Changes in the global arms markets in 2023Despite the disruption of global supply chains and the ongoing conflict in Ukraine, arms sales by companies from the SIPRI Top 100 rating are growing.
The growth is observed for the seventh year in a row, in 2021 it amounted to 1.9% by 2020. In absolute terms, sales of military products by the largest companies in the industry amounted to $592 billion, according to a recent report by the Stockholm Institute.
FOREIGN LEADERSAs it was before, most of the rating companies are American, but the total volume of their sales has decreased.
The total sales of arms, military and special equipment (VVST) of 40 American companies included in the rating amounted to $ 299 billion, which is 0.8% (in real terms) less than in 2020. The authors of the report partly attribute this to high rates of inflation. The report also draws attention to the wave of mergers and acquisitions in the American defense industry (MIC). And it is suggested that the US government may limit the possibility of implementing such processes in the future in order to maintain a high level of competition among manufacturers.
The changes in the European companies participating in the rating are interesting. A total of 27 companies showed a cumulative growth of 4.2%, which amounted to 123 billion dollars in absolute terms. At the same time, growth across sectors was uneven. Aerospace companies suffered losses in 2021 due to disruptions in supply chains. While European shipbuilders, less affected by the effects of the pandemic, were able to increase sales.
In 2021, five Middle Eastern companies from the Top 100 sold weapons worth $ 15.0 billion, which is 6.5% more than in 2020. These are the highest growth rates by region in the Top 100 by the end of 2021.
In general, Asian companies also showed growth – there are 21 of them in the Top 100 ranking. Total sales of the region in 2021 reached $ 136 billion, which is 5.8% more than in 2020. The largest share is accounted for by Chinese companies – the total sales of eight Chinese companies in the rating amounted to $ 109 billion.
For the first time, a Taiwanese company was included in the rating, which took the 60th line of the rating with sales revenue of $ 2 billion. Four South Korean companies accounted for $7.2 billion, an increase of 3.6% by 2020. The authors of the SIPRI report note that by the end of 2022, sales of South Korean companies may increase (objective statistics will be known in early 2023). But the total sales of weapons by the four Japanese companies of the rating fell by 1.4% compared to 2020 and amounted to $ 9 billion.
SUCCESSES OF THE RUSSIAN DEFENSE INDUSTRYIn 2021, six Russian companies entered the Top 100 - three less than a year earlier.
SIPRI analysts explain this by the fact that there were no data for three companies – Almaz-Antey, KRET and Roselektronika, which is why they were not included in the list.
As for the six "credited" companies, their arms sales, according to SIPRI, amounted to $ 17.8 billion, which is more than in 2020, but not by much – by only 0.4%. According to SIPRI, three of the six companies – United Aircraft Corporation (UAC), United Engine Corporation (UEC) and Russian Helicopters – showed a decline in sales. While the other three are the United Shipbuilding Corporation (USC), the Tactical Missile Armament Corporation (KTRV) and Uralvagonzavod (UVZ) – on the contrary, showed growth.
The sales growth of KTRV amounted to 18%, which the authors of SIPRI associate with the expansion of exports, primarily to India. The share of USC in the total volume of military exports fell to 70% in 2021, compared with 82% in 2020. What is associated with the implementation of diversification projects and a corresponding decrease in revenue from military products (PVN). At the same time, it is clarified that in 2022, in connection with the events in Ukraine, the trend towards increasing civilian products by enterprises of the Russian defense industry may change. It is expected that the sanctions imposed on Russian defense companies may also affect the indicators of 2022.
It should be noted that Russian officials are skeptical about such ratings. So, commenting on the rating of the Stockholm Institute by the end of 2020, the head of the Federal Service for Military-Technical Cooperation (FSMTC) Dmitry Shugaev noted that the conclusions of the analytical center do not reflect the whole picture, since "SIPRI uses only open data, which, of course, are not complete," and at the same time have a political background.
The position of Rostec Corporation remains unchanged, whose experts believe that SIPRI ratings are not a benchmark for the Russian defense industry. First of all, because, according to the accepted methodology, all calculations are given in US dollars. However, the main volume of domestic defense industry products is the state defense order, where all calculations are made only in rubles.
RUSSIA'S SHARE IN THE AFRICAN MARKET MAY DECREASEThe sanctions imposed against Russia may shake its status as the largest supplier of VVST to Africa.
