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...report entitled Conventional Arms Transfers Developing Nations, 1995-2002, published by the Congressional Research Service (CRS) on September 22, 2003 (CRS Report RL32084). This extract does not necessarily include all the charts and graphs, however, those included will retain their original chart or graphic number so that the reader can cross reference to the complete document. A complete electronic copy is available at http://www.fas.org/man/crs/Rl32547.pdf.]
Summary
This report is prepared annually to provide unclassified quantitative data on conventional arms transfers to developing nations by the United States and foreign countries for the preceding eight calendar years. Some general data are provided on worldwide conventional arms transfers, but the principal focus is the level of arms transfers by major weapons suppliers to nations in the developing world.
Developing nations continue to be the primary focus of foreign arms sales activity by weapons suppliers. During the years 1996-2003, the value of arms transfer agreements with developing nations comprised 63.9 percent of all such agreements worldwide. More recently, arms transfer agreements with developing nations constituted 60.4 percent of all such agreements globally from 2000-2003, and 53.6 percent of these agreements in 2003.
The value of all arms transfer agreements with developing nations in 2003 was over $13.7 billion. This was a substantial decrease over 2002, and the lowest total, in real terms, for the entire period from 1996-2003. In 2003, the value of all arms deliveries to developing nations was nearly $17 billion, the lowest total in deliveries values for the entire period from 1996-2003 (in constant 2003 dollars).
Recently, from 2000-2003, the United States and Russia have dominated the arms market in the developing world, with the United States ranking first and Russia second each of the last four years in the value of arms transfer agreements. From 2000-2003, the United States made $35.8 billion in arms transfer agreements with developing nations, in constant 2003 dollars, 46.8 percent of all such agreements. Russia, the second leading supplier during this period, made over $21 billion in arms transfer agreements, or 27.5 percent.
In 2003, the United States ranked first in arms transfer agreements with developing nations with over $6.2 billion or 45.4 percent of these agreements. Russia was second with $3.9 billion or 23.4 percent of such agreements. In 2003, the United States ranked first in the value of arms deliveries to developing nations at $6.3 billion, or 37.1 percent of all such deliveries. The United Kingdom ranked second at $4 billion or 23.5 percent of such deliveries. Russia ranked third at $3.3 billion or 19.4 percent of such deliveries.
During the 2000-2003 period, China ranked first among developing nations purchasers in the value of arms transfer agreements, concluding $9.3 billion in such agreements. The United Arab Emirates (U.A.E.) ranked second at $8.1 billion. Egypt ranked third at $6.8 billion. In 2003, Egypt ranked first in the value of arms transfer agreements among all developing nations weapons purchasers, concluding $1.8 billion in such agreements. China ranked second with $1.6 billion in such agreements. Malaysia ranked third with $1.5 billion.
Introduction
The data in the report illustrate how global patterns of conventional arms transfers have changed in the post-Cold War and post-Persian Gulf War years. Relationships between arms suppliers and recipients continue to evolve in response to changing political, military, and economic circumstances. Nonetheless, the developing world continues to be the primary focus of foreign arms sales activity by conventional weapons suppliers. During the period of this report, 1996-2003, conventional arms transfer agreements (which represent orders for future delivery) to developing nations have comprised 63.9 percent of the value of all international arms transfer agreements. The portion of agreements with developing countries constituted 60.4 percent of all agreements globally from 2000-2003. In 2003, arms transfer agreements with developing countries accounted for 53.6 percent of the value of all such agreements globally. Deliveries of conventional arms to developing nations, from 2000-2003, constituted 53.1 percent of all international arms deliveries. In 2003, arms deliveries to developing nations constituted 59.1 percent of the value of all such arms deliveries worldwide.
The data in this new report supersede all data published in previous editions. Since these new data for 1996-2003 reflect potentially significant updates to and revisions in the underlying databases utilized for this report, only the data in this most recent edition should be used. The data are expressed in U.S. dollars for the calendar years indicated, and adjusted for inflation. U.S. commercially licensed arms exports are incorporated in the main delivery data tables, and noted separately. Excluded are arms transfers by any supplier to subnational groups.
