United States Stays Atop Global Arms Market

September 2002

By Wade Boese

U.S. weapons deals accounted for nearly half the value of all worldwide arms sales agreements and weapons deliveries last year, ranking the United States as the top global arms dealer in each of the past eight years, according to a Congressional Research Service (CRS) report published August 6.

The CRS report, Conventional Arms Transfers to Developing Nations, 1994-2001, reported that the United States signed new arms sales contracts worth $12 billion last year and shipped a total of $9.7 billion in weapons to customers around the globe. Since 1994, the United States has agreed to nearly $100 billion in arms sales, while its actual exports amounted to almost $131 billion, reflecting completion of deals signed in the early 1990s. (All figures are in constant 2001 dollars unless noted.)

Although last year’s sums marked a decline from its previous year’s activities, the United States did not see its market share change much because all other major arms exporters also saw a drop in new sales as the global arms market experienced its first slowdown since 1997, falling sharply from $40 billion in 2000 to $26 billion last year.

Much of the drop in last year’s arms trade can be traced to a $12 billion reduction in arms buys by developing nations. Their roughly $16 billion in agreements collectively was their lowest total for the eight-year period covered by the annual report, which classifies all countries except Australia, Canada, Japan, New Zealand, Russia, the United States, and European nations as developing.

Developing countries have recently cut back on arms purchases because of their limited financial resources. Rather than buying new weaponry, many developing countries are focusing on upgrading previously bought equipment or integrating it into their militaries.

This approach has generally benefited the United States since many of its key clients in Asia and the Near East have made substantial arms buys in the past and are actively buying spare parts, services, and upgrades to keep existing equipment operational. Russia, on the other hand, suffers in comparison because a number of its top past customers, such as Syria, lack the hard currency to update or maintain their existing weaponry; and some countries doubt Moscow’s ability to provide such services reliably.

Nevertheless, Russia retained its position as the second leading arms dealer behind the United States for the third consecutive year, concluding new sales valued at $5.8 billion. Moscow’s rank, however, is largely attributed to deals with two countries, India and China, both of which have concluded major co-production agreements with Russia in recent years to make advanced fighter aircraft and, in India’s case, tanks. The Kremlin is also working to secure major new sales with Iran and would pursue deals with Iraq if UN arms sanctions were lifted, according to the report.

As they have for the past couple of years, leading European arms suppliers trailed the United States and Russia in negotiating new deals last year. France tallied $2.9 billion in agreements, while Germany had $1 billion in sales and the United Kingdom’s sum equaled $400 million. China made agreements to sell $600 million in arms.

On the other end of the trade, Israel ranked as the leading developing world arms buyer with $2.5 billion in agreements for 2001. Other top buyers were China with $2.1 billion in purchases and Egypt with $2 billion.

Over the entire eight-year period, the United Arab Emirates, which signed a contract for 80 US F-16 fighters two years ago, topped all buyers with $16 billion in weapons deals. Its neighbor and fellow US arms buyer, Saudi Arabia, had the second highest total at $14.1 billion. Yet, Saudi Arabia was unrivaled for actual imports, receiving $65 billion in arms between 1994 and 2001. (Amounts in this paragraph are in current dollars.)

The significant difference between the value of Saudi Arabia’s arms contracts and imports reflects the fact that arms deals often take some time to be implemented. Saudi Arabia, which bought huge amounts of weaponry immediately after the Persian Gulf War, dramatically curbed its arms buys after the mid-1990s due to a decline in its oil revenue and the need to pay off past debts.

Other past major arms buyers also curtailed their purchases in recent years because they could not afford them in the wake of the Asian financial crisis and fluctuating oil prices. The report concludes that the future global arms market will be significantly influenced by the state of the world economy.

Global Arms Transfers

Value of UN Security Council members' arms sales agreements by supplier. (Figures in millions of constant 2001 dollars.) Data taken from August 6, 2002, Congressional Research Service report, Conventional Arms Transfers to Developing Nations, 1994-2001, by Richard F. Grimmett.