Russia is losing its position, although our experts say that this is not the case.
Yelena Ivanova, Natalia Seibil
Despite the pandemic and a drop in global GDP in 2020, global arms sales continued to grow. The military-industrial complex did not experience any shocks from lockdowns and a decrease in demand - the states both ordered and continued to order weapons and military services.
“In many countries around the world, military spending has risen, and some governments have even accelerated payments to the defense industry to mitigate the impact of the Covid-19 crisis”, - says Alexandra Marksteiner, an analyst with SIPRI's military spending and weapons program.
Sales of Russian arms companies peaked in 2017. Since then, their volumes have only been decreasing. Compared to 2019, arms were sold 1.8 billion less . The fall was 6.5% . The Almaz-Antey concern, which, in addition to radar equipment, produces the famous S-300, S-400, S-500, Buki and other air defense systems of various ranges and basing, was especially hard hit. However, says Ruslan Pukhov , Director of the Center for Analysis of Strategies and Technologies , despite all the difficulties, Almaz-Antey kept its first place in the list of Russian companies and in the top twenty world leaders in the industry.
In 2020, Russian arms manufacturers faced several difficulties at once, and only one of them was “programmed” when 2020 was the lowest point for financing the State order, explains Ruslan Pukhov . The pandemic and lockdown have become the "black swan" for the industry. And although it was possible to avoid disruption of the state order, the events of 2020 left their mark on the results of the companies. The sharp drop in the dollar exchange rate in 2020 caused much more trouble for the Russian military-industrial complex.
Other sources of Novye Izvestia indicate that the 2011-2020 armament program has been completed, and the decline in purchases, which President Putin had warned the military-industrial complex about, has come. The Russian armed forces have been intensively re-arming for 10 years. Now everything will go more planned, as needed.
However, not all market analysts agree with SIPRI's estimates. If you look in dollar terms, says Alexey Leonkov, a military expert with the Arsenal of the Fatherland magazine, there is some decline, but the Stockholm Institute does not have all the information:
- S-400 deliveries to China and India follow completely different schemes, which bypass the dollar, because this is due to the fact that the United States is trying to impose restrictions on such transactions, which primarily concern financial institutions, namely banks. Russia has signed contracts for the supply of these complexes, they are supplied, Russia receives an equivalent that is absolutely not related to the dollar.
Indeed, SIPRI may not take into account a number of contracts, because no one will let them into the accounting department of the Russian Ministry of Defense, but conscientious scientists work in Stockholm who do not deliberately manipulate and do their job well and for a long time, Ruslan Pukhov notes:
“Both sides are right. It is obvious that Russian arms exports are reaching a certain plateau of 15 billion a year. Growth is being constrained, among other things, by US sanctions. In addition, a number of settlements with a country such as Algeria go bypassing dollars, and even bypassing euros, de facto exports may be higher than they are shown".
US sanctions continue to affect sales of the Russian military-industrial complex. They had a particularly strong effect immediately after their introduction. Ruslan Pukhov says:
"When at first the Americans made a complex face, many were frightened. A number of countries have canceled contracts. The classic story is how Kuwait refused to buy our tanks because of the risk of being sanctioned. The Philippines have made a number of statements that they cannot buy Russian weapons because they are afraid of US sanctions. Indonesia has suspended the contract for the SU-35. However, over time, it became clear that the devil is not so terrible as he is painted".
The first was Turkey, which purchased the S-400, despite the sanctions. India followed. Russian gunsmiths managed to work out the necessary mechanisms and agree with buyers on how the calculations will be carried out. Some of them are in national currencies, some - in barter. After that, the products are delivered, and the calculations are made. Many countries have already realized that the American ban is not so terrible, market experts say. Russia managed to partially overcome the effect of the sanctions, although they remained as a deterrent.
Russian weapons are unique in a number of ways. Even if there are similar systems on the market, for example, portable air defense systems, the Americans do not sell many of them. If any country plans to buy a large air defense system, then it has only two choices: either the American Patriot, or the Russian S-400. Russia has its own niche in the world arms market, because the United States will not sell these systems to a number of countries that are not among their allies. Plus, Americans are reluctant to transfer technology. Russian arms dealers are more open in this regard. And most importantly, our weapons are cheaper than American or European ones. Experts predict that Russian companies will sell more weapons in the future.
“Russian weapons have proven that they are the best in terms of efficiency - cost, so I predict an increase in arms exports starting next year”, - Ruslan Pukhov is sure.
