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Global military spending remains high at $1.7 trillion

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Total world military expenditure rose to $1739 billion in 2017, a marginal increase of 1.1 per cent in real terms from 2016, according to new figures from the Stockholm International Peace Research Institute (SIPRI). China’s military expenditure rose again in 2017, continuing an upward trend in spending that has lasted for more than two decades. Russia’s military spending fell for the first time since 1998, while spending by the United States remained constant for the second successive year. The comprehensive annual update of the SIPRI Military Expenditure Database is accessible from today at www.sipri.org.

‘Continuing high world military expenditure is a cause for serious concern,’ said Ambassador Jan Eliasson, Chair of the SIPRI Governing Board. ‘It undermines the search for peaceful solutions to conflicts around the world.’

After 13 consecutive years of increases from 1999 to 2011 and relatively unchanged spending from 2012 to 2016, total global military expenditure rose again in 2017.* Military spending in 2017 represented 2.2 per cent of global gross domestic product (GDP) or $230 per person. ‘The increases in world military expenditure in recent years have been largely due to the substantial growth in spending by countries in Asia and Oceania and the Middle East, such as China, India and Saudi Arabia,’ said Dr Nan Tian, Researcher with the SIPRI Arms and Military Expenditure (AMEX) programme. ‘At the global level, the weight of military spending is clearly shifting away from the Euro–Atlantic region.’

​​​​​​China leads continued spending increase in Asia and Oceania

Military expenditure in Asia and Oceania rose for the 29th successive year. China, the second largest spender globally, increased its military spending by 5.6 per cent to $228 billion in 2017. China’s spending as a share of world military expenditure has risen from 5.8 per cent in 2008 to 13 per cent in 2017. India spent $63.9 billion on its military in 2017, an increase of 5.5 per cent compared with 2016, while South Korea’s spending, at $39.2 billion, rose by 1.7 per cent between 2016 and 2017. ‘Tensions between China and many of its neighbours continue to drive the growth in military spending in Asia,’ said Siemon Wezeman, Senior Researcher with the SIPRI AMEX programme.

​​​​​​Spending falls sharply in Russia, but rises in Central and Western Europe

At $66.3 billion, Russia’s military spending in 2017 was 20 per cent lower than in 2016, the first annual decrease since 1998. ‘Military modernization remains a priority in Russia, but the military budget has been restricted by economic problems that the country has experienced since 2014,’ said Siemon Wezeman.

Driven, in part, by the perception of a growing threat from Russia, military spending in both Central and Western Europe increased in 2017, by 12 and 1.7 per cent, respectively. Many European states are members of the North Atlantic Treaty Organization (NATO) and, within that framework, have agreed to increase their military spending. Total military spending by all 29 NATO members was $900 billion in 2017, accounting for 52 per cent of world spending.

Higher spending by Saudi Arabia drives increase in the Middle East

Military expenditure in the Middle East rose by 6.2 per cent in 2017.** Spending by Saudi Arabia increased by 9.2 per cent in 2017 following a fall in 2016. With spending of $69.4 billion, Saudi Arabia had the third highest military expenditure in the world in 2017. Iran (19 per cent) and Iraq (22 per cent) also recorded significant increases in military spending in 2017. ‘Despite low oil prices, armed conflict and rivalries throughout the Middle East are driving the rise in military spending in the region,’ said Pieter Wezeman, Senior Researcher with the SIPRI AMEX programme. In 2017 military expenditure as a share of GDP (known as the ‘military burden’) was highest in the Middle East, at 5.2 per cent. No other region in the world allocated more than 1.8 per cent of GDP to military spending.

US spending no longer in decline

The United States continues to have the highest military expenditure in the world. In 2017 the USA spent more on its military than the next seven highest-spending countries combined. At $610 billion, US military spending was unchanged between 2016 and 2017. ‘The downward trend in US military spending that started in 2010 has come to an end,’ said Dr Aude Fleurant, Director of the SIPRI AMEX programme. ‘US military spending in 2018 is set to rise significantly to support increases in military personnel and the modernization of conventional and nuclear weapons.’