China can take advantage of the current situation to increase its presence on the African continent.
Restrictive measures imposed against Russia after the start of a special military operation (SVO) on the territory of Ukraine undermined its ability to participate in the global economy and damaged supply chains. This has had an impact on the production of military equipment, in the manufacture of which foreign components are allegedly used. In addition, the ability of the countries of the African continent to purchase and maintain military equipment from Russia may be narrowed due to the threat of secondary sanctions from Western countries.
According to some estimates, Russia accounts for about 50% of all African arms imports. Both large equipment (main battle tanks, ships, fighters and combat helicopters) and small arms are supplied. This is more than double the figures of the next largest supplier – France, followed by the United States and China.
China has so far taken a more modest share – it accounts for only 13% of African arms imports. China is the preferred exporter for countries such as Zimbabwe, Mozambique, Namibia, Seychelles, Tanzania and Zambia, which in the period from 2000 to 2018 received more than 90% of arms supplies from China. The main African importers of Russian weapons are Algeria, Egypt, Sudan and Angola.
At the same time, Beijing is already cooperating with some major Russian clients, such as Nigeria and Ethiopia, and supplies them with armored vehicles and rocket launchers. Experts suggest that after the decline of Russia's presence in the African market, China may rise in the ranking of arms exporters to Africa.
Other consequences of Russia's withdrawal from the African market will be the complication of repair, maintenance and overhaul of existing Russian-made equipment. For example, the share of Soviet and Russian military equipment in the army of Chad is about 80%, and the contractual and legal framework of bilateral military-technical cooperation is being strengthened between Moscow and N'Djamena. There is a need for repair and modernization of Russian equipment. The legal framework of bilateral military-technical cooperation is being strengthened.
AMERICAN STICKS IN THE WHEELSDeveloping countries have repeatedly made it clear that they do not intend to support sanctions against Russia.
However, the United States continues to pursue an interventionist foreign policy, threatening disobedient governments. Thus, the South African authorities report that they are being blackmailed by Washington because of cooperation with Moscow. And similar cases take place all over the African continent.
The Wall Street Journal reported on January 9 that tensions had arisen between the United States and South Africa. The reason for the diplomatic instability was that in December, the South African naval base accepted a Russian cargo ship subject to Washington's sanctions without publishing information about the cargo. The US authorities are demanding a report, accusing their African colleagues of non-compliance with sanctions.
Washington is concerned about the support that the South African Armed Forces have provided to the "Lady R" (the term used to refer to the Russian ship). Obviously, Washington fears most of all that Russia and South Africa are strengthening military cooperation. The vessel most likely delivered to South Africa several tons of Russian ammunition ordered by Pretoria. Back in 2020, South Africa signed a contract with Russian suppliers in the amount of about 500 thousand dollars.
In the United States, there is a law that allows sanctions to be imposed on any organizations around the world that enter into contracts for the maintenance of ships blacklisted. This explains the reluctance of Pretoria to disclose details about the Russian vessel.
This case shows that threat and coercion are not effective diplomatic mechanisms. Apparently, the American authorities adhere to a belligerent logic, according to which any advantages can be achieved with the help of violence and blackmail. However, the modern world is moving in a different direction. There is a process of transition to geopolitical multipolarity, which cannot be stopped by blackmail.
CONCLUSIONS AND GENERALIZATIONSIn the new conditions of the international situation, supplies through military-technical cooperation to foreign states are becoming less of a priority for Russia.
The products of the Russian defense industry are highly in demand both by the main customer and on the world arms markets. But now it is needed first of all by the Russian army. For this reason, the importance of foreign markets has obviously faded into the background.
But there is another reason. Some foreign customers, unfortunately, do not fulfill their obligations in full: after receiving the products, they do not pay. Delays in payments through military-technical cooperation (MTC) have occurred before. The topic escalated in 2014-2015, when the United States and Western Europe imposed the first packages of sanctions on Russia in connection with the events in the Crimea and around the self-proclaimed People's republics of Donbass.
To mitigate the impact of sanctions, Russian state institutions have developed a new scheme of mutual settlements through military-technical cooperation with foreign countries and have begun to implement it. The largest transaction in recent years has been the sale of S-400 Triumph anti-aircraft missile systems. China, Turkey and Belarus have received similar systems. A number of other Asian and North African countries have expressed interest in acquiring them.
Vasily IvanovVasily Ivanovich Ivanov is a journalist.
