Category Archives: Arms trade

Israel’s Weapons Sales to Europe Double Amid Refugee Crisis

Israel’s Weapons Sales to Europe Double Amid Refugee Crisis

Overall, Israel signed contracts worth $5.7 billion in sales of weapons and military technology; Official data shows a drop in sales to African nations, Asia and Latin America, and a rise in sales to Europe and the U.S.

Gili Cohen
Apr 06, 2016 11:00 PM

Israel in 2015 signed contracts worth $5.7 billion in sales of weapons and military technology – an increase of about $100 million over the previous year, Defense Ministry figures published on Wednesday show.

Sales to Europe more than doubled since 2014, reaching $1.6 billion, compared to $724 million the previous year. Most of 2015’s deals included aircraft upgrades, ammunition and unmanned aircraft sales.

Ministry data showed a drop in sales to African nations, Asia and Latin America, and a rise in sales to Europe and the U.S., in comparison to 2014. The apparent reason is the refugee crisis in Europe and the rise of terrorism on the continent.

The Defense Ministry said 2015 was “another challenging year for security industries around the world” and saw the effects of falling oil prices and the fall of currency values. According to the ministry’s military aid branch, which seeks to increase Israeli weapons exports, the number of deals is expected to remain stable in the coming year.

“The military industries have succeeded, via a series of actions, joint work and determination all over the world, to restore stability to the Israeli military exports market,” branch head Brigadier-General (res.) Mishel Ben Baruch said.

After three years of consistent rises in weapons deals with African nations, 2015 saw a drop of almost 50% in new contracts signed for the sale of Israeli defense products to African countries.

The extent of deals with African nations stood at $163 million that year, compared to $318 million in 2014 and $223 million in 2013.

African nations represent a small portion of Israeli defense exports. Similarly to other years, most of the weapons were sold to Asia and the Pacific. But there was also a drop in defense sales to Asian countries in 2015. In 2014, contracts signed with Asia totaled close to $3 billion, compared to $2.3 billion in the past year.

The Defense Ministry doesn’t detail weapons deals signed with foreign agents or bodies, or their costs, nor does it provide details on the identities of who purchases Israeli weapons or technology. In the United States, however, official deals done via the site of the Defense Security Cooperation Agency (DSCA) are reported.

“There is an extreme lack of transparency in the data, especially which countries are purchasing,” Meretz lawmaker Tamar Zandberg told Haaretz. “And the data, time after time, conceal shady undemocratic and not peace loving countries – despotic regimes using the weapons and technology to control or otherwise operate against civilians.

“Each time we see that Israel is unfortunately on the wrong side of history in these matters, and the most current example is South Sudan. Israel is still apparently selling monitoring equipment and various control mechanisms being used against civilians,” she said.

According to Defense Ministry data, some 15 percent of deals signed in 2015 focused on improving aircraft or aerial systems and there’s a similar figure for the sales of ammunition and gun positions. Twelve percent of the deals have to do with radar sales, and 11 percent in sales of unmanned weapons.

The Defense Ministry takes pride that Israel is “among the leading 10 defense exporters in the world,” Brigadier-General Ben Baruch said.

UK approved £7m Israeli arms sales in six months before Gaza conflict – Weapons were of kind ‘likely to have been used against the people of Gaza’

Exclusive: UK approved £7m Israeli arms sales in six months before Gaza conflict – Weapons were of kind ‘likely to have been used against the people of Gaza’

Cahal Milmo
The Independent, Sunday, 23 November 2014

Britain approved the sale of arms to Israel worth £7m in the six months before its offensive on Gaza this summer, including components for drones, combat aircraft and helicopters along with spare parts for sniper rifles, according to figures seen by The Independent.

The government data will raise fresh concerns that British-made equipment was used by the Israeli military during Operation Protective Edge in Gaza in July and August, which led to more than 2,000 Palestinian deaths and 73 Israeli fatalities, 66 of them soldiers.

The Independent can reveal that ministers in the Department for Business Innovation and Skills (BIS) have also ordered a fresh review of military export licences to Israel granted prior to the outbreak of the conflict after officials found 12 instances where arms containing British components may have been used in Gaza by the Israeli Defence Forces (IDF).

The refusal of the Government to suspend these licences caused a split in the Coalition and led to the resignation of Foreign Office minister Baroness Warsi, who described Britain’s stance during the Israeli land and air assault as “morally indefensible”.

Official figures declared to the Campaign Against Arms Trade (CAAT) show that Britain granted 68 export licences for £6.96m of military-use items to be sent to Israel between January and the end of June this year. In pictures: Israel-Gaza conflict

The licences covered a broad range of weaponry, including parts for drones and combat jets as well as military radar components and £600,000 of “high-power RF weapon systems”, in effect energy ray weapons which can be used for purposes from air defence to disabling cars.

The licences also included armour plating, anti-armour ammunition, electronic warfare components, sniper rifle parts and technology for weapons sights. One licence for an unspecified amount of small arms ammunition was refused on grounds of “risk of diversion or re-export to undesirable end-users”.

Some of the weaponry covers designations, such as military radar and fast jet components, which have already been named among the 12 licences identified by BIS officials as having been potentially put to use during Operation Protective Edge, which was launched to counter Hamas rocket attacks but condemned for its high civilian death toll.

The Independent revealed during the conflict that Britain had granted export licences to Israel worth £42m to 131 British defence manufacturers since 2010.

They included two companies identified as supplying components for the IDF’s Hermes drone, which military experts said had been used in the Gaza offensive.

Campaigners said the fresh evidence of significant weaponry sales increased the pressure for a fundamental change of Government policy towards military exports to Israel.

Andrew Smith, of CAAT, said: “The new data shows that right up until the eve of the bombing the UK was supporting licences for the same kinds of weapons that Vince Cable’s own review found are likely to have been used against the people of Gaza.

“Unfortunately it would not have been the first time UK weapons were used by Israel. The public was rightly shocked by this summer’s bombardment. That is why the UK must announce an embargo on all arms sales to Israel and an end to military collaboration.”

Labour MP Katy Clark said: “It is now abundantly clear that not only did the UK refuse to condemn Israeli military action throughout Operation Protective Edge but that it actively allowed UK companies to arm the IDF throughout the conflict.”

