Stagnation in Russian Arms Exports
The global arms market is a notoriously opaque business, with governments preferring to give out minimal data on their imports and exports of weapons. While this makes it notoriously difficult to gauge the exact size and value of the market, one thing is certain, which is that the global arms market is a huge business. According to data from the Stockholm International Peace Research Institute (SIPRI), in 2016 the volume of total arms transfers was just under $30 billion. While the US dominates the global arms trade, the Russian Federation is in a very strong second place, routinely holding a 25% share of international arms exports. The industry saw strong growth from 2000-2011 due to a variety of factors. The Soviet heritage of arms development and export allowed for a relatively easy modernization of older Soviet equipment and products. China and India along with many countries from the Middle east and North Africa had fast growing defense budgets with a demand for more equipment and arms. Seeing growing opportunities around the globe, the Russian government created Rosoboronexport, the sole state intermediary agency for the export/import of defense related products, services, and technologies. Rosoboronexport greatly consolidated and optimized the Russian arms market, while allowing for greater cooperation between domestic and international firms. All of this was in addition to the Russian government being very willing to work with countries like India and China on defense technology transfers; a big draw for countries who had an under developed domestic arms industry.
Russian arms exports peaked in 2012 at no more than $16 billion, depending on the data in analyzed. Data from Russian sources such as the Federal Service for Military-Technical Cooperation (FSMTC) often have the highest numbers, while sources like the US Department of State or SIPRI put the value at a much lower level. Regardless, since 2012 the Russia arms exports have been facing an increasing number of problems, and the current outlook is not good. Sanctions put in place by the US and EU since Russia’s annexation of Crimea and intervention in eastern Ukraine have made the export of some arms more difficult. The fall in oil prices has depressed demand from the Middle East and North Africa, while Venezuela’s subsequent economic crisis has caused a steep drop in demand from a previously strong buyer. In addition, Russia’s largest arms export destinations, India and China, have been becoming less dependent on Russian arms imports as they have developed their own domestic industries, often by using technology sharing and cooperation agreements signed with Russia to do so. This has also led India and China to demand more high-end technology and weaponry, an area that Russian firms are very weak in relative to their western counterparts in the US and EU. Russia has also been facing increased competition, with relative new comers to the global arms market like South Korea, Singapore, and Turkey ramping up production. Finally, there is increased domestic demand from the Russian military as it aids the Syrian government and pro-Russian rebels in Ukraine, forcing them to buy weapons that would otherwise be exported abroad.
These many negative factors make the forecast for Russian arms exports bleak, with most experts seeing the best-case scenario as a stagnation to minimal growth in arms exports. The chart below demonstrates this well, with multiple sources showing stagnation or decline in total export value since 2012. If Russia hopes to remain a strong player in the global arms market, it will need to take steps to ensure it does not become obsolete overtime. Sergey Denisentsev, an expert on the Russian arms industry and senior research fellow at the Center for the Analysis of Strategies and Technologies (CAST), when talking at the Center for Strategic and International Studies discussed some of the steps Russia could take to avoid this fate. First, there needs to be a greater emphasis on developing and completing high-end next-gen weaponry. Second, a push to fill more market niches that will grow in the future, such as robotics, electronic/cyber warfare systems, and small submarines. Finally, Russia needs to seek joint weapon systems development projects with India and China to ensure that Russian firms have a role to play in the growth of the two largest markets for arms. If these steps are taken and the right investments made, Russia will ensure its defense industry remains a powerful and important player in the global arms market. If not, it risks being continually overshadowed by western companies and potentially overtaken by its new and growing competitors.