GLOBAL DEFENCE TRADE 2015

Egyptian Rafales
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The global defense trade reached a record-breaking $65 billion in 2015 fueled by conflict in the Middle East and military spending in Southeast Asia.

This is according to the annual Global Defence Trade Report released on 13 June by IHS Inc.

The report found that the Middle East was the largest importing region, with $21.6 billion in deliveries of defense equipment.

Total defense spending accelerated in Asia-Pacific as states bordering the South China Sea boosted defense spending.

France has doubled its backlog of orders from $36 billion in 2014 to $55 billion, meaning that $55 billion worth of defense equipment has yet to be exported.

This increase means that France will overtake Russia as the second-largest global defense equipment exporter.

Germany moved from fifth- to third- largest exporter and the UK dropped from fourth to fifth. The largest global exporter, the United States, saw another 10 percent increase in exports over the past year, bringing the total to $23 billion (35 percent of the global total).

South Korea saw exports climb again to $871 million while there was significant change in the top five importing countries, with Taiwan, China and Indonesia all dropping out of the top five and Australia, Egypt and South Korea replacing them.

“The global defense trade market has never seen an increase as large as the one we saw between 2014 and 2015,” said Ben Moores, senior analyst at IHS. “2015 was a record-breaking year.” Markets rose $6.6 billion, bringing the value of the global defense market in 2015 to $65 billion. IHS forecasts that the market will increase further to $69 billion in 2016.

The largest Middle Eastern importers remain among the largest globally in 2015. Saudi Arabia and the UAE imported $11.4 billion (17.5 percent of the global total) worth of defense systems in 2015, up from $8.6 billion in 2014, according to the report.

“The combined value of Saudi Arabia and the UAE’s defense imports is more than all of Western Europe’s defense imports combined,” Moores said. Saudi Arabia’s imports grew from $6 billion to $9.3 billion; an increase that is three times that of the entire sub-Saharan Africa market.

“The US, Canada, France and the UK are the main exporters of defense equipment to the Middle East and beneficiaries of this spending boom,” Moores said.

The IHS report indicates that US trade flow to the Middle East has been driven by sales of military aircraft and associated mission systems.

Canada is the second-largest exporter of defense equipment to the Middle East with $2.7 billion in sales, moving the UK down the table to fourth place, just behind France. Germany and Russia each saw a 25 percent growth in exports to the region of $1.4 and $1.3 billion, respectively.

Russia is likely to increase its trade in the region as post-sanctions Iran begins to replace its exhausted aviation assets.

In 2018, France will move from the third to the second largest global exporter of defense equipment, pushing Russia down the table for the first time in decades.

“France has revived its defense industry and had spectacular back-to-back year of sales,” Moores said. “2014 and 2015 were France’s best-selling years in decades.”

France sold $26 billion of defense equipment, $8 billion in 2014 and $18 billion in 2015. In 2016, France secured the record-breaking $38.7 billion Australian submarine order.

This extended run has increased the French 10-year backlog for defense exports from $36.1 billion to $54 billion in 2016. These sales have included Rafale multi-role fighter aircraft, submarines and helicopters. The bulk of the sales went to India, Saudi Arabia, Australia, Qatar, Egypt and the UAE.

The value of military imports throughout Western Europe rose from $7.9 billion in 2013 to $9.6 billion in 2015. “This notable climb takes Western European imports back to 2010 levels but not their 2009 high point of $12 billion,” Moores said.

Nearly all of Western Europe’s military import gains in 2015 have come from Norway, pan-European programs and the UK.

UK imports nearly doubled as imports of MARS tanker ships from South Korea and CH-47 helicopters from the United States have commenced.

Total defense spending accelerated in Asia Pacific as states bordering the South China Sea boosted their defense spending.

Between 2009 and 2016, defense imports rose 71 percent in the region.

The United States continued to top the export table in 2015 having supplied $22.9 billion worth of goods and equipment compared with $20.7 billion worth 2014, $18.3 billion in 2013 and $12.9 billion in 2009.

This dramatic rate of growth cannot be tied to one particular factor but, going forwards, the total may exceed $30 billion as deliveries of the F-35 begin to ramp up, according to IHS.

This rise could be derailed by sustained low oil prices because, for the US, the Middle East is a key region for exports.

The United States delivered $8.8 billion worth of equipment to the Middle East in 2015.

The IHS report covers production, R&D, logistic support and service revenues where there is an export but does not cover munitions and small arms and anything under 57mm caliber was not included in the study.

The IHS report on global defense trades is in line with other figures. According to the Stockholm International Peace Research Institute (SIPRI), world military spending totaled almost $1.7 trillion in 2015, an increase of one percent in real terms from the previous year.

The 2015 increase is the first in military spending since 2011 and reflects continuing growth in Asia and Oceania, central and Eastern Europe and some Middle Eastern states.

The decline in spending in the West is also leveling off.

At the same time, spending decreased in Africa, and Latin America and the Caribbean. Thus, the global military expenditure picture is mixed, according to SIPRI.

The United States remained by far the world’s biggest spender in 2015, despite its expenditure falling by 2.4% to $596 billion. Among the other top spenders, China’s expenditure rose by 7.4% to $215 billion, Saudi Arabia’s grew by 5.7 % to $87.2 billion – making it the world’s third-largest spender – and Russia’s increased by 7.5% to $66.4 billion.

A combination of high oil prices and new oil discoveries and exploitation has contributed to a surge in military spending in many countries around the world in the past decade, SIPRI said. However, the crash in oil prices that started in 2014 has begun to reverse this trend in many oil revenue-dependent countries and further cuts in spending are expected this year.

Despite declining oil revenues, several other oil-exporting countries continued to increase military spending in 2015. Many of these countries – notably Algeria, Azerbaijan, Russia, Saudi Arabia and Vietnam – were involved in conflict or faced with heightening regional tensions.

However, Russia’s expenditure was lower than projected in its budget, and Saudi Arabia’s spending would have fallen but for the additional $5.3 billion cost of its military intervention in Yemen.

Russia and Saudi Arabia are planning cuts in 2016.

In Africa military spending fell by 5.3% following 11 years of continuously rising spending, SIPRI research found. This was mainly due to the large cut by Angola, the largest spender in sub-Saharan Africa in the wake of the sharp fall in oil prices.

(Source : sldinfo.com)

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