The next frontier of the defence industry

Recently outgoing commander of the Indo-Pacific command (INDOPACOM) Admiral John Aquilino made an interesting statement. Talking to a reporter, he said that in his three years as commander, China had built more than 400 aircraft, 20 major warships and doubled its missile inventory. That means from around 1,350 missiles that the Pentagon estimated in 2020, the force has now grown to near 2,700 or more. That’s rather a lot, even for China, especially when reliable research puts it at a total of 1,000 missiles deployed. True, China’s forces are particularly difficult to estimate, given the huge opacity, and different counting procedures. But it cannot escape notice that this estimate from the United States (US) commander comes at a time, when US elections are due, and the military is not unnaturally apprehensive of budget cuts under a new administration, even as President Biden’s request to Congress for an increase in the budget, was cut short by some $20 billion to avoid a government shutdown. The department of defence’s posture is heavily tied to the interests of the defence industry, that in recent years has seen a hefty rise of an unprecedented $238 bn – a 16% rise, on the backs of the Ukraine war, and rising tensions between major powers. Remember, the US defence industry is the largest in the world, selling weapons to 107 States. This matters. To everyone.

First, that question of Chinese missiles. Expert opinions in the US are well aware of the dangers of ‘overestimating’ military capabilities, given the history of how the Pentagon kept on ‘warning’ of Soviet military power, weeks before it broke apart. The highly reliable Bulletin of Atomic Scientists observed recently that public assessments by the US “must be verified as they can be institutionally biased and reflect a mind-set of worst-case thinking rather than the most-likely scenario”. It also states clearly that “Despite some claims to the contrary, China’s missile forces are not near parity with the United States. China has fewer nuclear-armed (and) conventionally-armed missiles than the United States”. It does have a larger force of about 450 land-based medium- and intermediate-range ballistic missiles, because the US was barred by the Intermediate Range Forces Treaty, from fielding this range of weapons until it pulled out in 2019. But the ‘threat’ is important for not just so that Congress backs a larger defence budget, but also for governments everywhere to be wedded to this ‘looming threat’ concept. As Stockholm International Peace Research Institute observes, Asia and Oceania accounted for a full 37% of all arms imports (2019-2023). The threat perception there is obvious.

It’s not just China. Ukraine climbed to fourth in the top of charts of defence imports receiving weaponry from 30 countries. But here’s the bigger deal. The rise in US defence exports is also due to the fact that major European countries are replenishing their stockpiles as they move older stocks to Ukraine. All that translates into an across the board rise in European defence spending, pushed hard through the North Atlantic Treaty Organization as part of Europe’s ‘duty’ to it .The US recently sanctioned another $400 million as the third tranche of aid, even as the State Department approved a proposed “emergency sale” of High Mobility Artillery Rocket System (HIMARS) to Ukraine, funded by Germany, to be supplied from the army inventory. Germany bought $2.9 bn worth of medium-range missiles from RTX (formerly Raytheon). Poland bought HIMARS as well, manufactured by Lockheed Martin, even as it sent its weapons to Ukraine. Resultantly, Poland doubled its defence budget, and data indicates that Central and Eastern Europe are spending more on defence than they did in the Cold War. Germany follows the United Kingdom with the largest individual increases. The end effect? Skyrocketing returns for defence industry like Rolls Royce, (190 % return on equity) together with other US firms. European industries like Rheinmetall, Saab, and Leonardo are also seeing a share price growth of 367%, 244%, and 198% respectively. That was last year. As the China-US confrontation heats up, expect these figures to go up. Among the top 100 defence companies of the world, are China’s NORINCO, and China South Industries Group among others. The ‘winners’ in the Ukraine war may not all be from the US and Europe.

Everyone knows that defence industry thrives on war. Indeed, defence exports are part of US public policy. Add to that, the fact that the US spends more in its defence than the next nine countries combined. Those are public indicators. Less apparent is the clout they enjoy by funding select think tanks and projects to provide policy papers for legislators, and public consumption, which, in turn, is quoted heavily in other countries. It’s an industry that spans the globe and has a strong interest in creating and sustaining a hostile environment. The best that can be said of them is that at least the influence of US industry is known to an extent. Nothing at all is known about the influence of Chinese military giants that also now beginning to span the globe thanks to the Xi Jinping policy of expansionism. Remember that following the end of the Soviet Union, the US Congress, in a bid to get a ‘peace dividend’ was intent on cutting the defence budget. Out of the blue came the ‘intelligence’ that Iraq was going nuclear. It wasn’t, and everyone knew it. Wars therefore may be created out of thin air. And finally, as world defence spending rises to a record $2,440 bn ,much less is being spent on critical areas of the climate crisis and allied dangers of yet another pandemic as viruses cross barriers in a rapidly heating world. Parts of the world are quite literally on fire as forests disappear, while others are fighting unprecedented floods. It’s a crisis of unimaginable proportions. Yet all that is being talked about is the next ‘frontier’ in defence industry. Time to call a halt to this in a hugely more dangerous world.

This article is authored by Tara Kartha, director (R&A), Centre for Land Warfare Studies, New Delhi.