2022, but we cannot tell how dramatic that will be because arms acquisition is a process that usually takes a few years to conclude. It is possible that the increase in 2022 will be significant yet not dramatic, with bigger increases in the years to come.”

When considering the impact of the war on the demand for arms, it is important to note that the weapons currently being supplied to Ukraine come mostly from stockpiles, not new acquisitions, he pointed out.

“And even as countries try to replenish their stocks, these weapons are cheaper compared to more complex weapon systems, like aircraft. So, the replenishing itself won’t have a large impact on arms sales.”

However, he said, countries will certainly buy new weapons. Since the invasion, several European countries announced increases in their military budgets for the years to come. Based on these announcements, arms producers are already anticipating the increase in demand.

Rheinmetall, for example, expects sales of the defence division to increase by 20 per cent in 2022. This projection is largely based on the need to replenish stockpiles of armoured vehicles sent to Ukraine and on Germany’s plans to massively increase military spending.

Excerpts from the Q&A follow:

Q: Since the weapons are being provided gratis, will they be considered as “arms supplies”, not “arms sales”?

A: It is important to note that our most recent data covers arms sales of 2021; that is, before the war. With that in mind, the data we use is arms sales because we look at the companies, not the country that supplies the weapons.

So, even if a weapon was supplied as aid to Ukraine, we would count the sale of that weapon to the supplying country and attribute that sale to the manufacturing company. However, if the weapon comes from stockpiles—it was procured long ago, for example—he supply of that weapon will not affect arms sales of the most recent year.

This is important to note as most of the weapons being supplied to Ukraine come from stockpiles, as I mentioned.

Q: And has the US stockpile to be refurbished with new weapons to make up for the shortfall?

A: The US Congress has appropriated $12.5 billion for the Fiscal Year 2022 to replenish stocks. The Department of Defense, as of October 2022, had awarded a total of $2.1 billion in contracts to replenish their stockpiles with multiple companies, such as a $624 million order with Raytheon for more Stinger missiles and a $95 million order with Lockheed Martin for additional HIMARS light multiple rocket launcher. This is an ongoing process.

Other notable developments, according to SIPRI, include:

  • Six Russian companies are included in the Top 100 for 2021. Their arms sales totalled $17.8 billion—an increase of only 0.4 per cent over 2020. There were signs that stagnation was widespread across the Russian arms industry.
  • The five Top 100 companies based in the Middle East generated $15.0 billion in arms sales in 2021. This was a 6.5 per cent increase compared with 2020, the fastest pace of growth of all regions represented in the Top 100.
  • The aggregated arms sales of the four Top 100 companies based in Japan was $9.0 billion, a decline of 1.4 per cent compared with 2020.
  • This is the first year in which a Taiwanese firm appears in the Top 100. NCSIST (ranked 60th), which specializes in missiles and military electronics, recorded arms sales of $2.0 billion in 2021.
  • Private equity companies are becoming more active in the arms industry, particularly in the US. This could affect the transparency of arms sales data due to less stringent financial reporting requirements compared with public companies. [IDN-InDepthNews — 05 December 2022]

Image credit: SIPRI.

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