Calendar Year Data Used
All arms transfer and arms delivery data in this report are for the calendar year or calendar year period given. This applies to both U.S. and foreign data alike. U.S. government departments and agencies publish data on U.S. arms transfers and deliveries but generally use the United States fiscal year as the computational time period for these data. (A U.S. fiscal year covers the period from October 1 through September 30). As a consequence, there are likely to be distinct differences noted in those published totals using a fiscal year basis and those provided in this report which use a calendar year basis for its figures. Details on data used are outlined in footnotes at the bottom of Tables 1, 2, 8 and 9.
Constant 2003 Dollars
Throughout this report values of arms transfer agreements and values of arms deliveries for all suppliers are expressed in U.S. dollars. Values for any given year generally reflect the exchange rates that prevailed during that specific year. In many instances, the report converts these dollar amounts (current dollars) into constant 2003 dollars. Although this helps to eliminate the distorting effects of U.S. inflation to permit a more accurate comparison of various dollar levels over time, the effects of fluctuating exchange rates are not neutralized. The deflators used for the constant dollar calculations in this report are those provided by the U.S. Department of Defense and are set out at the bottom of Tables 1, 2, 8, and 9. Unless otherwise noted in the report, all dollar values are stated in constant terms. Because all regional data tables are composed of four-year aggregate dollar totals (1996-1999 and 2000-2003), they must be expressed in current dollar terms. Where tables rank leading arms suppliers to developing nations or leading developing nation recipients using four-year aggregate dollar totals, these values are expressed in current dollars.
Definition of Developing Nations and Regions
As used in this report, the developing nations category includes all countries except the United States, Russia, European nations, Canada, Japan, Australia, and New Zealand. A listing of countries located in the regions defined for the purpose of this analysis Asia, Near East, Latin America, and Africa is provided at the end of the report.
Arms Transfer Values
The values of arms transfer agreements or deliveries in this report refer to the total values of arms orders or deliveries as the case may be which include all categories of weapons and ammunition, military spare parts, military construction, military assistance and training programs, and all associated services.
Major Findings
General Trends in Arms Transfers Worldwide
The value of all arms transfer agreements worldwide to both developed and developing nations in 2003 was over $25.6 billion. This is a significant decrease in arms agreements values over 2002, and is the third consecutive year that total arms agreements have declined, Chart 1.
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In 2003, the United States led in arms transfer agreements worldwide, making agreements valued at over $14.5 billion, 56.7 percent of all such agreements, up from $13.6 billion in 2002. Russia ranked second with $4.3 billion in agreements 16.8 percent of these agreements globally, down from nearly $6 billion in 2002. Germany ranked third, its arms transfer agreements worldwide standing at $1.4 billion in 2003. The United States and Russia collectively made agreements in 2003 valued at over $18.8 billion, 73.5 percent of all international arms transfer agreements made by all suppliers, Figure 1.
For the period 2000 through 2003, the total value of all international arms transfer agreements about $126.9 billion was lower than the worldwide value during 1996 through 1999 $133.7 billion, a decrease of 5.1 percent. During the period 1996-1999, developing world nations accounted for 67.3 percent of the value of all arms transfer agreements made worldwide. During 2000-2003, developing world nations accounted for 60.4 percent of all arms transfer agreements made globally. In 2003, developing nations accounted for 53.6% of all arms transfer agreements made worldwide Figure 1.
In 2003, the United States ranked first in the value of all arms deliveries worldwide, making over $13.6 billion in such deliveries or 47.5 percent. This is the eighth year in a row that the United States has led in global arms deliveries, reflecting, in particular, implementation of arms transfer agreements made during and in the years immediately following the Persian Gulf War of 1990 through 1991. The United Kingdom ranked second in worldwide arms deliveries in 2003, making $4.7 billion in such deliveries. Russia ranked third in 2003, making $3.4 billion in such deliveries. These top three suppliers of arms in 2003 collectively delivered over $21.7 billion, 75.7 percent of all arms delivered worldwide by all suppliers in that year. Figure 2.
The value of all international arms deliveries in 2003 was $28.7 billion. This is a significant decrease in the total value of arms deliveries from the previous year, a fall of over $13.1 billion, and by far the lowest total for the eight years covered by this report. The total value of such arms deliveries worldwide in 2000-2003, $148.2 billion was a substantial decrease in the value of arms deliveries by all suppliers worldwide from 1996 through 1999, $196.3 billion, a fall of $48.1 billion. Illustrated in Figure 2 and Charts 7 and 8.
