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NEWS & COMMENTARY 2008 SPEAKERS 2007 2006 2005

Friday, November 17, 2006

U.S. Arms Still Dominate International Market, Russia Leader to Developing World

On Oct. 23, 2006, the Congressional Research Service (CRS) released the most recent version of its annual arms transfer report, “Conventional Arms Transfers to Developing Nations, 1998-2005.” The report reveals that arms transfer agreements worldwide amounted to $44.2 billion in 2005, the largest total for arms agreements in the last eight years, and well above the 2004 sum of nearly $37 billion. Of the 2005 total, $30.2 billion, or 68.4 percent, of arms transfer agreements were made with developing countries, the highest total since 1998. In 2005, $17.7 billion out of $25.4 billion in worldwide arms deliveries (or 69.9 percent) went to developing nations.

The CRS report (also known as the Grimmett Report after its author, CRS Specialist in National Defense Richard Grimmett) defines developing nations as all countries except the United States, Russia, the European nations, Canada, Japan, Australia, and New Zealand. The report examines 14 categories of conventional weapons: tanks and self propelled guns, artillery, armored personnel carriers and armored cars, major surface combatants, minor surface combatants, submarines, guided missile patrol boats, supersonic combat aircraft, subsonic combat aircraft, other aircraft, helicopters, surface to air missiles, surface to surface missiles, and anti ship missiles.

For the period from 2002 to 2005, the United States ranks as the world’s largest exporter of arms to developing nations, although in 2005, the United States fell behind Russia and France respectively to place third in terms of new arms export agreements concluded with developing nations; in 2005, the United States concluded $6.2 billion worth of agreements, or 20.5 percent of all arms transfer agreements with the developing world. The United States did remain at the top of the list for total amount of arms deliveries made to developing countries, delivering $8.1 billion worth of weapons, or 45.8 percent of the world total. Russia was the second largest arms exporter to the developing world from 2002 to 2005, but first in new arms agreements with the developing world in 2005, concluding $7 billion in new agreements (23.2 percent of the world total). Russia also placed second for total arms deliveries to the developing world in 2005, with $2.7 billion worth of deliveries, accounting for 15.2 percent of the world total. With $6.3 billion (or 20.9 percent of the world total), France moved into second place for new arms agreements with the developing world, whereas the United Kingdom was third in arms deliveries to the developing world with $2.4 billion, or 13.6 percent.

Much has been made of Russia’s current billing as the world leader in global arms agreements to the developing world. However, perhaps more significantly, the data show that all five permanent members of the UN Security Council (P-5) hold the top five positions for both global arms agreements and deliveries in 2005. World wide, the P-5 countries (the United States, Russia, China, France, and the United Kingdom) together were responsible for approximately 75 percent of new arms agreements in 2005 (at a value of nearly $33 billion) and approximately 79 percent of arms deliveries, which totaled nearly $20 billion.

From the perspective of the largest recipients of weapons in the developing world in 2005, India completed the most arms transfer agreements in the developing world ($5.4 billion), followed by Saudi Arabia ($3.4 billion), and China ($2.8 billion). In terms of deliveries, however, Saudi Arabia ranked first with $3.5 billion in deliveries in 2005, and was followed by Israel ($1.7 billion), and India ($1.6 billion).

In addition to the raw data, the Grimmett report notes several trends in the developing world arms market, namely that purchasing is restricted by limited financial resources, and that few countries in Latin America and Africa can afford the major military modernization that yields high-valued arms agreements. Large-scale purchases of significant military equipment, therefore, are limited to a few countries, particularly China, India and a few others in the Near East.

The primary market for U.S. arms in the developing world continues to be the Near East, and the United States remains the largest arms exporter to that region (defined as Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, the United Arab Emirates, and Yemen). Between 2002 and 2005, U.S. transfer agreements with the Near East came to $17.6 billion, or almost 56 percent of total U.S. agreements with the developing world, which marks a decrease from the period from 1998 to 2001, during which almost 74 percent ($26.1 billion) of U.S. agreements with the developing world were with Near East countries.

While the Near East continues to be a lucrative market for arms transfers, Asia has recently emerged as the primary overall destination for arms within the developing world, accounting for 48.4 percent of all arms transfer agreements between 2002 and 2005. India accounts in large part for Asia’s dominance of arms purchases, as it was ranked as the developing world’s leading purchaser of arms in 2005, accounting for nearly 18 percent of all arms transfer agreements to the developing world. China also contributed to the rise in Asian arms consumption, ranking third out of all developing countries, with $2.8 billion in arms transfer agreements concluded in 2005. Russia has typically dominated arms agreements and deliveries to the Indian market, but in recent years, India has made an effort to expand its supply base. In 2004, India purchased the Phalcon early warning defense system aircraft from Israel for $1.1 billion, and in 2005 it purchased six Scorpene diesel attack submarines from France for $3.5 billion. Despite the diversified Indian supply market, Russia is still the leading supplier of arms to Asia, being responsible for 36.7 percent (or $16 billion) of arms transfer agreements to that region.

Although challenged by Russia and China, the United States will continue its dominance in the global arms market for the foreseeable future. Even though Russia and China have emerged as major trading partners with the developing world, the demand for U.S. weapons and weapons technology remains quite high. Traditional U.S. allies in Europe and the Near East, as well as emerging military partners in Africa and Asia, will continue to prefer U.S. weapons to those produced by Russia or China, due to the perceived superiority of U.S. weapons and their interest in gaining U.S. favor. Moreover, the United States is continuing its troubling trend of providing substantial amounts of weaponry to countries that support the global war on terrorism. Indeed, in 25 countries noted as key allies in the war on terrorism that were receiving little or no U.S. military assistance prior to Sept. 11, 2001, over 50 percent made more agreements for U.S. arms in the four years since 2001 than they did in the preceding 12 years. As the United States continues to use arm sales as a key tool in its foreign policy toolbox, U.S. arms transfers will remain at record totals.

For more information, please see the CRS Report for Congress, “Conventional Arms Transfers to Developing Nations, 1998-2005” by Richard F. Grimmett, available at http://www.fas.org/sgp/crs/weapons/RL33696.pdf, and CDI’s analysis of U.S. arms transfers to 25 key allies in the global war on terrorism at www.cdi.org.

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