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Interpreting Geo-politics through SIPRI’s Top 100 Defence Companies List

Published Dec 09, 2019
Updated Feb 06, 2020

SIPRI has just published the list of Top 100 Arms?Producing and Military Services Companies, 2018 on 09 December. Connecting listing with countries in which the companies are based could lead to key deductions on the geo-politics in the next decade or so given that arms buildup has a medium to long term effect.

One challenge however is non-inclusion of China’s defence majors as NORINCO in the list due to lack of adequate data, however SIPRI’s guestimates could be useful.

Domestic demand, government policies including new strategic formulations are the main drivers for placing orders on the defence companies, which is a standard norm which has not changed over the years, some cyclical fluctuations apart.

The outcome of the List is not surprising with domination of US companies ongoing for at least two decades on global arms production.

The spike in the defence budget by the Trump Administration in 2017, the outcome of which would be evidenced by the defence industry in the United States in 2018 is one factor.

Thus led by Lockheed Martin and Boeing, five U.S. companies occupy the top five slots.

As the SIPRI Fact Sheet states, “In 2018, for the first time since 2002, the top 5 in the Top 100 consisted solely of companies based in the USA. These five companies had combined sales of $148 billion or 35 per cent of total Top 100 arms sales. Companies ranked from 6th to 10th accounted for 15 per cent of the total”.

U.S. domination of geo-politics would be perhaps the simplest deduction that could be arrived at with the second place going to Russia and then China despite the fact that European companies have larger combined sales that the two non-Western powers.

Yet due to other factors in geo-politics it may not be a uni-polar one.

The combined arms sales of the 10 companies based in Russia listed in the Top 100 for 2018 were $36.2 billion.

SIPRI has also estimated that three Chinese arms companies would be ranked in the top 10 of the Top 100 arms-producing and military services companies: AVIC, NORINCO and CETC and seven others in the top 100.

Is it any surprise that the geopolitical contest will be mainly between these three powers which will dominate in the near future.

While sales of European companies in the Top 100 were $102 billion in 2018 with UK topping the list followed by France, these would have a secondary geo-political impact for lack of unified effect particularly after Brexit and despite plans of the European Union to field a joint military force.

For instance India and France could leverage potential of French companies Dassault Aviation and Naval Group to  have an impact of a second order such as retaining sovereignty and strategic autonomy.

Surprisingly sales of the European companies in top 100 have arisen by only 0.7 percent even though NATO which has a large number of European members has seen a uniform increase in the defence budget, the outcome of the Trump effect or pressure tactics employed by US President to offset the large US expenditure for what he claims defence of Europe and other allies.

Nevertheless, the influence of large European arms producers and exporters needs to be underlined albeit this will come through bandwagoning with the United States or with regional powers as India.

In what direction does UK go after Brexit is an “unknown,” for now but given the third largest arms sales in the Top 100, London should be expected to leverage the same to geo-political advantage.

Japan, India and South Korea are three which stand-out for having a sizeable proportion of defence sales by the domestic companies in the Top 100.

Others include Australia, Canada, Poland, Singapore, Spain, Sweden, Switzerland, Turkey and Ukraine.

Does this determine a global pecking order is difficult to say but nevertheless aspiration and ambition of some amongst these as India [Indo Pacific], Turkey [Middle East] and increasingly Japan [Indo Pacific] to exercise greater influence regionally would be evident.

In terms of high technology the F 35 has contributed to an increase in the sales by Lockheed Martin (US) and S 400 to Almaz-Antey [Russia].

Evidently control of high technology systems will continue to have an advantage on not just the bottom line but geo-political influence as well.

Conversely cutting off the high technology stream as a source of revenue to competing powers and defence majors could evolve as a major strategy for big ticket players, witness the U.S. imposition or threat of Countering America’s Adversaries Through Sanctions Act (CAATSA) on Russia which will lead to more buyers demurring from going for purchases even though they could well afford the same.

Fortunately for the World as the SIPRI Fact Sheet highlights global arms sales are just one tenth of sales of large manufacturing companies as Toyota.

Yet Realist posturing will remain a key trend for the future.

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