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Developing nations from 2000-2003 accounted for 53.1 percent of the value of all international arms deliveries. In the earlier period, 1996-1999, developing nations accounted for 66.9 percent of the value of all arms deliveries worldwide. In 2003, developing nations collectively accounted for 59.1 percent of the value of all international arms deliveries Figure 2.
The downturn in weapons orders worldwide since 2000 has been notable. Global arms agreement values have fallen from $41 billion in 2000 to $25.6 billion in 2003. Were it not for a few large military aircraft orders in 2003, the total for that year would have been substantially lower. It has been the practice of developed nations in recent years to seek to protect important elements of their national military industrial bases by limiting arms purchases from other developed nations. Instead they have placed greater emphasis on joint production of various weapons systems as a more effective way to preserve a domestic weapons production capability, while sharing costs of new weapons development. Some traditional weapons producers have been forced to consolidate sectors of their domestic defense industry in the face of intense foreign competition, while other supplying nations have chosen to manufacture items for niche arms markets where their specialized production capabilities provide them with important advantages in the evolving international arms marketplace.
The intensely competitive arms market of today has also led supplying states to emphasize sales efforts directed toward regions and nations where individual suppliers have had competitive advantages resulting from well established military support relationships with the prospective customers. In recent years, the potential has developed in Europe for arms sales to nations that have recently become members of North Atlantic Treaty Organization (NATO). Although there are inherent limitations on these potential sales due to the smaller defense budgets of several of these nations, creative seller financing options, as well as the use of co-assembly, co-production, and countertrade, to offset costs to purchasers, has resulted in some noteworthy contracts being signed. Most noteworthy in 2003 was a $3.5 billion sales agreement between the United States and Poland for the purchase of 48 F-16 C/D Block 52M fighter aircraft. Elsewhere within NATO, Germany in 2003 concluded a $1.7 billion agreement with Greece for 170 Leopard 2 Main Battle Tanks. It seems likely that competition will continue between the United States and other European countries or consortia over the prospective arms contracts within the European region in the years ahead. Such sales have the potential to compensate for lost contracts due to reduced demand for weapons from traditional clients in the developing world.
In recent years, numerous developing nations have reduced their weapons purchases primarily due to their lack of sufficient funds to pay for such weaponry. Even those prospective arms purchasers in the developing world with significant financial assets have exercised restraint and caution before embarking upon new and costly weapons procurement endeavors. The unsettled state of the global economy has influenced a number of developing nations to emphasize the upgrading of existing weapons systems in their inventories, rather than the purchase of newer ones. Given the substantial arms purchases made in the mid-1990s by a number of nations in the developing world, there has been a notable reduction in new arms agreements by these countries, since several of them are engaged in absorbing and integrating previously purchased weapons systems into their military force structures.
At present, there appears to be fewer large weapons purchases being made by developing nations in the Near East, while a relatively larger increase in purchases are being made by developing nations in Asia. Nonetheless, these apparent trends are subject to abrupt change based on the strength of either the international or regional economies. The health of the domestic economies in various nations in the developing world continue to be a very significant factor in their arms purchasing decisions.
Although some nations in Latin America, and, to a much lesser extent, in Africa, have shown interest in updating important sectors of their military force structures, many states in these regions also continue to be constrained by their limited financial resources. Limited seller- supplied credit and financing seems likely to continue to be a factor that inhibits the conclusion of major weapons deals in these regions of the developing world.
General Trends in Arms Transfers to Developing Nations
The value of all arms transfer agreements with developing nations in 2003 was $13.7 billion, a notable decrease over the $17.4 billion total in 2002. This was the lowest annual total, in real terms, during the eight-year period from 1996-2003. Chart 1, Figure 1. In 2003, the value of all arms deliveries to developing nations $17 billion was a clear decrease from the value of 2002 deliveries nearly $18.7 billion, and the lowest total of the last eight years, Charts 7 and 8, Figure 2.
Recently, from 2000-2003, the United States and Russia have dominated the arms market in the developing world, with the United States ranking first each of the last four years in the value of arms transfer agreements. From 2000-2003, the United States made over $35.8 billion in arms transfer agreements with developing nations, 46.8 percent of all such agreements. Russia, the second leading supplier during this period, made nearly $21.1 billion in arms transfer agreements or 27.5 percent. France, the third leading supplier,...
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