Wednesday, March 21, 2012

To market, to market, to buy a fat... gun. 
Earlier this week, the Stockholm International Peace Research Institute (SIPRI) released its annual database and report on international arms transfers during the period 2007-2011.  Comparisons with the previous dataset of 2002-2006 reveal a few particularly interesting nuggets of information. 

The top two suppliers remained the same, with the same domination of the market.  The United States accounted for 30% of arms exports, with a volume increase of 24% from 2002-2006; the major recipients were South Korea, Australia and the UAE.  Russia accounted for 24% of all exports, with a volume increase of 12%; its major recipients were India, China and Algeria.  Following the US and Russia, Germany weighed in with 9% of the global share, selling to Greece, South Korea and South Africa; France had 8%, selling to Singapore, Greece and Morocco; and the UK had 4%, selling to Saudi Arabia, the US and India. 

Contributing to the US leadership of arms exports was the order placed by Saudi Arabia for 84 new F-15SGs  and the rebuilding of 70 older F-15Es to current standards.  This was the largest arms deal worldwide in two decades and significantly boosted the US ranking, while also solidifying the US-Saudi relationship.

On the import side, India displaced China as the world's leader in arms imports during the 2007-2011 period, accounting for 10% of global imports.  India purchased primarily from Russia, approximately 80%, but a small amount also from the UK and Israel. Second was South Korea, with 6% of global imports primarily from the US, but also from Germany and France.  Third was Pakistan, with a 5% share, pretty evenly balanced between China and the US.  Fourth was China, with 5% of the market, primarily from Russia, but also France and Switzerland.  Finally comes Singapore, with 4% of the market, from the US, France and Germany.    

Although China was the leader in arms imports during the 2002-2006 period, improvements in the Chinese arms industry led to a growth of 95% in arms exports between the two periods.  China is now the 6th largest supplier of arms to the world, but it remains in 5th place for imports.  According to the report, China gained its growth in exports largely by supplying arms to Pakistan.  However, if China is able to enter another significant market and increase internal development of arms components, it would not be surprising to see China continue to climb the rank of exporters while reducing its imports.  

Two other interesting tidbits are present in the report.   First, Syria's imports of major weapons increased by 580% between the 2002-2006 and 2007-2011 period.  Russia was the primary supplier, with 78% of Syria's imports.  Of course this economic relationship contributes to Russia's reluctance to back a UN arms embargo on Syria.  Second, Venezuela's imports increased by 555% between the two periods, becoming the 15th largest importer instead of the 46th.  Russia again is the primary supplier and has provided Venezuela with a $4 billion credit line for future arms purchases. 

All these data give rise to some serious considerations.  With India and Pakistan in the top 5 ranking of arms importers, how well might that bode for that region?  Is a mini-Cold War forming between these two, willingly backed by Russia and China, respectively?  If so, how might that play out at a global level, with such super-powers possibly in a face-off behind their recipients?  Also, what is brewing in Venezuela?  Why does Chavez see the need for such an enormous increase in weaponry?  What position is Russia planning on playing by supplying the arms?  Because as we all know, supply and demand are the laws driving economics, but markets also give concrete representation to large-scale geopolitical relationships.  

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