The new review of licences was ordered after campaigners last month begin proceedings in the High Court to challenge the Government’s decision not to suspend the 12 licences after Downing Street insisted Israel had a “legitimate right to self-defence”.

BIS said last night that it wanted to consider “new information” concerning the issue but insisted its earlier review had established that the “vast majority” of approved licences were not for items that could be used by the IDF in Gaza.

In a statement, the department said: “To ensure that new information is taken into account, and in light of the fact that a ceasefire has been in place for more than two months, Ministers decided earlier this month to carry out a further review of extant licences for Israel – the results will be published in due course.”

Officials highlighted the treatment of one export case as evidence of Britain’s “robust” export control regime after the BIS data showed that a licence had been granted in March to send a water cannon from the UK to Israel.

BIS said that the riot control vehicle was in fact being sent by an Israeli manufacturer to the central African state of Burundi via Britain and was turned back by UK officials. The licence was to authorise the return of the water cannon to Israel.

Britain’s arms sales to Israel – January to June 2014

:: Combat aircraft components  – £306,802

:: Drones or UAV components – £93,497 (incl £79,607 to be incorporated for re-export)

:: Electronic warfare components – £1,491,372

:: Targeting equipment components – £977,949 (incl £98,529 to be incorporated for re-export)

:: Military radar components – £49,709

:: Imaging cameras and weapon night sights  – £1,491,372

:: Anti-armour ammunition – £8,600

:: Sniper rifle components – £13,202

:: High-power RF weapons system – £600,000

Germany Redoubles Support for Israel

Germany Redoubles Support for Israel

Feb. 24, 2014 –  

TEL AVIV — Germany is redoubling its already considerable security assistance to Israel with last week’s approval of a discounted submarine deal and a recently delivered cost-free Patriot loaner air defense radar.

A senior German government official told the Associated Press Nov. 30 that the Cabinet of Chancellor Angela Merkel approved a longstanding Israeli request for an additional Dolphin submarine, Israel’s sixth, and has earmarked €135 million (US $180 million) to subsidize about a third of its cost.

Spokesmen from the German MoD and the German Economics Ministry could not confirm the report when contacted Dec. 1, but Defense News has learned that the director-general of Israel’s MoD, retired Maj. Gen. Udi Shani, plans to visit Germany early this week to sign a memorandum of understanding (MoU) for Israel’s sixth Dolphin-class submarine.

Israeli sources here declined to discuss details of the prospective deal, yet noted that costs for the sixth submarine would exceed €600 million.

The German subsidy would cover about a third of the costs to construct the hull at Howaldtswerke-Deutsche Werft (HDW), the Kiel, Germany-based shipbuilding division of Thyssen-Krupp Marine Systems (TKMS). Remaining costs would be covered by Israeli national funds and US Offshore Procurement, meaning the portion of US military aid that is converted into Israeli shekels for development, production and integration of indigenous combat systems.

The subsidized submarine deal is a follow-on option to a 2005 agreement under which Germany underwrote about a third of the cost of two new air-independent propulsion (AIP) Dolphins. Those two submarines – Dolphin 4 and Dolphin 5 in Israel’s planned six-submarine Dolphin fleet – are still undergoing construction in Kiel. They are slated to be delivered in 2013 and 2014 respectively.

Once delivered, they will join three diesel electric Dolphins operational since 2001; two of them fully funded by Germany and the third of which was funded jointly by the two countries.

“Israel is enormously appreciative of Germany’s support for our underwater defense capabilities. But it’s not just a one-way street … This subsidy, like previous ones, goes directly to the shipyard and serves to support Germany’s industrial base,” a senior Israeli defense official said.

Defense and industry sources say it will take about seven years to ready the sixth Dolphin for deployment.

Free Loaner Radar

In another manifestation of expanding German-Israeli defense ties, the Israel Air Force (IAF) recently took delivery of a German Patriot radar provided as a cost-free loaner during the three or four years it takes Israel to retrofit its own inventory of AN/MPG-53 radars in the United States.

German, US and Israeli sources confirmed the trilateral cooperation, aimed at filling potential gaps in Israeli air defense coverage while IAF Patriot PAC-2 air defense radars are being serviced at the US Army’s Letterkenny Depot in Pennsylvania.

The loaner radar provided by the German Bundeswehr arrived here in-late October, shortly before the first of three Israeli Patriot radar sets was shipped to the United States for servicing. The German delivery marks an expansion of strategic cooperation with Israel, which received two full-up Patriot PAC-2 batteries from Luftwaffe stocks in 2003 in the run-up to the US-led coalition war in Iraq.

Sources say each radar will take about a year to replace aging components, extend service life, and improve its ability to interoperate with US European Command’s Patriot batteries that participate in biannual US-Israel exercises and could be rushed here for emergency deployment during wartime.

The entire upgrade program is estimated at $15 million and will be funded through annual US Foreign Military Financing (FMF) assistance to Israel. Israeli and German officials confirmed that the German loaner radar would remain here until the upgrade program is complete and all Israeli radars are redeployed and integrated with other elements of the IAF’s Air Defense Force.

“Germany has contributed to the Air Defence System of Israel since 2003 with the loan of two Patriot systems. Additional components are temporarily on loan to maintain the operational capability of the systems,” Lt. Col. Holger Neumann, a German MoD spokesman, told Defense News.

An IAF officer emphasized that the recently launched Patriot radar upgrade is more logistical in nature and is not aimed at converting Israel’s PAC-2 air defense force to the PAC-3 ballistic missile intercepting configuration at this time.

Separating Politics From Security

The prospective submarine deal and the German loaner radar come amid unusually public tension between Merkel and Israeli Prime Minister Benjamin Netanyahu over deadlocked peace talks with the Palestine Authority.

Since Merkel’s visit here in late January, the German chancellor has repeatedly and publicly prodded Netanyahu to move more decisively toward a Palestinian peace deal and to refrain from additional construction in disputed East Jerusalem and the West Bank. Such urgings became more acute over the summer and early autumn, when Merkel urged Netanyahu to seize opportunities inherent in the democratically inspired grassroots uprisings of the so-called Arab Spring.

But despite widely perceived Israeli intransigence on the political front, security ties with Germany — like strategic cooperation — are stronger than ever, and continue to expand, noted Shimon Stein, a former Israeli ambassador to Berlin.

