By Jaya Ramachandran
BERLIN (IDN) - New data launched by Stockholm International Peace Research Institute (SIPRI) shows that sales of arms and military services by the world's largest arms-producing companies, which amounted to $395 billion in 2012, has increased by 29 per cent in real terms since 2003. But compared to 2011 the 2012 data represent a 4.2 per cent decrease in real terms and follow a 6.6 per cent cut in that year.
The report released at the Munich Security Conference on January 31, 2014 points out at the same time that 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".
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.
SIPRI notes a rise in the share for companies outside North America and Western Europe. Since 2005 it has been increasing at 13.5 per cent, marking its highest point in the history of the Top 100, which does not include China-based companies due to lack of available data.
Russian companies 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 per cent, and Almaz Antei – with a 41 per cent rise – now stands in 14th place in the Top 100, the highest position taken by a Russian company since data became available in 2002, says the report.
Russia's growing domestic sales
SIPRI data indicate that Russian arms companies continue to maintain high export levels, but the increase in estimated arms sales in 2012 mainly reflects large and growing domestic sales, as part of Russia’s $700 billion 2011-2020 State Armaments Plan. "While there remains widespread scepticism 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," the report notes.
"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 Programme. "Nonetheless, the industry is still plagued by outdated equipment, inefficient organization and widespread corruption, which will continue to limit Russia’s ability to compete technologically with the West."
Iraq withdrawal affects US sales
Turning to the world's largest arms seller, the report says: Sales by the 42 US-based arms producers amounted to 58 per cent of the total arms sales of the Top 100, with 30 companies based in Western Europe making up another 28 per cent of the total. While these companies still accounted for 87 per cent 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 per cent in real terms – was by KBR, which provided logistic support to US forces in Iraq. Sales by companies providing armoured vehicles to US forces in Iraq and Afghanistan, including Navistar and AM General, also declined.
"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 in a SIPRI press release.
Other significant 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 per cent in 2012, reaching $1.44 billion – puts that company clearly in the Top 100 for both 2011 and 2012, says the report.
Brazilian aircraft manufacturer Embraer entered the Top 100 in 2010 and was one of the largest risers in 2012, by 36 per cent 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 per cent 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.
Companies headquartered in North America and Western Europe continue to dominate the global arms industry: 73 companies in the Top 100 for 2012 are from these regions, and they accounted for 86.7 per cent of the total arms sales of the Top 100.
The total arms sales of the 43 North American companies in the Top 100 (42 from the United States and 1 from Canada) fell by 6.6 per cent in real terms in 2012 and that of the 30 West European companies fell by 3.0 per cent (compared to the same companies in 2011).
Arms sales by companies in the Top 100 from the rest of the world rose by 13.6 per cent in real terms. These companies’ share of the total arms sales of the Top 100 is now at its highest level since the start of the current coverage of the Top 100, in 2002.
The Top 100 for 2012 includes companies from 23 countries, the highest number yet. This represents an increasing diffusion of large-scale, corporate arms production around the world, although the dominance of the USA, and to a lesser extent Western Europe, continues largely unchanged.
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. [IDN-InDepthNews – February 3, 2014]