​​​​​​Other notable developments

  • China made the largest absolute increase in spending ($12 billion) in 2017 (in constant 2016 prices), while Russia made the largest decrease (–$13.9 billion).
  • Military expenditure in South America rose by 4.1 per cent in 2017, mainly as a result of notable increases by the two largest spenders in the subregion: Argentina (up by 15 per cent) and Brazil (up by 6.3 per cent).
  • Military spending in Central America and the Caribbean fell by 6.6 per cent in 2017, largely due to lower spending by Mexico (down by 8.1 per cent from 2016).
  • Military expenditure in Africa decreased by 0.5 per cent in 2017, the third consecutive annual decrease since the peak in spending in 2014. Algeria’s military spending fell for the first time in over a decade (down by 5.2 per cent from 2016).
  • Seven of the 10 countries with the highest military burden are in the Middle East: Oman (12 per cent of GDP), Saudi Arabia (10 per cent of GDP), Kuwait (5.8 per cent of GDP), Jordan (4.8 per cent of GDP), Israel (4.7 per cent of GDP), Lebanon (4.5 per cent of GDP) and Bahrain (4.1 per cent of GDP).

* Unless otherwise stated, all figures for spending in 2017 are given in 2017 current US dollars. All percentage changes are expressed in real terms (constant 2016 prices).

** For countries in the Middle East for which data is available.

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SCO: Potential and Challenges to Regional Integration

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The modern system of the world is facing the state of imbalance as it passes through the phase of change and evolutionary development. Globalization has emerged as a main trend in international relations and deepens the interdependency between countries of the world. The rapid increasing interdependency contributes for countries to get close one another and to protect their interests. The desire of extending economic and trade activities, access to capital market and the contracts for investment are encouraging countries to work together and to cooperate. The cooperation for economic activities, trade, transportation, information, communication and transmission are making the countries and regions unite.

Regionalization has emerged as a new form and process of interaction among the countries of the world. Many countries are striving to establish a system of cooperation with their neighbors to enhance their potential and also to facilitate each other for solution regional issues. Thereby, the regionalization has taken diverse form of regional integration including the establishment of multinational regulatory system and flexible model of cooperation and partnership in different areas and at different levels. The Shanghai Cooperation Organization (SCO)is an outstanding example of regionalization and hybrid and new mixed model of interstate multifaceted cooperation.

SCO established in 2001 to meet the objectives of regional security and stability. Since the establishment the organization continued evolutionary path of multifaceted and multilateral cooperation. It does not desire to achieve a specific target level of collaboration, but it move systematically along the path of finding the common attribute in resolving the regional issues. The SCO also has potential of unique perimeters, new opportunities and directions of further development in the areas of security, economics and other mutual interests. The organization comprises of 43 percent of world population and 25 percent of global GDP. Similarly, it covers 80 percent area of Eurasia. Although the Shanghai Cooperation Organization is a young organization than the other international associations but it has the ability to achieve mutually beneficial solution of political, economic and security issues and it also leads to accumulation of unresolved issues of the region. However, the size never conflates with influence and effectiveness. In fact, the SCO is also facing hamstring by major regional economies and powers with their own interests in the region and mistrust between member states.

The Shanghai Cooperation Organization is often stated as a club of autocrat powers. The members follow the principle of noninterference in the internal affairs of other states. However, China and Russia adhere this principle rhetorical basis but not in reality. Both the countries have history of interference and violence of neighboring countries. The member states rely on the principle to push back at Western and local civil society effort to promote responsible governance, human rights and democratic norms in the region. Since the formation, the organization holds a broad goal of fighting against terrorism, extremism and separation. Furthermore, the convention of the Shanghai Cooperation Organization invokes the principle of United Nation charter to help clock the organization’s founding document with international legitimacy identifying all three equal threats to state security, public order and the safety of citizen. The member states also have commitment to share information about terrorist activities and threats and to make request to act against individuals or organization. Subsequent declaration of the Shanghai Cooperation Organization and agreements of the member states have simply added to the list of principles and their responsibilities. Since the surveillance of new technology the member states moved beyond the simple method of information exchange to best practice of monitoring and tackling.

On the other hand, the Shanghai Cooperation Organization has had very little achievements to strength domestic security despite the convergence of member states. The RATS (Regional Anti-Terrorism Structure) based in Tashkent Uzbekistan has been coordinating to combat these three evils Terrorism, Extremism, Separation). The RATS provides a platform and services to member states particularly Central Asian States of Kyrgyzstan and Tajikistan for sharing intelligence but it made very little progress. Furthermore the RATS shares intelligence with member states but the terrorist threats are increasing.