“There appears to be parallel tracks that allow Germany and the United States, for that matter, to augment security cooperation regardless of the frustration at the political and even personal level,” Stein said.

“And while steps taken by the Netanyahu government have caused more than a little irritation, the Iranian issue and other security concerns compel friendly countries like Germany to stand by Israel and to continue to strive to meet its security needs.

“The question is whether and at what point these two lines will intersect if core political differences remain unresolved,” he added.


Bush Delivers Huge Arms Sale to Saudi Arabia

Bush Delivers Arms Sale to Saudi Arabia

Associated Press  |  January 14, 2008
RIYADH, Saudi Arabia – President Bush, on his first visit to this oil-rich kingdom, delivered a major arms sale Monday to a key ally in a region where the U.S. casts neighboring Iran as a menace to stability.

Bush’s talks with Saudi King Abdullah, which began over dinner and were continuing with late-night meetings, also were expected to cover peace between Israelis and Palestinians and democracy in the Middle East.

Coinciding with Bush’s trip, the Bush administration in Washington notified Congress on Monday that it will offer Saudi Arabia the chance to buy sophisticated Joint Direct Attack Munitions – or “smart bomb” – technology and related equipment, the State Department said. The administration envisions the transfer of 900 of the precision-guided bomb kits, worth $123 million, that would give the kingdom’s armed forces highly accurate targeting abilities.

The sale is part of an overall $20 billion weapons package for Saudi Arabia, administration officials say.

The arms packages are an important part of the U.S. strategy to bolster the defenses of oil-producing Gulf nations, such as Saudi Arabia, against threats from Iran. Saudi Arabia and other Gulf states, which have majority Sunni Muslim populations, harbor deep suspicions about Shiite Iran’s apparent designs to establish itself as a major power. They have reacted skeptically to the conclusions of a new U.S. intelligence estimate about Iran.

Congress already has been briefed on the entire arms package, which also includes the sale of the Navy’s Littoral Combat system. Lawmakers mostly see the deal as critical to maintaining relations with a war-on-terror ally. Some are opposed to the JDAMs portion out of concern that it gives Saudi Arabia a technical edge over Israel and the ability to attack it, but are unlikely to muster the two-thirds majority needed to block the sales.

The administration has assured lawmakers in closed briefings in recent months that there would be proper restrictions on the JDAMs sales to ensure they would not threaten to Israel. Israel also has said it does not oppose the deal.

As for the topic of rising oil prices, Bush national security adviser Stephen Hadley would only say “we’ll have to see” when asked whether Bush would raise the issue with the king. The Saudis are responsible for almost one-third of OPEC’s total output.

Another item for discussion could be the democratic principles Bush has promoted during his trip. While Abdullah has tried to push some reforms on education and women’s rights and there have been limited municipal council elections, the king has been cautious and limited in his efforts. He apparently has been hampered by others in the royal family worried that fast changes could upset the country’s conservative clerics and citizens.

After arriving Monday afternoon in Riyadh from Dubai, Bush expected to hear Abdullah urge him to keep up the pressure on Israel to halt settlements in Palestinian territories. The administration was able to persuade the Saudis to participate in the U.S.-sponsored Mideast peace conference in Annapolis, Md., in November.

Bush enjoyed a warm embrace from Abdullah. He was staying a night at the monarch’s ranch – a rare show of hospitality to a visiting dignitary that reflects Bush’s hosting of Abdullah twice at his own ranch in Crawford, Texas.

And the king greeted Bush at the base of the steps of Air Force One – a gesture the president never affords foreign leaders visiting the U.S. A band played each country’s national anthem as the leaders walked on a red carpet behind a high-stepping uniformed officer carrying a gold sword.

The hospitality masked Bush’s deep unpopularity among ordinary Saudis.

A recent poll conducted for Terror Free Tomorrow, a bipartisan group whose goal is undermining world support for terrorism, found only 12 percent here view Bush positively – lower than Iran’s president or even al-Qaida chief Osama bin Laden – and more think warmly toward Iran than America. Top among the reasons are the chaos in Iraq that followed the 2003 U.S.-led invasion and the widespread Arab feeling that the United States is biased toward Israel and not serious in seeking Mideast peace.

A rare cold front brought clouds and rain to Riyadh for the visit. Tight security was evident: Hundreds of police cars have deployed along major roads and sharpshooters are on some rooftops. In one neighborhood, police using loudspeakers demanded that cars be removed from some streets as two helicopters hovered overhead.

Earlier in Dubai, Bush got a flavor of the cosmopolitan banking and business hub, whose glass skyscrapers and booming construction have turned it into the capital of Middle East hustle. The soaring Persian Gulf city-state was Bush’s second stop in the seven-state United Arab Emirates federation. On the first, in Abu Dhabi on Sunday, he delivered a gentle lecture on democracy to authoritarian Arab allies and attended an opulent picnic at a desert horse camp.

Bush engaged in a day of cultural diplomacy in Dubai. He stopped at the historic home of the city-state’s former ruler, now a museum, where a group of girls performed to Arabic music.He had lunch on cushions set in a circle with students of the Dubai School of Government. And he attended a gathering of a young leaders’ group, in a conference room atop one of Dubai’s signature buildings, the luxury hotel Burj Al Arab that is shaped like a tall ship sail.

Dubai is caught in the middle of the West’s efforts to crack down on business in and out of Iran to protest its nuclear ambitions. Dubai, with a powerful Iranian business community, is eager to maintain its lucrative financial ties with Tehran, but wary of angering the United States and the United Nations.

U.S. Set to Offer Huge Arms Deal to Saudi Arabia

U.S. Set to Offer Huge Arms Deal to Saudi Arabia

Published: July 28, 2007

WASHINGTON, July 27 — The Bush administration is preparing to ask Congress to approve an arms sale package for Saudi Arabia and its neighbors that is expected to eventually total $20 billion at a time when some United States officials contend that the Saudis are playing a counterproductive role in Iraq.

The proposed package of advanced weaponry for Saudi Arabia, which includes advanced satellite-guided bombs, upgrades to its fighters and new naval vessels, has made Israel and some of its supporters in Congress nervous. Senior officials who described the package on Friday said they believed that the administration had resolved those concerns, in part by promising Israel $30.4 billion in military aid over the next decade, a significant increase over what Israel has received in the past 10 years.

