Thanks To Developing Nations, America Is King Of The International Arms Market

  @ibtimes on August 29 2012 11:52 AM

A
A U.S. F-15E Strike Eagle, an all-weather, multirole fighter originally developed by McDonnell Douglas, now built by Boeing. The fighter is sold to key allies around the world. In 2011, Saudi Arabia ordered new jets and upgrades to an existing force, worth tens of billions. Photo: Reuters

The United States is not only the world's leading arms dealer, it is also enjoying the payoffs of one of the largest increases in foreign military sales in recent memory.

A Congressional Research Service report reveals that U.S. arms sale agreements have increased dramatically over the last few years.

Between 2008 and 2011, U.S. arms transfer agreements to developing nations amounted to $113 billion, or 54.5 percent of the total value of all arms transfer agreements to those nations.

The value of new U.S. arms transfer agreements with the developing world in 2011 alone was $56.3 billion, or 78.7 percent of the market -- a historic high point over the last eight years measured by the CRS, and likely for longer than that. Far behind in second place was Russia, which only got $4.1 billion in new agreements, a meager 5.7 percent of the market.

In fact, most of the world's arms sales go to the developing world, especially to South and Southeast Asia and the Middle East. Developing nations accounted for 68.6 percent of all arms transfer agreements between 2004 and 2011. The reliance of the global arms market on purchases from the developing world has only grown with time. Between 2008 and 2011, nearly 80 percent of all agreements were centered on selling weapons to the developing world; in 2011, it was nearly 84 percent.

Those developing nations spent in 2011 more than double on weapons than in the previous year: $71.5 billion compared to $32.7 billion.

Image
Image from CRS' "Conventional Arms Transfers to Developing Nations, 2004-2011" report, authored by Richard F. Grimmett and Paul K. Kerr.

As for actual deliveries of weapons to developing nation purchasers in 2011, the total amounted to $28 billion, another all-time record. Again, the U.S. placed first by delivering some $10.5 billion worth of weapons, ahead of Russia with $7.5 billion in deliveries.

Transfer agreements only represent a contract to provide arms in the future . Deliveries indicate an actual movement of physical weapons, munitions, or components from one country to another.

But experts in tracking conventional arms sales, including the report's authors, say that last year's figures were by and large a fluke. On the whole, the market for conventional arms has become more constrained and competitive in recent years.

That's largely due to the slow global economy and ongoing international financial crises, which have led purchasing nations to slow down their orders. Many are instead choosing incremental upgrades, components, training, and support services. Arms manufacturers are in turn promoting co-production contracts, local licensed production, and counter-trade offers in order to increase the competitiveness of their offers. But the process also cuts profit margins and increases domestic capabilities in purchasing nations, increasing the long-run chances that they will be less reliant on arms trade with more technologically advanced nations.

Although U.S. arms manufacturers are enjoying welcome news of new orders, elsewhere in the world, leading arms dealers in Russia and Western Europe saw their share of the market decline. Moscow's portion of worldwide agreements plummeted from 20 percent in 2010 to 5.6 percent in 2011; over that same period, France, UK, Germany, and Italy saw their overall share fall from 12.2 percent to 7.2 percent.

Indeed, one deal in particular inflated U.S. arms sales abroad more than any other in 2011. Saudi Arabia signed an agreement to purchase 84 new advanced F-15E Strike Eagle jets from Boeing (NYSE: BA) for $29.4 billion. The 69 existing F-15s it already has in its air force would also be upgraded as part of the deal. The longtime U.S. ally also bought a new fleet of AH-64 Apache attack helicopters, also from Boeing, and UH-60M Blackhawk utility helicopters from United Technologies (NYSE :UTX)-owned Sikorsky.

Tensions in the Persian Gulf between Saudi Arabia and Iran are thought to be a large contributor to new Saudi efforts to expand its military forces. The country has been the largest global recipient of agreements and arms deliveries over the last 8 years. The United Arab Emirates, a Saudi neighbor and equally concerned about Iranian belligerence, ranks third in the world as a recipient in arms transfer agreements.

India ranks consistently behind Saudi Arabia as the world's second largest recipient for transfer agreements and deliveries over the period measured. Unlike the Middle East, Indian purchases span across multiple sources, taking new jets from Western Europe, transport planes from the U.S., and ships from Russia. India agreed to pay $4.1 billion for 10 new C-17 Globemaster transport aircraft for $4.1 billion (again from Boeing), and 2.4 billion for France to upgrade 51 of its Mirage 2000 fighter planes, built by Dassault Aviation (Euronext: AM), both in 2011.

Last year, the U.S. also promised to sell Oman and Iraq 18 Lockheed Martin (NYSE: LMT) F-16 Fighting Falcons each, in deals individually worth $1.4 billion. Egypt would receive a co-production deal for the M1A1 Abrams main battle tank, built by General Dynamics (NYSE: GD) in a deal worth $1 billion. Taiwan would pay $2 billion for new Patriot-3 missiles, manufactured by Raytheon (NYSE :RTN).

Join the Discussion