Since the SCO framed, the high hopes of diplomatic relations, effective economic and security cooperation were made by the founding members. It was also expected that the organization may bring regional cohesion to Central Asia and it would create great opportunities for the regional states of mutual trade and economic activities, and it will lead towards security promotion of the region. The founding partners of the SCO had ambitious plan for the transforming the organization in to a cohesive bloc with political and economic integration. There was also a hope that the organization may counter influence of EAEU and CSTO and will maintain its own influence in the region. But Russia wanted to dilute Chinese influence within the organization by advocating its expansion in to south Asia and other neighboring states.The SCO has organized many joint military exercises and efforts but could get any significant level of achievements because they were symbolic and political moves. To encounter any kind of security crisis and military operation in the region, there is a need of political logistical and operational system. For example during the unrest in Kyrgyzstan in 2010, the organization delivered an anodyne statement for peace; security and stability, additionally, China and Russia were hesitating to get involved. While, the other states and powers tried to play their role to tackle the crisis.

China and Russia are the primary drivers of the Shanghai Cooperation Organization but have different visions for this organization. Although they share common interest of regional stability within the organization but at the same time their geopolitical interests pull them in different directions. These differences are a big question mark, how the organization would achieve their objective and would evolve?  Russia thinks of SCO as a security to prevent encroachment by outside powers NATO, UE and United States, and also a tool to maintain its geopolitical domination on the region and less than a partnership in Central Asia.

 Since the post-cold war, the economic imbalance has increased between China and Russia. China is increasing its economic influence in Central Asia while Russia is worrying about its security issues. Moscow hopes that the Pakistan and Indian including in Shanghai Cooperation Organization may bind Beijing to more work for the security and stability of the region than to enhance its own economic influence in the region. As the issues of uncertainty in Afghanistan, Pakistan-India confrontation and instability on China-India border are a clear threat to the interests of all member states. China is also suspected about the Russian ability to act as the security manager in an area where china has invested and is investing billions of dollars. On the other hand, Beijing may not be able rely on extra regional powers to secure and prevent Central Asia from the security deteriorated environment. However, SCO has not made any mechanism or approach to play a decisive security role in Afghanistan post withdrawal United States and NATO force.

China thinks that economic activities and investment can mitigate instability. Shanghai Cooperation Organization also a tool to promote Chinese soft power and economic influence in Central Asia. Therefore, Beijing has been continued its investment in the region and through OBOR and SCO. Although the Central Asian States are receptive to these Chinese overture but they are also keen to prevent SCO to become an anti-western bloc because the states feel the need of Western powers to counterbalance their powerful neighbors. Moscow already has upended its relationship with West over the Ukraine issue, thus, in these circumstances; Russia has no other choice to acquiesce Chinese increasing economic influence in the region. Moscow may pull itself from the Chinese efforts to multiply its security role in the region. The current clash on border between China-India put Russia in to awkward position. Russia does not like tension between China and India but it suggests dialogues and appears to have little interest mediating. Russia never wanted that China convert SCO in to an economic and trade bloc while China never wanted that Russia transform the organization into a military alliance. It is hard to imagine that Shanghai Cooperation Organization may be able to deliver its original goals eradicate extremism, terrorism and separation through mutual cooperation because it appears with the major focus on economic integration across the Eurasian region.

Now the Shanghai Cooperation Organization is coexisting with other regional initiatives like OBOR, AIIB, CSTO and EAEU. Both China and Russia have expressed their intentions to work within these institutions.     Since the formation, the SCO is facing many structural and organizational challenges. All members have their own interests and values of independence and sovereignty, which are difficult to reconcile with collective security particular Pakistan and India, China and India have mutual mistrust and all Central States also have territorial issues with one another.  

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Possibility of an alliance in Sino-Russian Relations

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The defense ministers’ meeting of NATO member states was held in video format a few days ago (17/2/2021). During the period, the discussion focused on the topic of “China-Russia threat” and believed that a “global approach” should be adopted to curb China-Russia expansion.” At the same time, this meeting also attracted widespread attention from outsiders.

Senior Russian researcher, Vasily Kashin published an article in which he emphasized that when there is a risk of military conflict with the United States, China and Russia should immediately form a military alliance. And share the missile early warning data collected by themselves.

