Arms sales decline worldwide: defense companies hit by crisis

Sales fall by 4.2 percent worldwide. According to the Sipri Institute, Russia is significantly increasing its arms spending, while the USA is buying much less.

Leopard tank from Krauss-Maffei Wegman (KMW) at an arms fair in Schonefeld near Berlin, 2008. photo: ap

The global arms business is in crisis. The 100 largest arms companies suffered a 4.2 percent drop in sales in 2012. This continued a trend from 2011. At that time, arms sales had fallen by 6 percent for the first time after the boom decade in the wake of the 9/11 attacks.

The slump has now also caught up with German manufacturers. Whereas in 2011 they were even able to buck the trend and increase their sales, they are now stagnating at Rheinmetall and Diehl. At tank manufacturer Krauss-Maffei Wegmann they were down by as much as 21.3 percent and at ThyssenKrupp by 26.5 percent.

The Stockholm-based peace research institute Sipri, which published these figures on Friday in its report on the "Top 100 arms companies," cited military budget cuts in the U.S. and Western European countries and the U.S. troop withdrawal from Iraq as the main reasons.

In the process, U.S. defense companies’ sales fell by more than 6 percent overall, twice as much as those of their Western European competitors.

"Which doesn’t change the fact that their sales, like profits, are at historically very high levels," explains Sam Perlo-Freeman, director of arms production research at Sipri.

The 43 North American and 30 Western European companies among the "Top 100" still dominate the largest share of the global arms market and account for 87 (2011: 89) percent of all arms sales.

If other countries have been able to increase their share of the arms business, this is mainly due to Russia’s arms spending, according to Sipri. A comprehensive modernization program by Moscow has led to a combined sales boom of 28.4 percent for the six Russian companies among the "Top 100."

Faced with shrinking domestic markets, Western defense companies are now "very active" in seeking new sales opportunities, the Peace Research Institute noted.

"Major failures" in preventing corruption

In doing so, they are apparently trying "by all means" to land contracts – "including those with corruption potential." Referring to Transparency International’s Anti-Corruption Index, Sipri states "major failures by leading arms manufacturers in their efforts to prevent corruption."

Krauss-Maffei Wegmann, which recently made the headlines because of allegations of bribery in tank deals with Greece, received the worst grade: Unsatisfactory.

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