Wars and regional tensions revive the coffers of defense companies

According to the report, all regions witnessed an increase Revenue from armswith particularly sharp climbs in between Companies Which is taken from Russia It is based in the Middle East.

In general, smaller producers have been more efficient in responding to the new demand associated with the wars in Gaza Ukraineescalating tensions in East Asia and rearmament programs elsewhere.

The report indicates that in 2023, many arms manufacturers increased their production in response to increasing demand. Total revenues also increased Weapons in the top 100 after falling in 2022. Nearly three-quarters of the companies increased their revenue from weapons compared to the previous year.

And the transfer Stockholm Institute Lorenzo Scarazzato, a researcher at the Institute for Military Costs and Weapons Production Program, said:

• “We saw a significant increase in gun revenue in 2023, and that is likely to continue in 2024.”
• “Guns revenues for the top 100 gunmakers still do not fully reflect demand, and many companies have launched hiring campaigns, indicating they are optimistic about future sales.”

American leadership

The report notes an increase in corporate income American weaponsBut at the same time he emphasizes that production challenges still exist

• 41 companies in the US Top 100 reported $317 billion in arms revenue, half of the total arms revenue of the top 100 companies and up more than 2.5 percent from 2022. As of 2018, the top five companies in the Top 100 based in USA has been .
• Of the 41 US companies, 30 increased their revenue from weapons in 2023. However, Lockheed Martin and RTX, the world’s largest arms manufacturers, were among the companies that recorded a decline.

Director of the Military Expenditure and Arms Production Program at the Stockholm International Peace Research Institute, Dr Nan Tian, ​​said: “Large companies such as Lockheed Martin and RTKS that produce a wide range of weapons products often rely on complex, multi-layered supply chains , making them vulnerable to ongoing challenges in the chain supply in 2023.

What about Europe?

As for the industry European weaponsIt lags behind the rest of the world in revenue growth, according to a report that says total arms revenue for Europe’s 27 largest companies will reach $133 billion in 2023. That’s just 0.2 percent more than in 2022, the slowest growth of any which region of the world.

However, the picture behind the low growth figure is more complex, as European arms companies that make complex weapons systems were mostly working on older contracts through 2023, so their revenues for the year do not reflect order flow.

At the same time, revenues for a number of other European arms manufacturers have risen significantly, driven by demand related to the war in Ukraine, particularly for ammunition, artillery, air defense and land systems.

It is worth noting that companies in Germany Sweden, Ukraine, Poland, Norway and the Czech Republic could benefit from this demand. For example, Germany’s Rheinmetall increased its production capacity for 155 mm ammunition, and its revenues were boosted by deliveries of Leopard tanks and new orders.

the arms race

In this context, professor of international economics, Dr. Ali Abdel Rauf Al-Idrisi, confirms in an exclusive statement to the website “Ektisad Sky News Arabia” that regional tensions and armed conflicts significantly contribute to the reshaping of the global economy. By increasing the demand for weapons and developing military technology.

• Regional tensions are pushing countries to escalate their military spending to improve their defense capabilities.
• Many countries in the vicinity of the conflict sign huge contracts for the purchase of weapons and military equipment, which leads to a boom in demand for these products.
• To meet the growing demand, arms manufacturing companies are increasing their production capacity.
• Governments, for their part, prioritize arms production in times of war, which has a positive effect on the economies of arms-producing countries such as the United States and Russia, as their exports expand to meet international needs.
• The conflicts are fueling a race for innovation in weapons technology, including the use of… Airplanes Drones, ballistic missiles and artificial intelligence technologies.
• The conflict in Ukraine, for example, has highlighted the importance of drones and cyber warfare technologies, prompting companies to invest heavily in this area.

He points out that large companies make huge profits in times of conflict thanks to long-term contracts with governments, which ensure the sustainability of companies’ incomes for long periods.

It also shows that the arms sector contributes to strengthening… Economic growth For producing countries, as it provides direct and indirect employment opportunities, arms exports also contribute to improving the balance of payments, especially for countries that depend on them, such as Russia, which uses them as a means of supporting its hard currency. economic sanctions.

Russian companies

As for Moscow, military production has led to a sharp rise in Russian arms companies’ revenues, according to the institute’s report.

• Two Russian companies on the list of the top 100 saw a 40 percent increase in revenue to an estimated $25.5 billion.
• That was almost entirely due to a 49 percent increase in arms revenue reported by Rostec, the state holding company that controls several arms manufacturers, including seven companies previously listed in the top 100 for which individual revenue figures could not be obtained. .