According to the article, Sino-Russian military technology cooperation has always been quite secretive, and because Russian companies have participated in the development of China’s ballistic missile early warning system, China and Russia are fully able to establish data sharing on this basis and establish their own global Missile defense network. Russian media subsequently reported on it and said that Russia has repeatedly proposed the formation of a Sino-Russian military alliance, and even President Putin himself has conveyed the idea of ​​an alliance with China.

It should be noted that the containment and suppression of China and Russia by Western countries do not stop there. To provoke the territorial sovereignty of China and Russia, US aircraft and warships have already on the doorstep of China and Russia, carrying out under the banner of freedom of navigation (FON).

Intensive reconnaissance activities, this behavior has seriously threatened the national security of China and Russia but also undermined global peace and stability. To build a global encirclement of China, the United States is also actively wooing other countries to join its anti-China front in an attempt to reorganize the eight-nation coalition forces to contain China.

It can be said that Western countries are pressing on with China and Russia step by step. As the US continues to escalate its suppression, the security situation around China and Russia will deteriorate again in the future, and the two sides may even break out head-on conflict.

Faced with the complex situation in the Indo-Pacific, China and Russia also need to strengthen cooperation in the field of national defense. After all, the two countries are originally a comprehensive strategic partnership of cooperation in the new era. In recent years, the strategic mutual trust between the two sides has been deepening and several rounds of military exercises have been jointly conducted.

Therefore, the opinions of Russian experts are in line with the future development trend of Sino-Russian relations. As a friendly country, Sino-Russian relations will only continue to develop for the better, and the possibility of China and Russia forming a military alliance in the future is not ruled out. The Chinese people also have extremely high expectations for the future direction of Sino-Russian relations. Chinese Foreign Minister Wang Yi once stated that Sino-Russian cooperation “has no end, no restricted zone, and no upper limit” (2/1/2020).

Foreign media believe that this means China’s non-aligned position or non-alignment Applying the Sino-Russian relationship again means that Wang Yi recognized the possibility of China and Russia forming a military alliance. Both China and Russia are peace-loving world powers and have always been committed to maintaining the peace and stability of the regional situation.

Therefore, even if a military alliance is concluded in the future, they will never follow a hegemonic line. In the final analysis, how China and Russia cooperate depends on changes in the international situation. Instead of worrying about the “threat” brought by the rise of China and Russia, Western countries should stop deteriorating the regional situation and work with China and Russia to maintain world peace and stability. Otherwise, this “heart disease” will never be eliminated.

It is worth noting that the Western countries, led by the United States, have a very playful attitude towards Sino-Russian cooperation. They have been using various means to sow discord between China and Russia in an attempt to prevent the establishment of a Sino-Russian military alliance.

However, the continuous deepening of cooperation between China and Russia is a historical development. The inevitable result of this is that no matter how obstructed by Western countries, Sino-Russian relations will continue to develop for the better, without any interference from external forces.

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The world arms sales market

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New data from SIPRI’s Arms Industry Database, released last December, show that arms sales by the world’s twenty-five largest defence equipment and military services companies totalled 361 billion dollars in 2019. This is an 8.5% increase in real terms in arms sales compared to 2018. All this emerged from the studies by the Stockholm-based International Peace Research Institute founded in 1966.

In 2019 the top five arms companies were all based in the United States: Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics. These five companies together recorded 166 billion dollars in annual sales. In total, twelve U.S. companies rank among the top 25 for 2019, accounting for 61% of total sales.

For the first time, a Middle East company appears in the top twenty-five. Edge, based in the United Arab Emirates, was established in 2019 from the merger of over twenty-five smaller companies. It ranks twenty-second and accounts for 1.3% of the total arms sales of the top twenty-five companies. This demonstrates that oil revenues in the Near and Middle East are also invested in businesses that produce jobs and money, and are not just accumulated for the personal expenses of the ruling elite. Edge is an example of how high domestic demand for military products and services, combined with the desire to become less dependent on foreign suppliers, is driving the growth of arms companies in the Near and Middle East.

Another newcomer to the top twenty-five list in 2019 was L3Harris Technologies (ranking tenth). It was created by the merger of two U.S. companies that were both in the top twenty-five in 2018, namely Harris Corporation and L3 Technologies.

