For a while at least, it looked like there was one trade that was immune from the global financial crisis. Governments continued buying foreign weapons in 2008 despite the economic turmoil that summer. But in 2009, the financial downturn finally caught up with some of them. Striving to contain soaring budget deficits resulting from declining tax revenues and rising social welfare expenditures, leaders of several developing nations cancelled or deferred many arms purchases, reducing international weapons purchases and deliveries to their lowest levels in years.
But the cutbacks in arms purchases weren’t universal — Asian governments in particular continue to purchase large volumes of foreign weapons.
This trend is underscored in a report, Conventional Arms Transfers to Developing Nations, 2002-2009, by Richard F. Grimmett, a specialist in international security with the nonpartisan Congressional Research Service (CRS), a division of the US Library of Congress. As its names implies, the report devotes special attention to recording arms transfers to developing countries, though it also looks at global sales contracts and actual deliveries. Along with the work of the Stockholm International Peace Research Institute (SIPRI), which does a better job at tracking arms transfers between developed countries, the CRS report is considered the most authoritative public source on unclassified global arms sales data.
According to the report, the value of global arms agreements (contracts for future deliveries) was $57.5 billion in 2009, an 8.5 percent fall from record sales in 2008. But in 2007, the value of worldwide arms transfer agreements between all countries amounted to almost $60 billion, a 9.2 percent increase over the $54.9 billion figure in 2006.
So, did the dip in the volume of purchases lead to a reshuffling of the global arms sellers’ pecking order? Not really. The United States still held first place despite signing only $22.6 billion worth of new arms contracts. Although this total was good for 39 percent of the developing world’s arms market, it was a massive drop-off from the 2008 figure of $38.1 billion, which amounted to more than 60 percent of the worldwide total. In addition to fewer contacts for completely new weapons systems, which marked the banner year of 2008, US firms signed fewer military support and services contracts than in that year. Yet Russia remained a distant second place in 2009, concluding $10.4 billion in arms deals, followed by France, with $7.4 billion in new contracts. Germany, Italy, and Britain also remained leading arms sellers, as usual.
One reason for the continuing dominance of US and Russian arms dealers in 2009 was that many countries deferred buying major new weapons systems and instead spent their limited defence funds on modernization, training, systems integration, improved support, or other projects to improve their ability to use the weapons platforms they purchased earlier. They typically contracted for these upgrades and services from the country they bought the weapons system from in the first place, usually the United States and the Soviet Union (and now Russia). During the Cold War, these two countries, and to a lesser extent their European allies, acquired an extensive network of clients for their major weapons systems, which has resulted in decades of purchases of upgrades, spare parts, and maintenance services as well as for next-generation systems that, being from the same national supplier, should have a high degree of interoperability with their existing stockpiles. These longstanding military-support relationships will likely sustain the US and Russian lead in coming years as well, making it difficult for China, India, and other emerging arms sellers from Asia or other developing countries to expand their own arms sales.
However, the CRS report devotes most attention to arms transfers to developing countries, specifically sales involving 14 categories of major conventional weapons (though calling China a developing country becomes less plausible with each annual CRS report now that it has the second-largest economy in the world and perhaps the second-highest level of military spending in the world). Indeed, India might also qualify to graduate out of the ‘developing country’ category as well given its growing military prowess.
Either way, the countries labelled ‘developing’ regularly account for well-over half of the value of all arms transfers in any given year, which includes the value of new purchases of military equipment, spending on modernization and maintenance of existing weapons, and the costs of training incurred by the arms purchaser in regard to those weapons. The CRS study estimated that $45.1 billion worth, or about 78 percent, of all arms were sold to the developing world in 2009, a drop from $48.8 billion in 2008.
Who’s generally been the top supplier to these developing countries? That position has rotated between the United States and Russia, with Russia leading when its two top clients, India and China, make large purchases or accept large deliveries of weapons. During the 2006-2009 period, the United States ranked first among all arms suppliers to developing countries, with $68.7 billion worth of new contracts, expressed in constant 2009 dollars,amounting to 38.6 percent of all new agreements. Meanwhile, from 2006-2009, Russia secured $42.4 billion worth of new agreements or a 23.8 percent share during this period.
Last year, the United States saw arms transfer agreements with developing countries amounting to $17.4 billion in 2009, a drop-off from $29.5 billion in 2008. Some of the largest contracts for new equipment came with Asian customers, including a purchase by Taiwan of a Patriot air defence missile system for $3.2 billion as well as $214 million worth of contracts with the Republic of Korea for various missiles and support.
Developing countries, meanwhile, contracted to purchase $10.4 billion of Russian weapons in 2009 — a near doubling of the $5.4 billion Russia sold in 2008 — while Russia’s share of all world arms transfer agreements also grew from 11.1 percent in 2008 to 23.1 percent last year. According to the latest SIPRI data, the Asia-Pacific region is the main destination for major Russian arms, accounting for more than two-thirds of Russian defence exports during the 2005–2009 period. Combat aircraft were Russia’s best export item — India purchased 82 Sukhoi-30 fighter aircraft during the last five years, while Malaysia bought 18 of these planes. On September 17 of this year, meanwhile, Indonesia's Air Force chief of staff Marshal Imam Sufaat confirmed that his service intended to purchase six more Sukhoi fighter jets, to add to the six Su-30MK fighter planes Russia has delivered to Indonesia since February 2009.