But administration officials remained concerned that the size of the package and the advanced weaponry it contains, as well as broader concerns about Saudi Arabia’s role in Iraq, could prompt Saudi critics in Congress to oppose the package when Congress is formally notified about the deal this fall.

In talks about the package, the administration has not sought specific assurances from Saudi Arabia that it would be more supportive of the American effort in Iraq as a condition of receiving the arms package, the officials said.

The officials said the plan to bolster the militaries of Persian Gulf countries is part of an American strategy to contain the growing power of Iran in the region and to demonstrate that, no matter what happens in Iraq, Washington remains committed to its longtime Arab allies. Officials from the State Department and the Pentagon agreed to outline the terms of the deal after some details emerged from closed briefings this week on Capitol Hill.

The officials said Secretary of State Condoleezza Rice and Defense Secretary Robert M. Gates, who are to make a joint visit to Saudi Arabia next week, still intended to use the trip to press the Saudis to do more to help Iraq’s Shiite-dominated government.

“The role of the Sunni Arab neighbors is to send a positive, affirmative message to moderates in Iraq in government that the neighbors are with you,” a senior State Department official told reporters in a conference call on Friday. More specifically, the official said, the United States wants the gulf states to make clear to Sunnis engaged in violence in Iraq that such actions are “killing your future.”

In addition to promising an increase in American military aid to Israel, the Pentagon is seeking to ease Israel’s concerns over the proposed weapons sales to Saudi Arabia by asking the Saudis to accept restrictions on the range, size and location of the satellite-guided bombs, including a commitment not to store the weapons at air bases close to Israeli territory, the officials said.

The package and the possible steps to allay Israel’s concerns were described to Congress this week, in an effort by the administration to test the reaction on Capitol Hill before entering into final negotiations on the package with Saudi officials. The Saudis had requested that Congress be told about the planned sale, the officials said, in an effort to avoid the kind of bruising fight on Capitol Hill that occurred in the 1980s over proposed arms sales to the kingdom.

In his visit with King Abdullah and other Saudi officials next week, Mr. Gates plans to describe “what the administration is willing to go forward with” in the arms package and “what we would recommend to the Hill and others,” according to a senior Pentagon official, who conducted a background briefing on the upcoming trip with reporters on Friday.

The official added that Mr. Gates would also reassure the Saudis that “regardless of what happens in the near term in Iraq that our commitment in the region remains firm, remains steadfast and that, in fact, we are looking to enhance and develop it.”

The $20 billion price tag on the package is more than double what officials originally estimated when details became public this spring. Even the higher figure is a rough estimate that could fluctuate depending on the final package, which would be carried out over a number of years, officials said.

Worried about the impression that the United States was starting an arms race in the region, State and Defense Department officials stressed that the arms deal was being proposed largely in response to improvements in Iran’s military capabilities and to counter the threat posed by its nuclear program, which the Bush administration contends is aimed at building nuclear weapons.

Along with Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates are likely to receive equipment and weaponry from the arms sales under consideration, officials said. In general, the United States is interested in upgrading the countries’ air and missile defense systems, improving their navies and making modest improvements in their air forces, administration officials said, though not all the packages would be the same.

Ms. Rice is expected to announce Monday that the administration will open formal discussions with each country about the proposed packages, in hopes of reaching agreements by the fall.

Along with the announcement of formal talks with Persian Gulf allies on the arms package, Ms. Rice is planning to outline the new agreement to provide military aid to Israel, as well as a similar accord with Egypt.

The $30.4 billion being promised to Israel is $9.1 billion more than Israel has received over the past decade, an increase of nearly 43 percent.

A senior administration official said the sizable increase was a result of Israel’s need to replace equipment expended in its war against Hezbollah in Lebanon last summer, as well as to maintain its advantage in advanced weaponry as other countries in the region modernize their forces.

In defending the proposed sale to Saudi Arabia and other gulf states, the officials noted that the Saudis and several of the other countries were in talks with suppliers other than the United States. If the packages offered to them by the United States are blocked or come with too many conditions, the officials said, the Persian Gulf countries could turn elsewhere for similar equipment, reducing American influence in the region.

The United States has made few, if any, sales of satellite-guided munitions to Arab countries in the past, though Israel has received them since the mid-1990s as part of a United States policy of ensuring that Israel has a military edge over its regional rivals.

Israeli officials have made specific requests aimed at eliminating concerns that satellite-guided bombs sold to the Saudis could be used against its territory, administration officials said.

Their major concern is not a full-scale Saudi attack, but the possibility that a rogue pilot armed with one of the bombs could attack on his own or that the Saudi government could one day be overthrown and the weapons could fall into the hands of a more radical regime, officials said.

U.S. Expands Lead in Shrinking Arms Market

U.S. Expands Lead in Shrinking Arms Market

Andrew Fisher

Arms Control Today » October 2009

In the midst of a global recession that reduced the global demand for weapons, the United States managed to expand its share of worldwide arms agreements significantly in 2008, according to a September report by the Congressional Research Service (CRS). Last year, developing countries continued to be the most important markets for arms sales, the report said.

The report, “Conventional Arms Transfers to Developing Nations, 2001-2008,” is the 2009 edition of the CRS’s annual analysis, authored since 1982 by international security specialist Richard Grimmett. It analyzes arms transfer agreements worldwide while giving particular attention to sales to developing countries.

The total value of all arms transfer agreements in 2008 was $55.2 billion, the lowest level since 2005, the report said. The peak was $59.7 billion in 2007.

In 2008 the United States concluded $37.8 billion worth of arms transfer agreements, representing 68.4 percent of all such agreements globally. That is up significantly from the U.S. total of $25.4 billion in 2007, which represented only 42.5 percent of global agreements. (See ACT, December 2008.)

During 2008, the United States also made worldwide deliveries of $12.2 billion, continuing eight years of dominance as the world’s top deliverer of arms. Grimmett defines arms deliveries as “items actually transferred,” while arms transfer agreements represent contracts signed between supplier and recipient countries. Due to their complexity, arms deals can take years to implement and can be adjusted over time, leading to figures for agreements and deliveries that rarely match.

