Why everyone in arms industry loves a good war

Rudroneel.Ghosh@timesgroup.comIn its ninth month the Ukraine war has entered a risky and unpredictable phase. Russia has not only resumed attacks on multiple Ukrainian cities – including the capital Kyiv – that are away from the actual battlefield, but also mused about tactical nuclear weapons.In response, Ukraine’s Western backers are further stepping up military assistance. On October 28, the US authorised another $275 million-worth of arms, munitions and equipment for Ukraine. This brings the total American military assistance to $18.5 billion since the beginning of the Biden administration. In the days ahead, Ukraine is expected to receive bigger quantities of more sophisticated weapons, such as air-defence systems and hi-tech drones.Medium108403454 Rising Defence SpendWith so much money for new orders, the global defence industry has hit a sweet spot. This is also because, as a March report by Janes points out, Russia’s invasion of Ukraine has pushed up everyone’s defence spending. Globally, the total spend will be a record $2.08 trillion this year, boosted by recent spending increases across Europe that has added $30.7 billion to its defence budgets this year, with 80% of this attributed to Germany.Medium108403456 Ukraine’s Supply LinesAn analysis of the military aid provided to Ukraine shows the scale of the military spend and the quantities of weapons being moved. According to the Ukraine Support Tracker, an initiative of Germany’s Kiel Institute For The World Economy, between January 4 and October 3 this year the US committed 27.6 billion euros in military assistance to Ukraine, of which 15.2 billion euros was towards specific weapons and equipment. This was followed by Poland’s pledge of 1.8 billion euros in specific military hardware, the UK’s 1.5 billion euros and Germany’s 0.7 billion euros.A list of the military items actually delivered to Ukraine provides clues to what kinds of weapons need to be replaced in the inventories of the donor nations, and which arms manufacturers are benefitting from fresh orders.As per the tracker, some of the significant military equipment delivered by the US includes Stinger anti-aircraft systems (made by Raytheon), Javelin anti-tank weapon systems (Raytheon and Lockheed Martin), Switchblade tactical unmanned aerial system (AeroVironment), M777 howitzer (BAE Systems), HIMARS multiple rocket launchers (Lockheed Martin), and a variety of ammunitions and armoured tactical vehicles.Meanwhile, the significant UK deliveries include Starstreak anti-aircraft systems (Thales), NLAW anti-tank weapon (Saab Bofors Dynamics-Thales), and armoured vehicles like the Mastiff 6x6 (Force Protection Inc). Germany has provided Gepard rapid-fire armoured vehicles and Panzerfaust 3 anti-armour weapons (Dynamit Nobel AG), while France has supplied CAESAR howitzers (Nexter Systems).Medium108403457 Medium108403458 Medium108403459 Medium108403461 Defence Cos Raking It InSince many of these platforms need to be replenished in the inventories of donor nations, fresh orders are being placed and production chains are being ramped up. As a result, arms manufacturing companies have seen their stocks trend upwards since the start of the war. In fact, defence stocks have outperformed global markets this year. Since the beginning of the war in February, shares of BAE Systems had risen by 37% in September. Over the same period, Lockheed Martin saw a growth of 8%, General Dynamics (makers of armoured vehicles) 5.6%, Northrop Grumman (makers of warheads and hypersonic missiles) 26%, and AeroVironment 80%.Medium108403462 New Players Cash InAdd to this windfalls for previously little-known defence firms like Turkey’s Baykar Makina, makers of the Bayraktar TB2 drones that achieved an almost legendary status among Ukrainian forces in the earlier part of the war. Baykar is owned by Selcuk Bayraktar – son-in-law of Turkish President Recep Tayyip Erdogan – and his brother Haluk. Kyiv had been buying Baykar drones even before the start of the war and there are talks of the Turkish company even setting up a factory in Ukraine, although some complications appear to have cropped up in that project. In August, the company had said it was working on increasing its production capacity and that it had a three-year order backlog.On the other side, Russia has turned to Iranian-made drones like the surveillance and attack Mohajer 6 – which is analogous to the Bayraktar TB2 – and the Shahed-136 kamikaze drones (manufactured by Iranian Aircraft Industrial Company) that have been used against critical Ukrainian infrastructure in recent weeks.Interestingly, according to a new report from the Institute for Science and International Security in the US, the Iranian drones have been found to be manufactured with Chinese components. In fact, the Shahed-136 drone uses an engine made by Beijing MicroPilot Flight Control System, which is a copy of a German engine.Clearly the war in Ukraine has not only been good for defence firms’ balance sheets, it is also spurring the testing of new systems, weapons collaborations and tactics. The conflict is heralding a new era of warfare with greater integration between troops and unmanned platforms. Arms merchants are already prepared for the next big war.