Although it still came in second last year in terms of both new contacts and deliveries, the Russian government has been especially skilled at employing creative means to boost its arms exports — including to Asia. Russian officials employ, for example, techniques such as flexible payment arrangements (including the liberal use of loans and counter-trades), forgiving hard-to-recover Soviet era debts that have impeded the financing of new purchases, allowing important clients such as China and India to co-assemble and co-produce some weapons systems under license, and generally undertaking a sustained effort to improve the provision of support and maintenance services. Besides addressing an area that past purchasers of Russian arms have occasionally found lacking, providing such services also helps generate post-transfer revenue.
The Russian government has also benefited from its willingness to authorize the sale of weapons to both sides of an arms race, including China and India, and China and Vietnam. For example, some of the most valuable arms sales contracts Russian negotiated last year were with Vietnam, including deals for 6 Kilo-class Project 636 diesel submarines for $1.8 billion and 8 Su-MK2 fighter aircraft for $500 million. Russia also secured a $570 million contract to provide the pariah regime in Burma with 20 MiG-29 fighter aircraft. In addition to high-end products such as sophisticated combat aircraft and missiles, Russian firms also manufacture cheap but durable weapons that have proven attractive to the strained defence budgets of developing governments lacking abundant oil, gas, or other lucrative natural resource exports.
But it’s far from clear that Russia will be able to maintain second place. Lagging Russian efforts to research and develop new weapons systems, which has already forced Russia’s own defence ministry to purchase advanced weapons platforms such as unmanned aerial vehicles and amphibious ships from European countries as well as Israel, will make it more difficult to stay competitive with other major arms suppliers.
In addition, Russia’s dominant place in the Indian market is under threat as US, European, and even Israeli arms dealers seek to offer New Delhi more effective weapons platforms. For decades, India has purchased its combat aircraft, major warships, and main battle tanks from Soviet and more recently Russian defence companies, which have generally been come with offers of liberal financing and generous technology transfers. Now the economic boom India has experienced during the past decade has given the Indian military the wherewithal to consider spending a bit more to obtain superior Western defence technology.
Most seriously, the Chinese government has sharply cut back its purchase of Russian weapons, primarily because the Chinese defence industry can now match the Soviet-era systems Russia normally exports, while Russia refuses to sell China its most sophisticated weapons for fear of Chinese copying or that the PLA might use Russian arms against India other countries. Russian analysts have noted, for example, Chinese technicians copying Russian weapons systems and, after making slight adjustments, selling them to third parties.
So far, Chinese firms have only managed to displace Russian military sales from a few low-value developing country markets. But already, Russian policymakers, aware of Chinese scientific and technological prowess, fear losing possible future defence sales to countries willing to accept the slightly lower performance capabilities of Chinese weapons systems in return for paying considerably less than what they would need to spend to buy only somewhat superior Russian military systems.
Thanks in part to its liberal ‘borrowing’ of Russian military designs and technologies, the Chinese defence industry has emerged as a potential rival to Russian sellers, particularly in developing countries such as Iran, where the Russian government has chosen to constrain its arms exports for political reasons. Western and Israeli pressure on Russia to constrain its arms sales to Iran has already led to Tehran’s emerging as the second-largest purchaser of Chinese weapons during the last five years, buying 14 percent of China's military exports by value. From 2005 through 2009, Iranian imports from China included more than 1000 anti-air and anti-ship missiles as well as about 50 infantry combat vehicles. China also remains a major arms provider to Pakistan, Burma, and countries seeking cheap light arms and small weapons.
How does Washington feel about the shifting fortunes of its former Cold War enemy? Certainly, it would be happy to see a decline in Russian arms sales to China in particular. In addition to the enormous volume of such sales, when it comes to the most advanced weapons, the Russians have been careful not to sell the PLA weapons that could prove most useful for fighting a ground war in the Chinese-Russian border region. Instead, Russian firms have offered platforms most useful for projecting power seaward, such as Sovremenny-class destroyers equipped, Sunburn anti-ship missiles, and Kilo-class submarines. Such transfers have potentially made it easier for the PLA to attack Taiwan, Japan, and the forces of the US Pacific Command.
But it’s not only the United States that is likely to be relieved at the changes. China’s military build-up is also prompting an arms race in several Asian regions. To China’s west, India has been seeking to enhance its defences against China, which has led Pakistan to increase its own arms imports from China, including by buying warplanes and warships, as well as from other countries. And according to SIPRI data, imports of major conventional weapons systems by China’s South-east Asian neighbours almost doubled in volume between 2005–09 and 2000–04.
Between the two periods, imports of major conventional arms by Indonesia rose by 84 percent, by Singapore by 146 percent, and by a remarkable 722 percent by Malaysia. Furthermore, Vietnam began purchasing foreign-made submarines and long-range combat aircraft from Russia last year. Unlike Japan, Australia, or South Korea, the countries of Southeast Asia do not have bilateral defence treaties with Washington.
Yet while Washington might be relieved by Russian decline in sales to countries like China, it must also worry about its West European allies, which are eager to expand their own exports by resuming weapons sales to China. The Chinese government has been pressing the European Union to lift the arms embargo on the sale of defence items to China, while in the past, French and German officials have campaigned to repeal the sales ban, and only vigorous intervention by Washington, supported by the governments of Japan and Taiwan, has led them to back down.
It’s clear for the US at least that while Asia provides ample opportunities, it also throws up real challenges – and dangers. Already insurgents in both Iraq and Afghanistan have used Chinese-made weapons, possibly acquired on the black market or other unauthorized arms sellers, against US troops fighting there.