Global arms sales rise for 7th year despite supply chain issues

Annual report on weapons trade shows sales up 1.9 percent, with Russia’s invasion of Ukraine adding to supply chain problems.

Ukrainian soldiers check their weapons at the front line in Donetsk. There are three men and one is checking the weapon while the other two are standing with their backs to the camera
Russia's invasion of Ukraine has increased demand for weaponry but also created problems [File: Dimitar Dilkoff/AFP]

Sales of arms and military services by the world’s 100 biggest defence companies rose 1.9 percent to $592BN in 2021 despite supply chain issues that held up shipments of critical components, according to new data from the Stockholm International Peace Research Institute (SIPRI).

The increase, accelerating from 1.1 percent in 2019-2020, marked the seventh consecutive year of rising global arms sales, SIPRI said in its Arms Industry Database released Monday.

SIPRI said supply chain issues continued to hold back trade in 2021 and were likely to get worse as a result of the Ukraine war.

“We might have expected even greater growth in arms sales in 2021 without persistent supply chain issues,” Lucie Béraud-Sudreau, director of the SIPRI Military Expenditure and Arms Production Programme, said in a statement. “Both larger and smaller arms companies said that their sales had been affected during the year. Some companies, such as Airbus and General Dynamics, also reported labour shortages.”

Russia’s invasion of Ukraine in February 2022 was also increasing supply chain challenges for arms companies around the world, the SIPRI report said.

For Western countries, it noted that Russia was a significant supplier of the raw materials used in arms production.

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

But Russia, which is increasing production because of the war, is also affected because of war-related sanctions that make it difficult for manufacturers there to access semiconductors and to receive payment for their deliveries.

Companies in the United States dominated the list with sales of the 40 US companies in the listing totalling $299bn in 2021, according to SIPRI, although sales were slightly lower in real terms as a result of high inflation.

Continuing a pattern established in 2018, the five firms at the top of the list were all based in the US: Lockheed Martin, Raytheon Technologies, Boeing, Northrop Grumman and General Dynamics.

But the report noted a large surge in sales from Chinese manufacturers, with the eight Chinese arms companies on the list having total arms sales of $109bn, an increase of 6.3 percent from the year before. Four of its manufacturers were in the Top 10.

“There has been a wave of consolidation in the Chinese arms industry since the mid 2010s,” Xiao Liang, a researcher with SIPRI, said in a statement. “In 2021 this saw China’s CSSC becoming the biggest military shipbuilder in the world, with arms sales of $11.1bn, after a merger between two existing companies.”

South Korean manufacturers also saw above-average growth in sales, with the four companies in SIPRI’s list reporting combined sales 3.6 percent above the previous year at $7.2bn, led by engine manufacturer Hanwha Aerospace. Its sales surged 7.6 percent to $2.6bn and are expected to grow significantly in the coming years after it signed a major arms deal with Poland earlier this year.

France’s Dassault Aviation Group also registered strong growth, with sales up 59 percent to $6.3bn in 2021, driven by deliveries of 25 Rafale combat aircraft.

Elsewhere in Europe, however, companies struggled with supply chain disruptions, with most military aerospace firms reporting losses.

There were 27 companies with headquarters in Europe in the top 100; their combined arms sales increased by 4.2 percent to reach $123bn.

The six Russian companies in the top 100 saw their sales rise by a marginal 0.4 percent to $17.8bn.

“There were signs that stagnation was widespread across the Russian arms industry,” the report said.

The SIPRI Arms Industry Database was created in 1989.

The current version contains data from 2002, and Chinese companies have been included since 2015.

This year’s update noted that private equity firms appeared to be buying up more arms companies, which could carry risks for transparency because they were not required to be as open about their finances as publicly-listed firms.

Source: Al Jazeera