Several other countries are significant arms sellers, although none on the scale of the United States. Italy was a distant second, with $3.7 billion in agreements, up from $1.2 billion in 2007, followed by $3.5 billion for Russia, down from $10.8 billion in 2007. These top three suppliers collectively made 81.5 percent of all international arms transfer agreements in 2008.

Worldwide weapons orders in 2008 were down 7.5 percent from 2007. A main factor in the drop was the decision by some purchasing countries to forgo major new systems because of budgetary restraints imposed by the global recession and rising oil prices, the report said. Those countries opted to limit purchases to the upgrading of existing systems, training and support services, or the integration of already purchased weapons into their forces, Grimmett said.

Continuing a trend that can be seen since 2001, developing countries, defined in the report as all countries except Australia, Canada, Japan, New Zealand, Russia, the United States, and European countries, have increasingly been the major market for arms from the world’s largest suppliers. Arms sales to developing countries comprised 76.4 percent of worldwide arms sales in 2008, with the United States generally finding its largest markets in the Near East, a region stretching from Morocco to Iran. Russia found its largest markets in Asia, the report said.

In 2008 the United States made 70.2 percent of its agreements with developing countries. Russia and France each made more than 90 percent of its agreements with such countries; for China and the United Kingdom, the figure was 100 percent.

Between 2007 and 2008, the value of arms transfer agreements with developing countries increased slightly, from $41.1 billion to $42.2 billion. The decrease in global arms sales during this time came from developed countries, where total arms sales decreased from $18.6 billion in 2007 to $13.0 billion in 2008. Deliveries to developing countries in 2008 were equal to $18.3 billion, slightly lower than the 2007 level of $18.4 billion and the lowest level during the 2001-2008 reporting period.

Oil Price Effects

Spiking oil prices squeezed budgets devoted to arms purchases in many countries in 2008, but increased oil revenue swelled defense budgets in oil-exporting developing countries and allowed them to devote huge sums of money to arms purchases, Grimmett said. Saudi Arabia led all developing countries in arms purchases over the reporting period, with a value of $36.7 billion since 2001 and $8.7 billion in 2008. The United Arab Emirates (UAE) has signed $15.3 billion in agreements since 2001, with $9.7 billion coming in 2008. Venezuela, another major oil exporter, has also emerged as a significant purchaser of arms, with agreements totaling $5.8 billion since 2001.

The United States dominated sales agreements with developing countries in 2008. Its sales of $29.6 billion represented 70.1 percent of the market, up 39.9 percentage points over 2007. In addition to taking advantage of its well-established network of purchasers for defense articles and services, the United States has been able to maintain a steady stream of orders for upgrades, spare parts, and support services, even when it has not concluded major new deals for weapons systems, Grimmett said.

An important market for the United States has traditionally been the Near East region, where Saudi Arabia has consistently been a top purchaser of U.S. arms. The UAE has emerged as a large customer as well, signing agreements in 2008 for a comprehensive Patriot air defense missile system for more than $6.5 billion.

The United States also sought to expand its military cooperation with India in 2008, signing a nearly $1 billion deal for C-130J cargo aircraft. In a recent speech, Assistant Secretary of State for Political-Military Affairs Andrew Shapiro cited arms sales as an “important tool for broadening and deepening our partnerships with emerging powers such as India.” An end-use monitoring agreement signed in July by India and the United States may pave the way for the sale of advanced weaponry, including fighter aircraft, in the near future. (See ACT, September 2009.)

Russia, which has relied on the Chinese and Indian markets for high-value arms sales, has worked in recent years to expand its base of customers through creative financing options, such as debt swaps and “licensed production agreements,” which allow its customers to produce and sell Russian weapons, Grimmett said. Russia also has improved its follow-on support services, which have been viewed as lacking in the past, the CRS report said. Russia’s military hardware has been attractive to less-affluent developing countries because it ranges from basic to the most highly advanced systems, the report said.

Russian exports to China during the reporting period have included fighter aircraft, destroyers, submarines, anti-ship missiles, military transport aircraft, aerial refueling tankers, and jet engines. Grimmett wrote that such purchases show that “Chinese arms acquisitions are apparently aimed at enhancing its military projection capabilities in Asia, and its ability to influence events throughout the region.”

Russia’s most significant agreements in 2008 include deals with India to provide 80 Mi-17 helicopters for $1.3 billion and to upgrade MiG-29 fighters for $1 billion.

An important emerging market for Russia is Venezuela, with which Moscow has concluded significant agreements for the sale of fighter aircraft and helicopters, along with licensing agreements to produce AK-103 assault rifles. Following the Sept. 13 announcement of a $2.2 billion agreement between Russia and Venezuela, Secretary of State Hillary Rodham Clinton said the deal raises “the question as to whether there is going to be an arms race in the region.” She also said that Venezuela needs to be “putting in place procedures and practices to ensure that the weapons that they buy are not being diverted,” highlighting a long-standing U.S concern that arms are being diverted to criminal groups elsewhere in the region.

Although Russia has had some success in diversifying its arms exports, Grimmett said that long-term foreign sales of Russian arms may be hampered by the absence of sustained investment in research and development that other suppliers, such as the United States, have undertaken.

Currently a major importer of arms, China has also emerged as a growing source of arms for developing countries in Africa and Asia that are looking for options that are more affordable than the major weapons systems offered by other suppliers.

China’s arms sales to developing nations peaked at $2.8 billion in 2005 and amounted to only $800 million in 2008. One notable sale was that of an airborne warning and control system to Pakistan for $278 million in 2008. China is not likely to earn large revenues from such transfers but may view them as “a means of enhancing its status as an international political power, and increasing its ability to obtain access to significant natural resources, especially oil,” Grimmett said.

U.S. gave more than $10 billion in military aid to Pakistan since 9/11

International Herald Tribune
Plan would use antiterror aid on Pakistani jets
Thursday, July 24, 2008

WASHINGTON: The Bush administration plans to shift nearly $230 million in aid to Pakistan from counterterrorism programs to upgrading that country’s aging F-16 attack planes, which Pakistan prizes more for their contribution to its military rivalry with India than for fighting insurgents along its Afghan border.

Some members of Congress have greeted the proposal with dismay and anger, and may block the move. Lawmakers and their aides say that F-16s do not help the counterterrorism campaign and defy the administration’s urgings that Pakistan increase pressure on Al Qaeda and Taliban fighters in its tribal areas.