How much the military-industrial complex of Russia produces for export and how much for the needs of its own Armed Forces, it is difficult to say. All data is classified so that foreign intelligence services could not disrupt the work. However, if in the 1990s and at the beginning of the 2000s, military enterprises worked mainly for foreign contracts, because the state defense order was small, now the state has again become the main customer. And although a number of enterprises can export up to 40%, experts say, most of them mostly work for their army and navy.
Now that the rearmament has been largely completed, the state has set the task of developing civilian or dual-use products and increasing exports. Despite the uniqueness of some types of Russian products, American industry remains superior. As the source of Novye Izvestia said, we are lagging behind in electronics, and backwardness cannot be overcome in two leaps across the abyss.
American companies, as, indeed, every year, dominate the world ranking of the military-industrial complex. The first five places on the list since 2018 are occupied by Americans. Combined, US arms manufacturers account for 54% of SIPRI's top 100 sales. In total, in 2020, these companies alone sold arms worth $ 285 billion. This is half of all budget revenues of Canada, one of the ten largest economies in the world for the same year. American military concerns are getting bigger. According to researchers in Stockholm, this trend is especially evident in the field of military space. Northrop Grumman, which makes B-2 Spirit strategic bombers and military drones, or KBR , has bought up space technology firms in recent years.
America is leading the arms market for various reasons. First, American industry has several key characteristics that make it superior in the military sector. First, according to experts, American weapons are very good. With the world's largest military-industrial complex, Americans invest the most in it. If there is another reason where these more than a quarter of a trillion dollars came from, Ruslan Pukhov says:
"Under President Trump, the Americans rejected all the self-restraints that they imposed on themselves when selling weapons to countries that violate human rights or persecute gays, where this could negatively affect the situation, a war could start. Under Trump, this entire ideological husk was thrown back, and the Americans rushed to sell actively, in a way that they had not done before. Biden continued this line".
In addition, the American military-industrial complex has the largest market in the world. The US government is actively helping their companies. You buy our weapons, and we will help you enter our market - this is how marketing in the military sector works in the American way. We must not forget that after 2014, the United States, in addition to the obligations of European countries under NATO, had an additional argument for the sale of American arms to Europe. There are countries in the world that, as the expert Alexey Leonkov said, buy from the Americans “under the hood”:
"Saudi Arabia recently signed a contract for the supply of the Patriot air defense system. Why is this Saudi Arabia, who is threatening it with ballistic missiles - it is not clear, although before that there was a very powerful campaign that Iran threatens Saudi Arabia with the use of its missile arsenal. The campaign passed, the hype died down, but the contract was signed. Thus, the Americans have imposed this kind of supply on many countries".
The second place in terms of sales is occupied by Chinese firms. The Top 100 now includes 5 weapons manufacturing companies. Total sales were $ 66.8 billion, or 13%. The Chinese ousted British companies and came in second after the Americans. Like Russia, China has undertaken military modernization. Now the Chinese military-industrial complex has focused on mergers with civilian companies. “Chinese companies have become some of the most advanced military technology manufacturers in the world,” said Dr. Nan Tian, Senior Research Fellow at SIPRI. Thus, NORINCO became one of the developers of the civil-military navigation system BeiDou.
The number of armed conflicts in the world is not decreasing. In the same 2020, the Stockholm Institute counted 39 , 20 of them - in Africa south of Magib, 7 - in the Middle East and North Africa, Asia and Oceania - 7, in Europe - 3, in America - 2. The world is shaken by civil wars , religious clashes, armed conflicts with insurgents, conflicts between states. The volatility and conflict potential in the world is growing, which is why arms sales will grow. The military conflict continues between India and Pakistan, and Russian arms dealers are faced with a paradoxical situation - they are selling more there, and the Russian share in the Indian market has begun to fall. The fact is that the Indian arms market is growing faster than Russian supplies.
SIPRI scientists have noted another feature of 2020. While all Top 100 sales rose 1.3% , total arms sales from companies outside the United States, China, Russia and Europe increased 3.4% . Their share in the Top 100 market rose to 8.1% , while the share of the largest Russian companies was only 5%.
Three Israeli companies sold $ 10.4 billion worth of arms and accounted for 2% of the list's sales. 5 Japanese firms lagged behind them quite a bit. The ranking includes 4 South Korean defense firms, which increased their share by 4.6% compared to last year. Arms sales from three Indian manufacturers are growing. They will continue to grow, because the Indian government announced a reduction in the import of military equipment.
The world continues to arm itself.