Arms Sales: Future of the Lucrative Trade With Middle East

Posted on March 2, 2011

Arms sales to the Middle East is not only lucrative, it’s big business for Russia, China, US, UK, France, India and many more countries.  Now as the world turns its attention to Libya, the arms sales from various nation states are beginning to be identified.   Russian aircraft was used in an attempted bombing in Libya this morning.

A moral imperative can wane in light of economic realities. After the Chinese military attacked protesters in Tienanmen Square, 1989, the EU forbade arms sales to China.  But China has baled out some EU countries during this depression and the mood is shifting.  Not so with Britain.  It is steadfast in opposition to revision of the policy. []  However, Britain is not as obstinate about the Middle East at this point.

As with the US and others, arms sales to the Middle East is one of Britain’s most profitable trade areas:

How big are arms sales to the Middle East and North Africa? The unrest in Libya, Tunisia, Egypt and across the region has brought attention to one of the UK’s most successful export markets: military equipment.

It’s a world shrouded in secrecy, and centred on giant arms fairs, such as Idex, taking place in Abu Dhabi. In the UK the international arms trade is managed by Strategic Export Controls, which grant licenses. They’re not just for arms, but for a whole range of ‘controlled’ products. Here’s the official take from the Department for Business, Innovation & Skills:

The Export Control Organisation is responsible for legislating, assessing and issuing export and trade licences for specific categories of “controlled” goods. This encompasses a wide range of items including so-called dual-use goods, torture goods, radioactive sources, as well as military items. Whether a licence is required depends on various factors including the items exported and any sanctions in force on the export destination.

If items exported from the United Kingdom are controlled, then a licence is needed to legally export. Exporters are responsible for complying with the law, understanding the regulations and keeping informed.

This is isn’t everything sold, but the vast majority and everything granted a license is categorised. The official reports (published in PDF format) detail the maximum values of licenses granted in each group. There is a searchable database (you can access it here). But for the breakdowns, you have to use the PDFs. Licenses can and are often revoked – as some have just been to Bahrain. [Guardian]

As for the US, the largest US arms sales were made in 2010 to the Saudis.  It is unclear since the turmoil in the Middle East broke out what the Obama  administration will do following a review that  has begun. Listen to a public radio discussion of arms sales to the Middle East below or read a partial transcript.

Wednesday, February 23, 2011

Listen to the show Marketplace

Audio: Hear Janet Babin’s original story on Marketplace

CHIOTAKIS: How big are these sales? What are we talking about here?

BABIN: Pretty big Steve. Let’s take Egypt as an example. It received more than a $1 billion in U.S. aid last year. And a big recipient of that money has been Lockheed Martin — for the F-16 fighter jets it sold to Egypt. And Boeing did pretty well too for a deal to sell F-15s fighter jets and C-17 Transport Jets to Saudi Arabia.

CHIOTAKIS: Are these sales at risk from the unrest there?

BABIN: They’re somewhat protected by long delivery times for orders, and usually the contracts with governments are pretty long. I spoke with Richard Aboulafia about this. He’s an aerospace analyst with the Teal Group and he says so far, these defense markets are relatively safe. But that could change.

RICHARD ABOULAFIA: The real risk here is Saudi Arabia as a possible area of unrest moving forward. And they just signed off on one of the biggest arms deals in history. And that provides an awful lot of revenue to both Boeing and United Technologies Corporation, who makes Sikorsky helicopters.

That Saudi arms deal by the way Steve was worth $60 billion.


HOBSON: All right, so we know the arms industry is a big business. Give us a sense of the size.

BABIN: Well, six Gulf nations, including Saudi Arabia, Bahrain, Kuwiat and Jordan, are expected to spend $70 billion on defense this year. And the U.S. will get some of that. And the Wall Street Journal reports this morning that figure is expected to rise to $80 billion in 2015.

HOBSON: And now we’re talking about a White House review of some of the business that has to do with the United States.

BABIN: That’s right. The paper reports that before all this unrest, the Obama Administration’s strategy was to sell arms sales to Arab Allies in an effort to isolate Iran. Right? But that strategy can backfire if you’re not sure who’s in charge in some of these places. And these concerns stretch to Europe as well. Prime Minister David Cameron happens to be in the region this week. He brought with him a group of eight U.K. defense industry officials.

Roy Isbister is with SaferWorld. That’s a U.K. advocacy group.

ROY ISBISTER: There seems to be no thought to scaling back on the interest that’s been shown in this.

So Isbister says there’s a huge arms sales expo that’s still going on in Abu Dabi this week, and that’s where Cameron and the industry officials are headed. So it looks like the U.K. at least, still hopes to sell £5 billion, that’s about $8.1 billion, worth of arms to Middle East allies this year. []

Surplus arms sales have benefited the UK as reported in  Janes.

Posted in: Uncategorized