Who gains from the Ukraine war?

 

When the Covid-19 pandemic steamrolled its way into every country, fearful national leaders turned to the western medical establishment and pharmaceutical companies. As a result, Big Pharma and related businesses saw a staggering surge in profits.

Now, with the latest war – this time in Ukraine – in full swing and fears about national security going through the roof, guess who is making the moolah? Yes, conflicts bring cheer to weapons makers, traders and smugglers.

The difference between the above two industries is that while the pharmaceutical industry contributes towards prolonging life, the arms industry contributes towards terminating life.

The sad reality of life is that some groups and individuals will gain when conflicts or tensions arise between nations. So, despite the economic turmoil roiling the world, weapons makers and traders are assured of continued work and profits.

A December 2021 report by the Stockholm International Peace Research Institute (SIPRI) says sales of arms and military services by the industry’s 100 largest companies totalled US$531 billion in 2020, an increase of 1.3% in real terms compared with the previous year.

SIPRI says sales of the top 100 arms companies in 2020 were 17% higher than in 2015, the first year for which SIPRI included data on Chinese firms. It marked the sixth consecutive year of growth in arms sales by the top 100.

Arms sales increased even as the global economy contracted by 3.1% during the first year of the pandemic.

Alexandra Marksteiner, researcher with the SIPRI military expenditure and arms production programme said: “The industry giants were largely shielded by sustained government demand for military goods and services. In much of the world, military spending grew and some governments even accelerated payments to the arms industry in order to mitigate the impact of the Covid-19 crisis.”

Writing in The Conversation on March 9, professor Peter Bloom of the University of Essex noted that the shares of two US arms manufacturers, Lockheed-Martin and Raytheon Technologies, were up by around 16% and 3% respectively since the invasion, against a 1% drop in the S&P 500. BAE Systems, the largest player in the UK and Europe, he said, was up 26%.

“Of the world’s top five contractors by revenue, only Boeing has dropped, due to its exposure to airlines, among other reasons.”

Bloom added: “What the west and Russia share is a profound military industrial complex. They both rely on, enable and are influenced by their massive weapons industries.”

Bloom went on to quote the Jan 25 remarks by Gregory J Hayes, the chief executive of Raytheon: “We just have to look to last week where we saw the drone attack in the UAE… And of course, the tensions in eastern Europe, the tensions in the South China Sea, all of those things are putting pressure on some of the defence spending over there. So I fully expect we’re going to see some benefit from it.”

According to an AFP report on April 3, defence contractors are seeing long term benefits from the war in Ukraine.

It notes that Raytheon and Lockheed-Martin made revenues of US$64 billion and US$67 billion respectively last year.

AFP quoted Burkett Huey of Morningstar, a financial services company, as saying that the war in Ukraine had reshuffled the geopolitical order in a way that hadn’t been seen in the past 30 years and that nations would feel the need to increase investment in defence products. This, he added, would profit arms manufacturers.

The upshot of all this is that the Ukraine war is benefitting arms manufacturers and traders. Along the way, arms smugglers, militants and terrorists will benefit too.

The tragedy of it is that a proliferation in weapons manufacture and sales to feed those involved in conflicts will not only make the world less safe but will also add to the already massive refugee problem.

In the long term, we will all be affected by the resultant insecurity and instability – including weapons makers, traders and their families. Don’t they see it? In the end, nobody gains.

For us right now, the question is whether the Ukraine war will spark a race among countries in Asia and Southeast Asia to acquire more weapons. The answer has to be yes.

China’s claims to territory in the South China Sea, including areas belonging or claimed by Malaysia and several member-states of ASEAN, has been causing tension for some years now. This has led to many of these nations increasing military spending to shore up their defence.

Data prepared by SIPRI show that military spending increased by 33% between 2009 and 2018 in Southeast Asia and that arms acquisitions in the last decade were about twice those of the previous decade.

One would have thought that the US was the largest supplier of arms to the region but that is not the case. According to SIPRI, Russia is the largest supplier of major arms to Southeast Asia, accounting for more than a quarter of all deliveries in the past 20 years.

With the war in Ukraine, the Russian supply will be stopped or reduced. Will China take the opportunity to fill the void? Or will some other country do so?

SIPRI says China allocated an estimated US$293 billion to its military in 2021, an increase of 4.7% compared with 2020. China’s military spending, it notes, has grown for 27 consecutive years.

Whatever China does will have an impact on Southeast Asia, especially on the claims and counter claims over parts of the South China Sea. Will we see an escalation in tensions? - FMT

The views expressed as those of the writer and do not necessarily reflect those of MMKtT.