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September 17, 2012 (TSR) – Amid the rising tensions in the Middle East, with the United States locked in a Persian Gulf confrontation with Iran, the U.S. defense industry tripled its global arms sales to a record $66 billion in 2011. Half of that went to Saudi Arabia to counter the Islamic Republic of Iran.
A recent report by the U.S. Congressional Research Service said the 2011 figure, amounting to nearly 78 percent of all global arms sales constituted an “extraordinary increase” over the 2010 U.S arms sales total of $21.4 billion.
The study by CRS, a division of the Library of Congress, is considered the most detailed overview of unclassified global arms deals available to the general public.
The report cautions that the international arms market is shrinking because of a weaker global economy and major defense spending cutbacks by the United States and its European allies.
This has meant that the defense industries in the United States and Europe and to a lesser extent those in Russia and China, have come to rely on exports to maintain production lines for weapons systems used by their national military forces.
These cutbacks obviously have a knock-on effect that further undercuts the economies concerned.
Bear in mind, too, that arms sales aren’t the same thing as arms delivered, a process that can take five or six years.
But it is clear that arms sales have increasingly become a vital element of maintaining economic stability to the United States and other industrialized nations.
“Europe’s combat aircraft industry faces an uncertain future,” the International Institute for Strategic Studies in London reported in a Sept. 7 analysis, while the stealthy F-35 Joint Strike Fighter is the combat jet of choice for most air forces, including Israel’s.
“While Europe still has several types of fighter aircraft in production, there is no new European-developed manned combat aircraft currently in prospect and the outlook for the development and production of unmanned air systems is also unclear,” the ISS said.
“Any future aircraft programs and collaborations will reflect the continuing scaling down of capabilities and ambitions by European countries.”
High oil prices, and burgeoning fears about Iran’s growing isolation because of U.S and European economic sanctions over its nuclear program, are likely to ensure that the Saudis and their five partners in the Gulf Cooperation Council — the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain — have funds for large-scale defense procurement.
But by all accounts they’ve already signed up for most of their most important military requirements, air-defense missile systems, advanced combat aircraft, new warships and armor.
The Saudi deals embrace a multitude of weapons systems and advanced military technology, such as command-and-control systems for battlefield management as well as radar and communications systems.
So major arms purchases from the GCC may be few and far between in the next few years.
Even so, Forecast International, a market intelligence and analysis firm in the United States, observed in February that the GCC, as well as other Arab states, is expected to spend $385 billion on its defense and security forces over the next four years.
To what extent that remains true isn’t clear but there appears to be a steady stream of lucrative contracts for upgrades and high-tech support services that the Arab states cannot provide themselves.
This, in turn, is likely to intensify the competition within and between the U.S. and European defense establishments, for Middle Eastern contracts.
Germany, for instance, is easing its long-held restrictions on arms sales to conflict zones, to sell arms to Arab states, largely out of economic necessity. These include two Type-209 diesel-electric submarines to Egypt and 600-800 Leopard tanks to Saudi Arabia worth up to $12.6 billion.
In July, Turkey signed a $2.5 billion deal with a German consortium for six U-214 submarines.
The alternative is mergers, including trans-Atlantic combines. One project under way, a tie-in between the European Aeronautic Defense and Space Co. and Britain’s BAE Systems could provide a template for such arrangements.
A merger like that would pose a major challenge to Boeing, the leading U.S. aerospace contractor.
BAE, Britain’s largest defense company and a key supplier to Saudi Arabia, has a major presence in the United States. In 2011, the United States accounted for more than 40 percent of BAE’s $31 billion income.
US LEADS IN FOREIGN MILITARY SALES
More than 75 percent of the legitimate international weapons trade came from U.S. military sales, largely to Persian Gulf allies, a report says.
The Congressional Research Service said more than 75 percent of the weapons traded, or around $66.3 billion, came from sales by the U.S. government, a review of government records from The New York Times reports.
U.S. weapons sales in 2010 were reported at $21.4 billion. Russian arms sales last year came in second at $4.8 billion.
U.S. military assets have been positioned in the Persian Gulf to protect shipping lanes in the Strait of Hormuz, a key conduit for oil transits from the region.
Patrick Ventrell, a spokesman for the U.S. State Department, had said the missile threat to U.S. forces deployed overseas was growing.
“The U.S. will continue to work with our partners in the Middle East to strengthen missile defense in the Persian Gulf,” he said during a recent press briefing.
U.S. Defense Department documents reviewed recently by Times indicate there are plans to send $4.2 billion in advanced missile systems to Kuwait. The United Arab Emirates was the recipient of more than $12 billion in U.S. missile defense programs during the past four years.
FOOD FOR THOUGHT
If the United States shared its record revenue from international weapon sales in 2011 with the world, every person would have about $9.50.
Weapons sales by the US tripled to a record high of $66.3 billion, pumped up by $33.4 billion in sales to Saudi Arabia, according to an annual report prepared for Congress by the nonpartisan Congressional Research Service.
