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The revenues of the world’s main arms suppliers declined in 2022, due to production problems that prevented companies from meeting the increase in demand that was amplified in particular by the Ukraine war, researchers from the Stockholm International Peace Research Institute (SIPRI) said.

According to a new report issued by the institute, sales of weapons and military services to the 100 largest arms companies in the world amounted to $597 billion (549 billion euros) in 2022, a decrease of 3.5 percent compared to 2021.

In parallel, geopolitical tensions, as well as the Russian invasion of Ukraine, have increased global demand for weapons and military equipment. In this context, the decrease in revenues was “unexpected,” according to Sipri researcher Diego Lopez da Silva.

“What this decline actually shows is that there is a time lag between a demand shock such as (that caused by) the war in Ukraine and the ability of companies to increase their production to meet this demand,” Lopez da Silva said.

Supply chain

According to the research institute, this situation is due, in large part, to the decline in revenues of major arms manufacturers in the United States, as they faced “supply chain issues and labor shortages” resulting from the “Covid” pandemic.

The United States alone recorded a 7.9 percent decline in arms sales in 2022, but it nonetheless represents 51 percent of global arms revenues during the same year, with 42 American companies among the list of the 100 largest companies in the world.

American arms suppliers are particularly vulnerable to supply chain disruptions, because the weapons systems they produce are often more complex than elsewhere.

“This means that the supply chain is more complex and includes more stages, which makes it more vulnerable,” Lopez da Silva said.

Russian arms manufacturers also saw their revenues drop by 12 percent, to $20.8 billion, according to the report.

The researcher indicated that this decrease is partly due to sanctions imposed on Russia, but it may also be the result of payment delays on the part of the Russian state.

In addition, the transparency of arms manufacturers in Russia decreased, and only two Russian companies were included in the list of the top 100 companies, “due to a lack of available data,” according to “Sipri.”

In other parts of the world, where the military equipment produced is less complex, manufacturers have been able to meet demand, as is the case in the Middle East and Asia-Pacific.

The strongest increase was in the Middle East, where the growth rate reached 11 percent, reaching $17.9 billion.

This is good for Turkish companies in particular. For example, Baykar, which produces drones widely used in Ukraine, saw its revenues jump by 94 percent.

Military spending

The total sales volume of arms suppliers from Asia and Oceania increased by 3.1 percent, reaching $134 billion in 2022.

China, one of the world’s largest arms exporters, saw an increase in the total revenues of the eight arms companies included in the classification by 2.7 percent to $108 billion.

Lopez da Silva does not see any signs of slowing demand in the future. He told Agence France-Presse that purchase orders and order books at companies are “increasing significantly.”

In addition, a large number of European countries have pledged to increase military spending in light of Russia’s invasion of Ukraine, with some goals extending until 2030.

“This demand will continue in the coming years,” the researcher said. “So we expect military spending to continue to increase, and thus arms revenues as well.”