{"id":29840,"date":"2022-06-08T00:18:00","date_gmt":"2022-06-08T00:18:00","guid":{"rendered":"https:\/\/www.lifeandnews.com\/articles\/?p=29840"},"modified":"2022-06-09T15:57:28","modified_gmt":"2022-06-09T15:57:28","slug":"global-arms-industry-getting-shakeup-by-war-in-ukraine-and-china-and-us-look-like-winners-from-russias-stumbles","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/global-arms-industry-getting-shakeup-by-war-in-ukraine-and-china-and-us-look-like-winners-from-russias-stumbles\/","title":{"rendered":"Global arms industry getting shakeup by war in Ukraine \u2013 and China and US look like winners from Russia\u2019s stumbles"},"content":{"rendered":"\n

Terrence Guay<\/a>, Penn State<\/a><\/em><\/p>\n\n\n\n

Russia\u2019s war in Ukraine is upending the global arms industry.<\/p>\n\n\n\n

As the U.S. and its allies pour significant sums of money<\/a> into arming Ukraine and Russia bleeds tanks and personnel<\/a>, countries across the world are rethinking defense budgets<\/a>, materiel needs and military relationships. Countries that historically have had low levels of defense spending such as Japan<\/a> and Germany<\/a> are bulking up, while nations that purchase most of their weapons from Russia are questioning their reliability and future delivery.<\/p>\n\n\n\n

My research<\/a> in this area suggests that, however this war eventually ends, the repercussions for the global defense industry, and for the countries whose companies dominate this sector, will be enormous. Here are four takeaways.<\/p>\n\n\n\n

1. Russia will be the biggest loser<\/h2>\n\n\n\n

Russia\u2019s general sales pitch<\/a> for its weapons has been they\u2019re \u201ccheaper and easier to maintain than Western alternatives.\u201d This is why Russia accounted for 19% of the world\u2019s arms exports<\/a> from 2017 to 2021, second only to the U.S., which had 39% of the market.<\/p>\n\n\n\n

However, this pitch may no longer be effective for many countries that have seen Russian equipment<\/a> losses and failures in Ukraine.<\/p>\n\n\n\n

To date, the U.S. estimates Russia has lost<\/a> almost a thousand tanks, at least 50 helicopters, 36 fighter-bombers and 350 artillery pieces, according to Business Insider. Thousands of Russian soldiers have been killed, with estimates ranging from about 15,000<\/a> to as high as 30,000<\/a>, and Russia is still unable to control Ukraine\u2019s airspace.<\/p>\n\n\n\n

The situation has become so dire that there are reports<\/a> that commanders are trying to preserve equipment by forbidding troops from using them to evacuate wounded soldiers or to support units that have advanced too far.<\/p>\n\n\n\n

Russia\u2019s offensive weapons have also proved disappointing. Its missile failure rate<\/a> \u2013 the share that either failed to launch, malfunctioned mid-flight or missed their target \u2013 may be as high as 50% to 60% due to design flaws<\/a> and outdated or inferior equipment.<\/p>\n\n\n\n

These problems, along with the Russian military\u2019s slow progress achieving any of President Vladimir Putin\u2019s stated objectives<\/a>, have raised serious doubts<\/a> among the country\u2019s traditional customers for weapons exports. Russia sells almost 90% of its weapons to just 10 countries<\/a>, including India, Egypt and China.<\/p>\n\n\n\n

What\u2019s more, Russia\u2019s ability to replace these equipment losses has been hampered by economic sanctions<\/a>, which bars key foreign components like circuit boards. And Russia will almost certainly need to replace its own military hardware before it exports anything abroad.<\/p>\n\n\n\n

That means that even countries that want to keep buying Russian tanks and fighter jets will have to wait in line or turn elsewhere to fulfill their defense needs.<\/p>\n\n\n\n

2. Russia\u2019s loss is China\u2019s gain<\/h2>\n\n\n\n

The country that will likely see the greatest gains from Russia\u2019s displacement as a major arms supplier is China.<\/p>\n\n\n\n

In recent years, the country has taken a 4.6% share<\/a> of the global arms trade, putting it in fourth place behind France\u2019s 11%. At the same time, seven of the top 20 global defense companies<\/a> in terms of revenues earned from defense sales are Chinese, signaling the sector\u2019s big ambitions.<\/p>\n\n\n\n

Currently, the Chinese government buys most of its weapons and vehicles from these domestic arms makers, but China has the capacity to export more military products abroad.<\/p>\n\n\n\n

For example, China is already the world\u2019s largest shipbuilder<\/a>, so exporting more naval ships<\/a> is a natural next step. The country is expanding<\/a> its niche role in drone technology and attempting to leverage modernizing its air force with domestically built aircraft to increase exports.<\/p>\n\n\n\n

At the moment, only three of the world\u2019s 40 biggest arms importers<\/a> \u2013 Pakistan, Bangladesh and Myanmar \u2013 buy a majority of their weapons from China. That could change if China takes advantage of Russian weakness to position itself as a reliable national security, economic and political partner \u2013 a core feature of its Belt and Road Initiative<\/a>.<\/p>\n\n\n\n