The timing of the action also caught lawmakers off guard, prompting some of them to suspect the deal is meant to curry favor with the new Pakistani prime minister, Yousaf Raza Gilani, who will meet with President George W. Bush in Washington next week, and to ease tensions over the 11 members of the Pakistani paramilitary forces killed in an American airstrike along the Afghan border last month.

The financing for the F-16s would represent more than two-thirds of the $300 million that Pakistan will receive this year in American military financing for equipment and training. Last year, Congress required those funds to be used specifically for law enforcement or counterterrorism purposes. Pakistan’s military has rarely used its current fleet of F-16s, which were built in the 1980s, for close-air support of counterterrorism missions, largely because the risks of civilian casualties would inflame anti-government sentiments in the Federally Administered Tribal Areas. State Department officials say the upgrades would greatly enhance the F-16s’ ability to strike insurgents more accurately, while reducing the risk to civilians. The officials, who spoke on condition of anonymity because Congress is weighing the plan, said the timing was driven by deadlines of the American contractor, Lockheed Martin.

Having the United States pay for the upgrades instead of Pakistan would also free up cash that Pakistan’s government could use to help offset rising fuel and food costs in the country, which have contributed to an economic crisis there, the State Department officials said.

Under the original plan sent to Congress in April, the administration planned to give Pakistan up to $226.5 million of the aid to refurbish two P-3 maritime patrol planes, buy new airfield navigation aids and overhaul Pakistan’s troubled fleet of Cobra attack helicopters. The State Department notified Congress last week that the administration had changed its mind and would apply the funds to the F-16s.

Lawmakers immediately bridled at the shift, questioning whether the counterterrorism money could be spent more effectively. "We need to know if this is the best way to help Pakistan combat Al Qaeda and the Taliban," Senator Patrick Leahy, a Vermont Democrat who heads the appropriations subcommittee on State Department and foreign operations, said in a statement.

Representative Nita Lowey, a New York Democrat who heads the House appropriations subcommittee on foreign operations, said in a statement, "It is incumbent on the State Department and Pakistan to demonstrate clearly how these F-16s would be used to fight Al Qaeda and the Taliban in order to get congressional support."

In a two-page notification to Congress, the State Department said that upgrading the avionics, electronics and radar systems of Pakistan’s older F-16s would "increase the survivability of the aircraft in a hostile environment" and make the "F-16s a more valuable counterterrorism asset that operates safely during day and night operations." The notification said the modernized systems would also increase the accuracy of the F-16s’ support of Pakistani ground troops, lessening the risks of civilian casualties.

Many congressional officials remain unconvinced. "Using F-16s this way is like hitting a fly with a sledgehammer," said one senior Senate Democratic aide, who spoke on condition of anonymity because of the current negotiations. It remains unclear whether any lawmaker will block or postpone the financing, and risk harming relations with Pakistan any further.

Even if approved, the upgraded F-16s would not be available until 2011, said one House aide who has been briefed on the issue, and who spoke on condition of anonymity, raising the question whether the funds could be spent on counterterrorism equipment that could be employed more quickly.

Pakistan agreed to buy about 70 F-16s in the 1980s, and about 40 were delivered before Congress cut off all aid and military sales in 1990, citing Pakistan’s secret development of nuclear weapons.

A new deal was struck after the Sept. 11 attacks to allow Pakistan to buy newer models, in part to reward Pakistan’s cooperation in fighting terrorism. In 2006, Pakistan was a major recipient of American arms sales, including the $1.4 billion purchase of up to 36 new F-16C/D fighter aircraft and $640 million in missiles and bombs. The deal included a package for $891 million in upgrades for Pakistan’s older F-16s.

At that time, the United States agreed to use $108 million of its annual security aid to Pakistan to retrofit the older F-16s with equipment to make them comparable to the newer models that will be delivered in the next several years. But the administration promised Congress that the Pakistani government would pay for the rest of the upgrades with its own funds. With Pakistan now facing economic hardships, top Pakistani leaders appealed to senior State Department officials to help defray the costs of the ongoing upgrades.

The debate over the F-16 financing comes at a time when Congress has grown increasingly frustrated with the administration’s Pakistan policy, arguing it has been weighted too heavily on security assistance. The United States has given more than $10 billion in military aid to Pakistan since the Sept. 11 attacks, when President Pervez Musharraf agreed to become an ally in the campaign against terrorism. Of that amount, $5.5 billion was specifically intended to reimburse the counterinsurgency efforts by the Pakistani Army, but congressional auditors have said that Pakistan did not spend much of that money on counterinsurgency.

Senior administration officials, including top military officers, are also voicing increasing exasperation with Pakistan’s efforts to combat militants in the mountainous region along the border with Afghanistan. "We need Pakistan to put more pressure on that border," Admiral Mike Mullen, the chairman of the Joint Chiefs of Staff, said on "The NewsHour with Jim Lehrer" on PBS on Tuesday.


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Does troop surge mean a defense-stock surge?

Does troop surge mean a defense-stock surge?

Stepping up the Iraq war may be good for the sector, but some companies have already profited. Fortune's Jon Birger guides investors through the defense minefield.

By Jon Birger, Fortune senior writer
January 12 2007: 3:57 PM EST

NEW YORK (Fortune) — Will the planned troop surge in Iraq lead to a stock surge for defense contractors? The short answer is: probably not.

Yes, defense companies specializing in equipping the troops on the ground will likely get a boost in orders as a result of President Bush's plan to send another 20,000 troops into Iraq. Some likely beneficiaries: armor and body armor makers like Ceradyne (Charts) and Armor Holdings (Charts), battlefield computer and communications equipment company DRS Technologies (Charts), and armored-vehicle maker Force Protection (Charts). Among the major defense defense contractors, the best bet is General Dynamics (Charts), maker of the Abrams tank and other military vehicles.

The problem is that expectations of a surge are already built into their stock prices. Armor and DHS are up 20% since November, for example. Force Protection is up 100%. The easy money has already been made.

That being said, there's still a secular case to be made for defense as a sector, one that goes beyond the narrow benefits of 20,000 more troops in Iraq. As much money as the U.S. is spending on defense, the untold defense-sector story is the arms race unfolding abroad.