The top twenty-five list also includes four Chinese companies. Three of them are in the top ten: Aviation Industry Corporation of China (AVIC, ranking sixth), China Electronics Technology Group Corporation (CETC, ranking eighth) and China North Industries Group Corporation (Norinco, ranking ninth).

The combined revenue of the four Chinese companies in the top 25 list, which also includes China South Industries Group Corporation (CSGC, ranking twenty-fourth), grew by 4.8% between 2018 and 2019. Chinese arms companies are benefiting from the People’s Liberation Army’s military modernisation programmes.

Conversely, the revenues of the two Russian companies in the top twenty-five, namely Almaz-Antey and United Shipbuilding, declined between 2018 and 2019, for a combined total amount of 634 million dollars. A third Russian company, United Aircraft, lost 1.3 billion dollars in sales and dropped off the top 25 list in 2019. Domestic competition and reduced government spending on modernising the Russian Navy were two of the main challenges for United Shipbuilding in 2019.

After the United States, the People’s Republic of China recorded the second largest share of 2019 arms sales by the top twenty-five companies, accounting for 16%.

The six Western European companies together account for 18%. The two Russian companies in the ranking account for 3.9%. Nineteen of the top twenty-five arms companies increased arms sales in 2019 compared to 2018. The largest absolute increase in arms sales revenue was recorded by Lockheed Martin: 5.1 billion dollars (11% in real terms). The largest percentage increase in annual arms sales (105%) was reported by French manufacturer Dassault Aviation Group. A strong increase in export deliveries of Rafale fighter aircraft pushed Dassault Aviation into the top 25 arms companies for the first time.

The Sipri report also examines the international presence of the 15 largest arms companies in 2019. These companies are present in a total of 49 countries, through majority-owned subsidiaries, joint ventures and research facilities. With a global presence in 24 countries each, Thales and Airbus are the two most internationalised companies, followed closely by Boeing (21 countries), Leonardo (21 countries) and Lockheed Martin (19 countries).

The United Kingdom, Australia, the United States, Canada and Germany host the largest number of these companies.

Outside the North American and Western European arms industries, the largest number of foreign corporate entities is hosted by Australia (38), Saudi Arabia (24), India (13), Singapore (11), United Arab Emirates (11) and Brazil (10).

There are many reasons why arms companies might want to establish themselves abroad, including better access to growing markets, collaborative arms programmes or policies in host countries that link arms purchases to technology transfers.

Of the 49 countries hosting foreign industries in the top 15 arms companies, seventeen countries are low- and middle-income ones. Southern countries seeking to restart their arms production programmes have welcomed foreign arms companies as a means for benefiting from technology transfers.

Chinese and Russian arms companies in the top 15 list have only a limited international presence. Sanctions against Russian companies and government limits on takeovers by Chinese companies seem to have played a role in limiting their global presence.

All these data were collected by the Sipri Arms Industry Database founded in 1989. At that time, it excluded data for companies in Eastern European socialist countries, including the Soviet Union. The updated version contains 2015 data, including data for companies in the People’s Republic of China and the Russian Federation. An archive of the first one hundred data sets for the period 2002-2018 is available on the Sipri website (www.sipri.org), while for the first twenty-five ones it has been updated with the latest available information.

Arms sales are defined as sales of military goods and services to military customers at national and international levels. Unless otherwise stated, all changes are expressed in real terms. Comparisons (e.g. between 2018 and 2019 or between 2015 and 2019) are based on the groups of companies listed in the respective year (i.e. the comparison is between different groups of companies).

For 2020-2021, Sipri is releasing its dataset on arms sales of the world’s largest companies along with the results of a mapping on the internationalisation of this industry. For this reason, a new dataset was created, including 400 subsidiaries, joint ventures and research facilities linked to the top fifteen arms companies in 2019. Data sources included corporate investment documents, information on company websites, public records and newspaper and magazine articles.

To be included in the mapping, an arms industry must have been active for the majority of its fiscal year, as well as be located in a country other than that in which its parent company is headquartered and also (i) produce military goods or provide military services to military customers; (ii) produce or provide services for dual-use goods to military customers.

This is the first of the key data handovers in view of the publication of the next Sipri Yearbook in mid-2021. Before that, Sipri will release its data on international arms transfers (details of all major international arms transfers in 2020), as well as its data on global military expenditure (comprehensive information on global, regional and national trends in military expenditure). We will inform readers of all this in due course.

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