Ukraine: Defence giants of the world greatly benefiting from war

LONDON (Parliament Politics Magazine) – The unjustified aggression of Russia’s invasion of Ukraine has faced condemnation from countries of the world. There are valid concerns about a resurgent Russian empire, as well as the possibility of a new world war. The nearly half-trillion-dollar (£381 bn) defence sector that supplies both sides with armaments, as well as the considerable profits it will gain as a result, is less well-known.

Spending on defence has already risen dramatically as a result of the invasion. The EU said that it will buy and supply guns to Ukraine for €450 million (£375 mn), while the US has offered US $350 million in military aid, in addition to nearly 90 tonnes of military supplies and US$650 million in the previous year.

In total, the US and Nato had sent 17,000 anti-tank weaponry and 2,000 Stinger anti-aircraft missiles, for example. An international coalition of nations, that includes the United Kingdom, Australia, Turkey, and Canada, have come forward for arming the resistance of Ukraine.

For the largest defence contractors of the world, this is a huge win. Raytheon, for instance, manufactures the Stinger missiles and, in collaboration with Lockheed Martin, the Javelin anti-tank missiles that are sold to countries such as the United States and Estonia. Both US companies, Lockheed and Raytheon, have had their stock prices rise by about 16 percent and 3 percent, respectively, since the invasion, compared to a 1% dip in the S&P 500.

The largest fish in the UK and Europe, BAE Systems, is up 26%. Only Boeing has slid out of the top five contractors in the world in terms of revenue, owing to its exposure to airlines and other factors.


A window of opportunity has opened for the western defence industry

Top Western arms corporations were informing investors about an anticipated increase in profits ahead of the battle. On a January 25 earnings call, Gregory J. Hayes, the CEO of US defence behemoth Raytheon, stated:

Just look at the drone attack in the United Arab Emirates. Certainly, tensions in eastern Europe and in the South China Sea, were placing pressure on part of the country’s defence spending. So he was confident they would get some benefits from it.

The global defence industry, even at the time, was expected to grow by 7% by the year 2022. According to Richard Aboulafia, the MD of US defence firm AeroDynamic Advisory, the biggest risk to investors was that the whole thing was exposed to be a Russian house of cards and the threat disappeared.

According to an exclusive report by Times, defence businesses are profiting in a number of ways as a result of the lack of any signs that this would happen. They will face increased demand from countries including Denmark and Germany, which have stated that they will increase their spending on defence, in addition to directly selling weapons to the warring parties and supplying other countries that are sending arms to Ukraine.

The scope of the industry is global. With 37 percent of all sales in arms from 2016 to 2020, the United States is clearly the international leader. Russia ranks second with 20%, followed by China (5 percent ), Germany (6%), and France (8%). 

Aside from the top five exporters, there are a slew of additional people who could benefit from this war. Despite Russian concerns, Turkey’s insistence on supplying Ukraine with weapons, especially high-tech drones, which would be a big boon to its defence industry, which is the supplier of 1% of the world market.

With about 3% of global sales, one of the newspapers in Israel published an article recently titled “An Early Winner of Russia’s Invasion: Israel’s Defence Industry.”

Russia, on the other hand, has been developing its own sector since 2014 in Western sanctions’ response. To lessen its dependency on foreign weaponry and knowledge while also increasing overseas sales, the government launched a large import replacement programme. There have been rare cases of continuous licensing of armaments, such as a £3.7 million licence from the UK to Russia, although this expired in 2021.

Russia, as the world’s second-largest arms exporter, has targeted a wide spectrum of overseas clientele. Its arms exports decreased by 22% between 2016 and 2020, but this was primarily owing to a 53% decrease in shipments to India. Simultaneously, it increased sales to nations like China, Algeria, and Egypt significantly.

Russian weaponry might be less expensive and easier to operate and maintain relative to systems of the West, according to the US congressional budget report. The missile maker Almaz-Antey (sales volume US$6.6 billion), United Aircraft Corp (US$4.6 billion), and United Shipbuilding Corp (US$4.5 billion) are the three largest Russian defence companies.