Procurement: The Big Five Fight To Stay Alive

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July 30, 2010: Last year, British defense exports were nearly $11 billion, up about 70 percent from 2008. In 2008, French exports were also up, to $8.28 billion worth of weapons. France achieved that by cutting a lot of the red tape and bureaucracy arms exporters had to put up with. The French and British efforts to surpass each other is not the real arms race. The real powerhouse these days is still the United States, which supplies about half of global arms exports.

The United States and Russia have long been the largest exporters of weapons, often accounting for 50-70 percent of world sales in the past. Russia has been trying to catch up by not just selling on price, but also on service and warranties. Most of the cost of a new weapon comes during the lifetime (often a decade or more) of use. In the past, Russia had a bad reputation for support, and lost a lot of those "after-market" sales. The U.S. was much better in that respect, but much more expensive. Now the Russians not only have the price advantage (often half, or less, the cost of equivalent American weapons), but an improving reputation for providing good service. The Russians are also selling more high tech, and expensive, warships. For many years, warplanes comprised about two thirds of Russian sales, but now, about half the sales are for warships.

Russia has another advantage in that it is not shy about paying bribes. Britain achieved its large sales recently for the same reason, and attempts by British legal authorities to investigate bribery in Saudi Arabia was openly suppressed by the government (the Saudis threatened to take their business elsewhere, and cut off counter-terror cooperation otherwise.)

Russia also has another problem with China. Over the last decade, about 40 percent of Russian arms exports went to China. That is now at risk, as Russian manufacturers feud with the Chinese over stolen technology. The Chinese have been quite brazen of late, as they copy Russian military equipment, and then produce their own versions without paying for the technology. Worse, the Chinese are now offering to export these copies. The Russians are trying to work out licensing deals with the Chinese, but are not finding much interest. The Chinese say their generals are angry over how Russia sells technology to potential Chinese enemies, like India.

The traditional top exporters (U.S., Russia, Britain and France) are facing more competition from Germany, China, Israel, India, South Korea and many other minor players who are seeking to break into the top five, and stay there. This also threatens to break the lock NATO countries have had on the majority of arms exports.

 

 

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