Russia had a record year for arms exports in 2013, moving $13.2 billion worth of weapons, military equipment and defense services. Russian officials admitted that they did not expect to increase weapons sales over the next few years, largely because arms sales worldwide, both for export and domestic consumption is shrinking. Currently about half of Russian sales are aircraft (jets and helicopters) and 25 percent are anti-aircraft systems. Russia still gets orders because they are cheaper than Western stuff, and nearly as good.
One reason for Russian forecasts of flat arms sales is China, which is becoming a major competitor. In 2012 China became the fifth largest arms exporter on the planet. In 2008-2012 China exported $11.2 billion (in 2012 dollars) worth of weapons, 55 percent of it to Pakistan and another seven percent to Burma. China, like Russia before it, got sales by selling to outcast nations (Pakistan for developing nukes and supporting terrorism, Burma for being a brutal dictatorship for decades). Russia still does that but with higher quality second-rate stuff. Plus, Russia has had India as a major customer for decades. Both Russia and China will tolerate bribe requests and all manner of bad behavior to get a sale. That often makes a difference in many countries.
Britain was displaced from the top five in 2012, leaving the United States the largest exporter followed by Russia, Germany and France. Exports are even larger if you include support and training services, which are particularly lucrative with the more complex and effective Western weapons.
Largely because of large sales to oil-rich Arab states in the Persian Gulf, arms exports hit a record $71.5 billion in 2011. The year before (2010) the total was only $32.7 billion. In 2011, 84 percent of those exports went to developing nations (mainly in the Middle East) while for the period of 2004-11 the percentage was only 69 percent. Developing nations can produce most of their own weapons but often do not because it's cheaper to buy them overseas. Even the United States does this. For example, a Norwegian firm has supplied American troops with billions of dollars' worth of remotely controlled gun turrets over the last decade. Norway in turn buys combat aircraft and anti-aircraft missiles from the United States.
Currently the United States supplies a little over half of those exports (weapons and associated services). The next largest supplier was Russia, with 15 percent. In 2011, the U.S. accounted for 79 percent, mainly because most of the sales to the Arab oil-states were American. This American domination is largely a result of the collapse of the Soviet Union in 1991. The Soviets were the low-end supplier but no one wanted to buy from a loser and the Western nations, especially the U.S., picked up a lot of new business.
The U.S. has long had the most export sales, despite having the most expensive weapons. Despite the cost, the American stuff had a good reputation for effectiveness and reliability. American manufacturers provide excellent (and expensive) support. Most countries, if they could afford to buy American, did so. The others searched for someone offering cheap but effective weapons. The supplier has often been Russia and increasingly China (often with copies of Russian stuff). China has been moving into traditional Russian markets over the last two decades.
Russian arms sales rose sharply after 2001 because the economies of their two biggest customers (India and China) were increasing rapidly. That and the escalating price of oil (driven largely by increased demand from China and India) have sent international arms sales from $29 billion in 2003 to over $70 billion today. Oil rich countries, particularly those in the Persian Gulf, are eager to buy more weapons with which to defend their assets from an increasingly aggressive Iran.
The stall in Russian sales after 2007 arose from a special problem with China, one of its biggest customers. Over the last decade about 40 percent of Russian arms exports went to China. That began to shrink as Russian manufacturers feuded 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 tried to work out licensing deals without much success.
Another factor in the sharp growth in arms exports was largely because, after 2001 global defense spending increased nearly 50 percent to over $1.4 trillion. That's about 2.5 percent of global GDP. After the Cold War ended in 1991, defense spending declined for a few years to under a trillion dollars a year. But by the end of the 1990s it was on the rise again. The region with the greatest growth has been the Middle East, where spending has increased 62 percent in the last decade. The region with the lowest growth (six percent) was Western Europe. The current recession may get global defense spending stalled at, or maybe even a little below, $1.4 trillion for a year or two. But the spending growth has resumed now that the recession is over in many parts of the world.