China is not capable of supplanting U.S. and European weapons, which are considered \u201ctop shelf\u201d<\/a> because of their high quality and price. But China may well fill the market niche that Russian arms makers dominated, thereby increasing Beijing\u2019s role as a major weapons exporter \u2013 and gaining the political and economic benefits<\/a> that accompany that.<\/p>\n\n\n\n

One of China\u2019s biggest challenges<\/a> will involve proving that its weapons work well in live combat situations.<\/p>\n\n\n\n

\"a
The U.S. has given Ukraine a third of its Javelin anti-tank missiles. Ukrainian Defense Ministry Press Service via AP<\/a><\/figcaption><\/figure>\n\n\n\n

3. American arms makers will also be big winners<\/h2>\n\n\n\n

U.S. weapons manufactures dominate the global arms industry. The Ukraine war will likely ensure this stays that way for some time.<\/p>\n\n\n\n

The world\u2019s five largest arms companies<\/a> are all American: Lockheed Martin, Raytheon, Boeing, Northrop Grumman and General Dynamics. In fact, half of the top 100 producers of arms are based in the U.S. Twenty are European. Only two are Russian \u2013 despite the country being the world\u2019s second-largest source of arms<\/a>.<\/p>\n\n\n\n

The massive amounts of weapons being transferred from the U.S. to Ukraine will keep American arms makers busy for some time to come. For example, the U.S. has transferred about one-third of its stock of Javelin anti-tank missiles<\/a> to Ukraine, and it will take three to four years for the Raytheon-Lockheed Martin joint venture to replace them. The US$40 billion aid package recently signed<\/a> by President Joe Biden includes $8.7 billion to replenish U.S. weapons stocks<\/a>.<\/p>\n\n\n\n

The companies\u2019 soaring stock prices are a sign investors believe profitable days are ahead. Lockheed Martin\u2019s stock price is up over 12%<\/a> since the invasion began \u2013 with most of the gains occurring in its immediate aftermath. Northrop Grumman has jumped 20%<\/a>. At the same time, the broader stock market as measured by the S&P 500<\/a> has slumped about 4%.<\/p>\n\n\n\n

4. More countries will become arms makers<\/h2>\n\n\n\n

The flipside to this is that some countries that relied on others for their defense needs may seek to become more self-sufficient.<\/p>\n\n\n\n

India, which relied on Russia for almost half<\/a> of its weapons imports in recent years, is realizing<\/a> that Russia will need most or all of its production capacity to replace tanks, missiles, aircraft and other weapons used or lost in Ukraine, with less leftover for export.<\/p>\n\n\n\n

That means India will need to either source spare parts for vehicles and weapons from other former Russia arms customers such as Bulgaria, Georgia and Poland, or build up its own defense industry. In April, India announced<\/a> it would ramp up production of helicopters, tank engines, missiles and early airborne warning systems to offset any potential reduction in Russian exports.<\/p>\n\n\n\n

Concerns about Russian reliability<\/a> are also growing. In May, India canceled<\/a> a $520 million helicopter deal with Russia. While there are reports U.S. pressure played a role<\/a>, it also seems to be part of the government\u2019s strategy over the past few years to build its own domestic defense industrial base.<\/p>\n\n\n\n

Brazil<\/a>, Turkey<\/a> and other emerging market countries<\/a> have also been developing their own defense industries over the past two decades to reduce their reliance on arms imports. The Ukraine war will accelerate this process.<\/p>\n\n\n\n

Putin likely didn\u2019t expect to shake up the global arms market with his effort to annex Ukraine \u2013 or cause the decline of his country\u2019s weapons sector. But that\u2019s just one more way his war is causing a geopolitical earthquake.<\/p>\n\n\n\n

This article has been updated to correct the size of the canceled Indian helicopter deal.<\/em><\/p>\n\n\n\n

Terrence Guay<\/a>, Clinical Professor of International Business and Director, Center for Global Business Studies, Penn State<\/a><\/em><\/p>\n\n\n\n

This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Terrence Guay, Penn State Russia\u2019s war in Ukraine is upending the global arms industry. As the U.S. and its allies pour significant sums of money into arming Ukraine and Russia bleeds tanks and personnel, countries across the world are rethinking defense budgets, materiel needs and military relationships. Countries that historically have had low levels of […]<\/p>\n","protected":false},"author":44,"featured_media":29841,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[277],"tags":[11942,145,11940,2501,11939,11941,234,11192,949,11411,2011,11943],"_links":{"self":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/29840"}],"collection":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/comments?post=29840"}],"version-history":[{"count":2,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/29840\/revisions"}],"predecessor-version":[{"id":29843,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/29840\/revisions\/29843"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media\/29841"}],"wp:attachment":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media?parent=29840"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/categories?post=29840"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/tags?post=29840"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}