The sales by the US accounted for nearly 78 per cent of all global arms sales, which rose to $85.3 billion in 2011, the highest level seen since 2004, the report said.
Keeping in mind the United States is expected to reach a $16.4 trillion government debt by the end of the year, what does the figure of $66.3 billion in arms revenue represent?
- Earnings from weapons sales are expected to top spending on housing and urban development in the 2012 fiscal year ($49 billion), or homeland security ($47 billion), or energy ($43 billion) or justice ($33 billion).
- Those earnings are $4.7 billion shy of the government’s spending on education ($71 billion).
- It is about one eleventh of US defence spending ($766 billion).
Humanitarian and environmental spending:
- It is more than eight times what the government set aside for foreign assistance in the 2012 fiscal year under its global health initiative, which focuses on the health of women and families and on innovation ($8.17 billion).
- It is over 400 times the amount set aside for clean energy under the government’s global climate change initiative ($160 million).
- It is 484 times the amount set aside for sustainable landscapes – which are activities that reduce gas emissions using the land – under the same program ($137 million).
The previous US arms revenue record was set in 2008, when sales reached $38.2 billion, measured in 2011 dollars.
While Washington remained the world’s leading arms supplier, nearly all other major suppliers, except France, saw declines in 2011, according to the annual report prepared for Congress.
France signed arms sales valued at $4.4 billion in 2011, up from $1.8 billion a year earlier, but Russia, the world’s number two arms dealer, saw its sales nearly halved to $4.8 billion in 2011. The four major European suppliers — France, the United Kingdom, Germany, and Italy — saw their collective market share drop to 7.2 percent in 2011 from 12.2 percent a year earlier.
Saudi Arabia was the biggest arms buyer among developing countries, concluding $33.7 billion in weapons deals in 2011, followed by India with purchases of $6.9 billion and the United Arab Emirates with $4.5 billion.
Key US weapons sales in 2011 included:
- $33.4 billion to Saudi Arabia for 84 Boeing Co F-15 fighters, dozens of helicopters built by Boeing and Sikorsky Aircraft, a unit of United Technologies Corp,
- $3.49 billion for Lockheed Martin Corp’s Terminal High Altitude Area Defense, an advanced missile shield, to the United Arab Emirates, and $940 million for 16 Chinook helicopters built by Boeing,
- $1.4 billion for 18 F-16 fighter jets built by Lockheed Martin,
- a $4.1 billion agreement with India for 10 C-17 transport planes built by Boeing,
- and a $2 billion order by Taiwan for Patriot antimissile batteries.
GERMANY SELLS EGYPT SUBMARINES
Germany’s reported plan to sell Egypt two advanced submarines, apparently to the dismay of Israel, underlines Berlin’s controversial drive to ease tight restrictions on arms exports and boost military sales in the Middle East, Africa and India.
On Aug. 31, Egypt’s leading newspaper, al-Ahram, quoted navy commander Rear Adm. Osama Ahmed el-Gindi as saying the German government had agreed to sell two Type 209 diesel-electric attack submarines produced by Howaldtswerke-Deutsche Werft AG of Kiel, the main supplier of submarines to the German navy.
Berlin has remained tight-lipped about Gindi’s disclosure, which triggered angry protests in Israel, particularly amid the rise of an Islamist government in Cairo following the February 2011 fall of President Hosni Mubarak in a pro-democracy uprising.
Egypt’s new president, Mohammed Morsi, a former leader of the once-outlawed Muslim Brotherhood, has indicated his objections to Israel’s 1979 peace treaty with Israel and reportedly seeks to negotiate major revisions amid growing tensions in the Sinai Peninsula.
The mass-circulation Israeli daily Yediot Ahronot quoted unidentified government sources as warning the reported submarine sale to Egypt has caused “a dramatic deterioration in the relationship” between Israel and Germany.
Berlin denied there was any rupture.
Government spokesman Steffen Seibert, speaking at a briefing in Berlin, indirectly confirmed the Egyptian report.
“It has not changed the German attitude toward Israel or the obligation the German government has to ensure Israel’s security,” he said.
That commitment has been a cornerstone of Germany’s foreign policy because of the Nazi Holocaust in World War II.
Seibert refused to be drawn out on details of the reported sale to Egypt, citing secrecy provisions of Germany’s Federal Security Council, which must approve all arms exports.
The Israelis claim the Egyptian purchase would undermine the Jewish state’s military supremacy in the region but observers see that assertion as exaggerated.
Israel, without doubt the major military power in the Middle East, has bought six Dolphin-class submarines — based on the Type 209 design — from Germany since the late 1990s. Three are in service, with the other three, more advanced boats scheduled for delivery by 2017.
Government sources told the Financial Times Deutschland the Israeli Dolphins are far more advanced than those to be sold to Egypt and delivered by 2016.