Fueled by high commodities prices and rising political unrest, spending on armaments is on the rise all across the globe. And U.S. defense contractors have an edge over their European rivals, says retired Air Force brigadier general David Baker, now an analyst with Stanford Washington Research Group, because their products "have been proven in combat."

In recent months the Department of Defense has announced the sale of $1.5 billion in fighter jet engines to Saudi Arabia, $123 million in F-16 parts to Chile, and $300 million in military helicopters to Brazil, for example. Other big orders for U.S. arms have come from Japan, Jordan, Greece, and South Korea not to mention Iraq itself.

The bottom line: what's happening in Iraq is simply the most visible manifestation of an increasingly militarized world, a point Merrill Lynch (Charts) chief investment strategist Richard Bernstein made in a recent report. And while that may not bode well for world peace, it is good for the bottom lines of defense companies.

The simplest way to play this trend is with an exchange traded sector fund: PowerShares Aerospace & Defense Portfolio (Charts). As for individual stocks, our favorite defense name is the same one FORTUNE picked in our 2007 Investor's Guide: General Dynamics. In addition to its core defense businesses, General Dynamics also owns red-hot corporate jet maker Gulfstream, itself a backdoor homeland security play. With more and more corporations seeking to shield executives and other key personnel from the delays and hassles of flying commercial, Gulfstream boasts an order backlog of $6.5 billion, up from $5.2 billion a year ago.


Japan set to spend millions on missile defense

Boeing orders soar to record year

Arming the Indian Government

Since the Soviet Union’s collapse, other countries, including the U.S., Russia, Germany, France, and Israel, have begun in earnest to sell India arms and provide military assistance, or are negotiating to do so.


Arming the Indian Government

For decades, the Soviet Union was the Indian government’s main outside supplier of arms and military assistance. Since the Soviet Union’s collapse, other countries, including the U.S., Russia, Germany, France, and Israel, have begun in earnest to sell India arms and provide military assistance, or are negotiating to do so. At the same, India is seeking to make its defense industry far more self-sufficient,(189) in part by relying on technology transfers from a variety of countries. India also plans to privatize its defense industry by expanding the ownership of some of its key defense outfits, and opening them up to foreign partnerships.(190) Despite serious fiscal constraints, India’s defense budget of 230 billion rupees ($7.41 billion) for 1994-95 reportedly represents an increase of approximately 8 percent in real terms after adjusting for inflation and an expected rise in prices.(191)


This chapter briefly reviews several of these recent developments. The discussion, however, is by no means be an exhaustive analysis of all arms transfers to India. Rather, the information is presented in the hope that countries which provide arms and assistance to India, and those which are considering it, will condition supply on significant, concrete improvements in the government’s human rights record.(192) Close scrutiny should be given by potential suppliers to the government’s human rights performance in Kashmir and Punjab, since it is in these states that Indian security forces have committed some of the worst and most regular abuses. Given the eagerness of India to acquire weapons and military technology from new suppliers, this is an important moment when nations may be able to put pressure on India to improve its human rights record. Sources in India also assert that the purchase of new military equipment is prompted in part by continuing conflict in Kashmir and Punjab.(193) Linking arms supplies with human rights improvements in Kashmir and Punjab, therefore, is critical.


Countries which have recently provided arms and other forms of military support to the Indian government–or have been negotiating to do so–include Belarus, Bulgaria, China, the Czech Republic, France, Germany, Great Britain, Holland, Hungary, Israel, Italy, Malaysia, New Zealand, Poland, Romania, Russia, Scotland, Singapore, Slovakia, Spain, South Africa, Sweden, Ukraine, the U.S., and former Yugoslavia. This list, however, probably presents only a partial picture of the full range of actual or potential supplier countries.


Given that assault rifles and other small arms and light weapons have been used frequently by Indian security forces in attacks on civilians in Kashmir and Punjab, the Arms Project is particularly concerned about reports of major purchases of such weapons. In May 1993, the Indian Defense Ministry began negotiating deals for 100,000 Kalashnikov assault rifles and 50 million rounds of ammunition, with possible suppliers including Russia, Hungary, Romania, and Israel.(194) In an apparently separate deal, the Indian government announced plans in August 1993 to purchase more than 100,000 small arms, including Kalashnikovs, from Bulgaria, Poland, the Czech Republic and Slovakia.(195)


The Indian Ministry of Defence (MoD) announced in October 1993 that it was finalizing contracts with ammunition producers in a number of countries to supply equipment for a new munitions factory complex in Bolangir, in eastern India. Touted as the largest and most technologically advanced munitions plant in Asia, the Ordnance Factory Bolangir will annually produce 200,000 Barmines (antitank landmines), 200,000 rounds of 155mm ammunition, 150,000 rounds of 125mm shells for T-72 tanks, large quantities of 30mm ammunition for BMP-1 and -2 infantry fighting vehicles, a variety of large caliber munitions, fuzes, explosives, and detonators. Some plant equipment is already at various stages of installation, including items supplied by Day and Zimmermann (U.S.), Meissner GmbH & Company (Germany) and a Bulgarian company.(196) Reportedly, the three finalists for an estimated 500 million rupee contract for a 155mm shell plant–the most extensive and important part of the Bolangir factory–are Day and Zimmermann, Meissner GmbH & Co., and Societe Nationale des Poudres et Explosifs (snpe) of France.(197)


One of the biggest equipment problems facing the Indian government in recent years has been the increasing lack of spare parts for Soviet-made equipment. According to Indian officials, Russia has not been able to supply most of those parts.(198) The Indian government has described the shortages as severe, and reportedly is unable to locate as many as 100,000 spare parts for Soviet weapons.(199)


Relief is apparently coming in one area, however. An agreement was signed on June 30, 1994 to create a joint company called Indo-Russian Aviation Private Ltd., based in Nasik, India, that will focus on the production of aircraft spare parts for the Indian Air Force. The company will also provide support and maintenance for Russian-designed aircraft in India.(200)


A particular problem has been the deterioration of India’s MiG-21 fighters. A number of countries and companies have expressed interest in refurbishing and upgrading the MiG-21s, including not only Russia, but also the United States,(201) Israel,(202) France,(203) and Singapore.(204) It appears that the new Indo-Russian Aviation company will have the inside track for reworking 100-125 MiG-21s, at a cost of about $400 million.(205)


A major arms deal currently under negotiation is the Indian Air Force’s purchase of eighty advanced jet trainers for an estimated $1.2 billion.(206) In August 1993, India’s MoD began negotiations with a Franco-German consortium (comprising France’s Dassault Aviation and Germany’s Dornier Luftfahrt GmbH) and with British Aerospace.(207) Offers from U.S. and Russian manufacturers were rejected.(208)

Need for Human Rights Conditions

The dissolution of the Soviet Union–formerly India’s greatest outside supplier of military equipment–as well as conflict in Kashmir, tensions in Punjab, and the always present threat of war with Pakistan, is causing India to urgently seek to diversify its sources of arms, ammunition, and military technology. India’s rush to purchase large quantities of military hardware and technology, and its reliance on other governments for various forms of military support, make this an important time to bring pressure on the Indian government to improve substantially its compliance with norms of human rights and humanitarian law.