Dr. Nan Tian said:

• “Official data on Russian arms production is scarce and questionable, but most analysts believe that production of new military equipment increased significantly in 2023, while Russia’s existing arsenal underwent extensive renewal and modernization.”
• “Fighter planes, helicopters, drones, tanks, ammunition and missiles are believed to have been produced in greater numbers as Russia continues its offensive against Ukraine.”

The war in Ukraine

In turn, Dr. Rami Al-Khalioubi, a professor at the Moscow Higher School of Economics, pointed out in exclusive statements to the “Ektisad Sky News Arabia” website that “the war in Ukraine represented a major impetus to the militarization of the world and the strengthening of the arms industry sector.”

He adds: “In the Russian case, the military industry has turned into a locomotive of the Russian economy, as the destruction of Russian tanks by the Ukrainian armed forces, for example, directly affects Russian military factories that depend on government contracts to produce more equipment.” .”

He continues: “This is somewhat similar to artificial technological progress, as happens when companies like Apple and Samsung stop supporting old apps and force users to buy new devices. Wars also force countries to produce new weapons as would replace the one destroyed during the conflict.” “

South Korean and Japanese companies lead revenue growth in Asia

Returning to the report of the institute, it is indicated that:

• The 23 companies in the top 100 based in Asia and Oceania reported a 5.7 percent year-over-year rise in arms revenue to $136 billion.
• The four companies based in South Korea saw a combined 39 percent increase in arms revenue to $11 billion.
• The five Japan-based companies saw combined arms revenue rise 35 percent to $10 billion.
• Japan’s policy to build up its military from 2022 has led to a wave of domestic orders, with some companies seeing the value of new orders increase by more than 300 percent.

“The sharp rise in arms revenue between South Korean and Japanese companies reflects a broader picture of military buildup taking place in the region in response to rising threat perceptions,” said Xiao Liang, a researcher at the Stockholm Military Institute for Peace Research. Weapons Expenditure and Production Program. “South Korean companies are also trying to expand their share of the global arms market, including demand in Europe related to the war in Ukraine,” he added.

Arms companies in the Middle East

Six of the top 100 arms companies were based in the Middle East. The combined revenues of these companies increased by 18 percent and reached 19.6 billion dollars.

With the outbreak of the Gaza war, the arms revenues of the three Israeli companies in the top 100 companies reached $13.6 billion. This is the highest number ever recorded by an Israeli company in the 100 largest companies according to the Stockholm Peace Research Institute.

The three Turkey-based companies saw arms revenue grow 24 percent to $6.0 billion, thanks to exports fueled by the war in Ukraine and the Turkish government’s continued push toward self-reliance in arms production.

Dr Diego López da Silva, Senior Research Fellow in the Military Expenditure and Arms Production Program at the Stockholm International Peace Research Institute, said:

• “The Middle East’s top 100 arms manufacturers saw arms revenue rise to unprecedented levels in 2023, and growth looks set to continue.”
• “Specifically, in addition to achieving record arms revenues in 2023, Israeli arms manufacturers are booking more orders as the war in Gaza continues and expands.”

Other areas

• Nine of the top 100 companies based in China posted their slowest annual increase in arms revenue (+0.7 percent) since 2019 amid a slowing economy. Total arms revenues in 2023 reached $103 billion.
• The combined arms revenues of the three Indian companies in the top 100 list rose to $6.7 billion (+5.8 percent).
• NCSIST, the only Taiwan-based company in the top 100, reported a 27 percent increase in arms revenue to $3.2 billion.

Development of weapons technology

In this context, San Jose State University academic advisor and information technology expert, Dr. Ahmed Banafa, explains in a special statement to the Ektisad Sky News Arabia website that regional wars and tensions are among the most prominent drivers of the global arms industry, as they play a key role in advancing innovation, increasing productivity and reshaping the international balance of power.

He points out that conflicts contribute to the acceleration of the development of military technology. Modern technologies such as artificial intelligence and drones have become one of the main pillars of modern wars, explaining that large companies are competing not only to increase production to meet growing demand, but also to develop advanced weapons that give strategic advantages to buyer countries.

• Wars push companies and countries to develop advanced military technologies faster, which increases the effectiveness and accuracy of weapons.
• Increased demand for weapons during conflict doubles corporate revenues, supporting new investment in research and development.
• The arms industry contributes to the strengthening of some countries’ economies through employment and increased exports, but at the same time it can make the economy vulnerable to fluctuations in geopolitical conditions.

But he adds: “Despite economic and technological gains, wars have a negative impact on global peace and stability,” warning of the dangers of an arms race and the proliferation of advanced weapons among non-governmental groups.

Dr. Banafa concludes his remarks by highlighting the ethical challenges facing countries and companies that produce weapons, stressing the importance of finding a balance between pursuing economic interests and protecting international stability and peace.