Ukraine war is not all good news for arms industry – DW – 12/05/2022

According to a new report from the Stockholm International Peace Research Institute (SIPRI), the world’s top 100 arms producers continued to increase sales in 2021, but supply chain problems have slowed growth in the sector. .

Shortages caused by the COVID-19 pandemic contributed to curbing growth by 1.9 percent in 2021 compared to 2020, the report published on Monday said. SIPRI predicts that the war in Ukraine could create similar problems for the industry in the near to medium term.

What the report predicts about Ukraine

While Russia’s invasion and the response from Ukraine and the West have boosted demand for weapons, it has also left producers facing challenges in the supply of raw materials and components.

SIPRI, an international organization that focuses on research on conflict, weapons, arms control and disarmament, noted that Russia is a major supplier of raw materials used in the manufacture of weapons.

“This could hamper ongoing efforts in the United States and Europe to bolster their armed forces and replenish their stockpiles after sending billions of dollars worth of ammunition and other supplies to Ukraine,” the report said.

Although Russian companies are ramping up production because of the war, the SIPRI report notes that they are having trouble accessing semiconductors. Companies are also affected by war-related restrictions, for example when it comes to receiving payments.

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“It takes time to increase output,” said Diego Lopes da Silva, senior researcher at SIPRI. “If supply chain disruptions persist, it could take years for some key arms producers to meet new demand stemming from the war in Ukraine.”

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What happened in 2021?

The main focus of the report was on industry patterns in 2021, when it found that supply chain issues related to the pandemic appear to slow growth.

“We can expect an even higher increase in arms sales in 2021, without persistent supply chain problems,” said Lucie Beraud Soudreau, director of SIPRI’s military spending and arms production program. “Both large and small arms companies said their sales suffered during the year. Some companies, such as Airbus and General Dynamics, also reported labor shortages.”

North America

The list of the top 100 arms suppliers is dominated by companies in the United States, with 40 firms based there. They also accounted for more than half of the global total of $592 billion in sales, $299 billion (€284 billion). As of 2018, the top five companies in the top 100 are based in the United States.

North America was the only region to see a decline in arms sales compared to 2020. The 0.8% real decline was partly due to higher inflation in the US economy during 2021.

Europe

For 2021, 27 of the top 100 arms suppliers were headquartered in Europe. The region saw a 4.2 percent increase in combined arms sales over 2020, totaling $123 billion.

Although it was a profitable year for shipbuilders, aircraft manufacturers in the region did not do so well.

“Most European companies specializing in military aerospace reported losses for 2021, which they blamed on supply chain disruptions,” said Lorenzo Scarazzato, a researcher at SIPRI. “In contrast, European shipbuilders seem to have been less affected by the pandemic and have been able to increase their sales in 2021.”

With arms sales of $4.5 billion, Rheinmetall (ranked 31st) remains Germany’s largest arms manufacturer. However, its arms sales fell by 1.7 percent in 2021 due to the pandemic and supply chain disruptions.

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Asia

Combined arms sales of the 21 companies from Asia and Oceania in the top 100 reached $136 billion in 2021 – up 5.8 percent from 2020.

These include China’s CSSC, now the world’s largest military shipbuilder, with $11.1 billion in arms sales following a merger between two existing companies.

The combined arms sales of the four South Korean companies in the top 100 rose 3.6 percent to $7.2 billion in 2020. These include a 7.6 percent rise in sales at cross-sector group Hanva, which is expected to rise further after a major arms deal with Poland and Russia’s invasion of Ukraine.

It was the first year that a Taiwanese firm, NCSIST, which specializes in missiles and military electronics, made the list – with $2 billion in arms sales.

Russia and the Middle East

6 Russian companies were in the top 100 for 2021 with total sales of $17.8 billion – 0.4% more than in 2020. SIPRI noted that before the Russian invasion of Ukraine, there were signs that the Russian arms industry had stagnated. .

Five Middle East-based companies to generate $15.0 billion in arms sales in 2021 This was a 6.5 percent increase over 2020, the fastest growth rate of all regions in the top 100.

Edited by: Sean Seneco

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