Germany paid the lion’s share of the overall cost of the Dolphin sales to Israel, including more than one-third of the $1.8 billion price tag for the batch now being built, as well as giving Israel until 2015 to pay its share.
When all six boats are operational, Israel will have the most powerful submarine arm in the Middle East.
The Dolphins have reputedly added a third dimension to the Jewish state’s nuclear attack capability, currently based on the country’s air and land missile forces.
Egypt’s small navy has four aging Chinese-built Romeo-class Project 633 submarines acquired in the 1970s. These were to have been replaced years ago but financial constraints delayed the move.
If the sale to Egypt goes ahead, it will provide a big boost for Berlin’s expanding arms export program and its broadening foreign policy, underlining how defense exports have assumed a new importance for the industrial powers amid shrinking defense budgets.
Germany’s coalition government under Chancellor Angela Merkel has been quietly easing restrictions for some time but has come under growing domestic criticism, with opposition Green Party leader Claudia Roth denouncing the “deals with death.”
But Germany’s keen to hustle more arms sales in the Middle East that have long been dominated by the United States, Britain and France, with Russia pushing hard to build up its post-Soviet business.
Berlin is negotiating with Saudi Arabia for the sale of some 600 Leopard 2A7+ main battle tanks potentially worth $12.6 billion.
It’s possible Merkel’s seeking to emulate the United States, which sells weapons to both Israel and its Arab adversaries without qualms.
The German newsmagazine Der Spiegel recently observed that Merkel is “drawing lessons from Afghanistan and Libya … Instead of intervening in conflicts, she wants to help arm certain countries to provide stability in crisis regions. But if history is any guide, the plan could backfire.”
Qatar’s eyeing the acquisition of 200 Leopards worth $2.5 billion. A team from Munich’s Krauss-Maffei Wegmann recently flew to the emirate to discuss a possible deal.
AUSTRALIA INCREASES MIDDLE EAST ARM SALES
Since 2009 Australia has sold more than $13 million in military equipment to three Middle East nations.
Turkey, Oman and Saudi Arabia are three of Australia’s newest markets for military equipment, the Defense Materiel Organization said.
“From fighter planes and satellites to tents and rations, the Defense Material Organization is Australia’s largest project management organization and its mission is to acquire and sustain equipment for the Australian Defense Force,” DMO, a branch of Australia’s Ministry of Defense, notes on its Web site.
“The DMO exists to meet the Australian Defense Force’s military equipment and supply requirements as identified by Defense and approved by Government. The 2012 Public Defense Capability Plan provides an account of Major Capital Equipment proposals that are currently planned for government consideration (either first or second pass approval).
“The projects outlined in the public version of the Defense Capability Plan 2012 reflect the strategic and defense requirements outlined in the Defense White Paper 2009, Defending Australia in the Asia Pacific Century: Force 2030.”
The Ministry of Defense declined, however, to disclose what Australian private defense companies have been exporting to the three nations, the Canberra Times reported.
Australian arms sales to the Middle East could soon expand, however. The Defense Export Unit, an Australian government initiative, which was established to support a strong, long-term Australian military industry by helping contractors find overseas business so they didn’t have to rely solely on supplying Australian defense needs, has undertaken a trade mission to the Middle East.
In July the Australian government established an Australian Military Sales Office, an integrated entity to allow the government to sell Australian-made defense equipment that is in active service with the Australian military, directly to foreign government clients on behalf of Australian manufacturers.
Government support for Australian arms exports are welcomed by the country’s defense manufacturers, who are finding local conditions difficult due to both the strength of the Australian dollar and recent cuts to the government’s defense budget.
The push for increased Australian arms exports is at odds with another government initiative, as in July Australia’s Minister for Foreign Affairs Bob Carr issued a news release stating that he would seek U.N. support for a treaty to require countries to track and report on major arms transfers and sales, leading to greater enforcement of U.N. arms embargos and sanctions regimes.
“We’re seeking a comprehensive agreement on arms control — enforceable through public reporting to the U.N. — and aimed at reducing the continued flow of conventional weapons to rogue groups and terrorists,” Carr said.
“Each day there are around 2,000 deaths in conflicts fueled by illegally traded arms. Yet as Amnesty International points out, global trade in some foods is more strictly regulated than trade in weapons. Momentum is building for action on an arms trade treaty.
“Countries heavily affected by illegal weapons trades — in Africa, the Pacific and the Caribbean — are looking to Australia and others for leadership. We’ll be taking up that challenge with this national address to the U.N. — pushing for a unified international response, and for a crackdown on illegal arms sales around the world.”
Google also has created a little SOBERING visualization, which shows all the (known) arms trade between the globe’s countries over the past 20 years. The fully interactive world map lets you spin the globe to dig around and see how varying countries stack up. What’s particularly interesting is the way that Google’s data mining has allowed it to break down imports and exports by civilian and defense spending, as well as taking into account ammunition. We hope this wakes everyone up and know we need to stop the real threat of our world.