While recognizing India’s right to defend itself, the Arms Project urges countries which provide arms and military assistance to India to tie supply to significant, specific improvements in India’s human rights performance. Potential suppliers should pay close attention to the government’s record in Kashmir and Punjab, since it is in these states that government forces have committed some of the worst and most regular violations of human rights and humanitarian law.

Increase in UK arms sales to human rights violators around the world

Britain last year licensed military equipment sales to 14 of the 17 countries involved in major armed conflict, Caat (Campaign Against the Arms Trade) said yesterday. It added that Britain had also licensed weapons equipment to 10 countries at the bottom third of the UN human development index…Licences for British arms sales to Israel last year amounted to nearly,,1747892,00.html

Huge jump in arms sales to Israel

UAE, Jolted by Port Deal, Is Key Western Arms Buyer

UAE, Jolted by Port Deal, Is Key Western Arms Buyer

Thalif Deen

UNITED NATIONS, Feb 23, 2006 (IPS) –  The United Arab Emirates (UAE), the centre of a growing controversy over its proposed management of U.S. port terminals, is one of the world’s most prolific arms buyers and a multi-billion-dollar military market both for the United States and Western Europe.

 The energy-rich Persian Gulf nation is currently taking delivery of about 8.4 billion dollars worth of military equipment, mostly state-of-the-art fighter aircraft, ordered from the United States (6.4 billion) and France (two billion) over the last five years.

 The delivery of 80 U.S.-built F-16 E/F fighter planes — described as one of the biggest single arms packages to a Middle Eastern nation and finalised back in March 2000 — is to be completed only in 2007.

 U.S. President George W. Bush’s threat to veto any attempts to block last week’s deal permitting a state-owned UAE company to take over the management of six U.S. port terminals has underlined the significance of the political and military relationship between the two countries.

 Despite growing bipartisan opposition to the deal — mostly prompted by a fear-psychosis that U.S. ports should not be managed by a state-owned Arab company because of possible terrorist infiltration — Bush says the UAE has been a strong U.S. ally in the fight against global terrorism.

 He also sees no risk in a Middle Eastern company overseeing U.S. ports and shipping terminals despite potential terrorist threats.

 But an equally significant fact in the longstanding bilateral relationship is that the UAE is a vibrant arms market not only for the United States but also its allies in Western Europe, particularly France and Britain.

 "The UAE (arms) market is definitely important to the United States," says Tom Baranauskas, a senior Middle East analyst at the Connecticut-based Forecast International, a leading provider of defence market intelligence services.

 "Just the order for 80 of the newest-generation F-16E/Fs" alone was a major buy from the United States, he said.

 "Interestingly, there are already upgrades planned for these fighter planes even though they have not completed delivery," Baranauskas told IPS.

 The upgrades and maintenance of the already delivered aircraft — and proposed new arms purchases — will have to be ensured only by a continued military relationship between the UAE and the United States.

 But he also pointed out that the UAE military’s procurement priorities are shifting, "and this shift may affect the U.S. competitiveness, and actually benefit Europeans more than the United States".

 Besides French Mirage fighter planes, the UAE has also taken delivery of about 36 British Aerospace Hawk 100 trainer/ground attack aircraft, four warships from Germany, and two frigates from the Netherlands. Additionally, France has supplied about 400 battle tanks in a deal worth nearly 3.8 billion dollars.

 With an armed force of only about 50,000 to 60,000 troops, the UAE is considered one of the world’s best equipped militaries. A country which does not receive any U.S. military aid, the UAE pays hard currency for all its weapons purchases.

 Projected orders for military equipment from the United States exceeded 650,000 dollars in 2005, with an anticipated increase to about 1.9 billion dollars in 2006, according to estimated figures released by the U.S. State Department in early February.

 According to Forecast International, the UAE’s military budget for 2006 is estimated at about 3.7 billion dollars, compared with 20.2 billion dollars by Saudi Arabia, the Middle Eastern nation with the largest single defence budget, followed by Israel (9.9 billion dollars), Iran (7.9 billion dollars) and Kuwait (4.9 billion dollars).

 A country with the world’s third largest oil reserves and the fifth largest gas reserves, the UAE has a per capita income of over 17,000 dollars, with oil accounting for 30 percent of gross domestic product (GDP) and 75 percent of national revenues.

 The unprecedented rise in oil prices in world markets — from about 12 dollars per barrel in 1998 to 65 dollars last week — has increased the purchasing power of countries such as the UAE.

 Baranauskas said that "looking at the UAE inventory of weapons, particularly fighter planes, it is quite obvious that the Emirates does rely heavily on the U.S. as a source".

 But it is also obvious that the UAE does not "put all its eggs in one basket" as evidenced by the procurement of French and British weapons systems.

 "If I had to hazard a guess on the potential impact of the current imbroglio, there will be increased interest on the part of the UAE military to move to further arms source diversification" — and away from relying too heavily on the United States.

 "You could already see some UAE unhappiness over a failed deal to buy Hawkeye airborne early warning aircraft due to the U.S. refusal to fully transfer Link-16 secure communications technology," he added.

 The Europeans traditionally have been more willing to sell equipment without strictures, and well-equipped militaries with the wherewithal to buy high-tech equipment are not going to settle for systems that cannot be used to their full capabilities because the U.S. refuses to provide the full-up version, Baranauskas said.

 "Yet, Israel usually gets such full-up versions. The double-standard here is noted and duly filed away in memory, to possibly rebound in a later competition," he added. (END/2006)