Part II. Military Spending and Armaments, 1997

SIPRI Yearbook 1998: Armaments, Disarmament, and International Security

May 1998

Part II. Military Spending and Armaments, 1997
Elisabeth Sköns, Agnès Courades Allebeck, Eva Maria Loose-Weintraub, Reinhilde Weidacher, Eric Arnett, Siemon T. Wezeman, and Pieter D. Wezeman

Chapter 6. Military Expenditure and Arms Production
Chapter 7. Military Research and Development
Chapter 8. Transfers of Major Conventional Weapons

Chapter 6. Military Expenditure and Arms Production

World military expenditure, which has been declining since 1987, corresponded to roughly $740 billion in 1997. The decline has averaged 4.5% per year during the 10–year period 1988–97, but the rate of decline has slowed down in recent years and was only 1% in the past two years.

The deepest cuts over the 10–year period were made by Russia and other successor states of the USSR. Their combined military expenditure in 1997 was around one–tenth of that of the USSR in 1988. Spending has also declined significantly in Africa, North America and Central America, where there have been cuts by around one–third over the 10 years.

The Middle East and Asia have been exceptions to the trend. Military spending in the Middle East has increased by 9% but there have been considerable fluctuations over the period, with a peak around 1991 as a result of the Persian Gulf War. In both South and East Asia, military expenditure increased by around 25% over the 10 years. However, in several East Asian countries the military budgets adopted for 1997 were cut as a result of the financial crisis in the region, and future expenditure plans are being revised downwards.

The arms industries in most of the 20 major arms–producing countries have been forced to cut their capacity in response to the sharp fall in domestic arms procurement expenditures. This has led to an intensive restructuring of the industry. In spite of the return to growth in the arms purchases of many countries, this adjustment process is expected to continue. The rate of concentration remained high in the US arms industry in 1996 and 1997. The restructuring process in Western Europe progressed more slowly, but there were indications in 1997 that the process of international concentration was speeding up in Europe.

No data exist on global arms production. SIPRI estimates for the top 100 arms–producing companies in the Organisation for Economic Co–operation and Development (OECD) and the developing countries (excluding China) show that the value of sales in 1996 remained virtually unchanged from 1995, at $156 billion. Among the top 100 companies in 1996 US companies accounted for 55% of the combined arms sales, while 40 West European companies accounted for 35%, and 14 companies in other OECD countries and 8 in non–OECD countries (India, Israel and South Africa) together accounted for the remaining 10%.

In Appendix 6D Julian Cooper shows that it is possible to estimate Soviet and Russian military spending, with an extended time series for the military expenditure of Russia and the former USSR. The problems involved in making such estimates include lack of transparency (particularly before 1992), 'military' items placed under other budget heads, and the huge difference between adopted military budgets and actual expenditures during the 1990s. Estimates are presented in current roubles, as a proportion of GNP and in US dollars using purchasing–power parity rates. The conclusion is that military expenditure has fallen from an estimated $257 billion in the USSR in 1987 to $24.1 billion in Russia in 1997, and as a proportion of GNP from 16.6% in 1987 to 3.8% in 1997.

Appendices 6A and 6B contain tables of military expenditure by region, country and income group and for NATO countries by function.

Appendix 6C explains the sources and methods for the military expenditure data.

Appendix 6D by Julian Cooper, is a study of the military spending of the USSR and the Russian Federation in 1987–97.

Appendix 6E by Elisabeth Sköns, Reinhilde Weidacher and the SIPRI Arms Industry Network, contains financial and employment data on the top 100 companies in the OECD and developing countries in 1996.

Chapter 7. Military Research and Development

Global military research and development (R&D) expenditure continued to decline in 1997, mainly because of reductions in the US budget, which will be cut by another 14% by the year 2001. Critics claim that US forces are vulnerable to new threats, particularly ballistic and cruise missiles, but these fears are exaggerated. US investment in military R&D is more than seven times that of France, the nearest competitor. It is unlikely that a global challenger to US power will emerge before 2020. Rather, the international system will increase its dependence on US technology and military intervention.

By the mid–1990s most members of the Organisation for Economic Co–operation and Development (OECD) were spending less than 110% of their 1983 R&D funding levels. The fear commonly expressed that science would be irreversibly militarized by the build–up in the 1980s has not been borne out, the military share of government and national R&D having returned to its 1983 level or lower in most cases. Contrary to expectations, the 1991 Persian Gulf War did not lead 'second–tier' arms producers to increase their R&D budgets in the hope of developing or countering technologies demonstrated by the USA, which itself cancelled several programmes at that time.

Russia is allowing its design bureaux to sell their expertise abroad, but has promised to limit technology transfer. Japan reduced its military R&D investment for the first time since 1976.

Chapter 8. Transfers of Major Conventional Weapons

The global SIPRI trend–indicator value of international transfers of major conventional weapons in 1997 was just over $25 billion. There has been a clear trend of increasing arms transfers since 1994, but the volume is still only 62% of the volume in 1987, when the highest level since 1950 was reached.

There were no major changes in the ranked list of arms exporters in 1997. The USA remained the dominant exporter, increasing its share of deliveries to 43%. Nearly all the transfers originate from a small number of supplier countries. The leading suppliers for the period 1993–97 were the USA, Russia, the UK, France, Germany and China. Among the arms recipients, countries in North–East Asia and the Middle East are the leading importers.

While plagued by many serious armed conflicts, the countries in Sub–Saharan Africa are not major recipients of major conventional weapons and there seems to be no indication that these weapons have played an important role in the outbreak or outcome of these conflicts.

With some important exceptions, most arms exporters provide official data on weapon exports. However, much of this information is aggregated and there is no common definition of arms transfers upon which countries base their figures. Generally, the official data are difficult to analyse or to compare. In 1997, several countries released, for the first time, data on arms exports or promised to do so in 1998. In 1997 a group of government experts evaluated the UN Register of Conventional Arms but failed to reach a consensus regarding changes or improvements.

Appendices 8A and 8B, by Ian Anthony, Pieter D. Wezeman and Siemon T. Wezeman, provide data on the transfers of major conventional weapons in 1997.

Appendix 8C explains the sources and methods for the data collection.