Although at its zenith at the end of the Cold War, by the end of the century the arms industry in Britain, just as elsewhere in the world, had begun to contract. Defense spending by the UK government had fallen from 3.4% in 1993 to a mere 2.6% in 1999. The absence of a potent global threat had significantly reduced the need to maintain previous levels of procurement. The fall of the Soviet Union and the defeat of Saddam in the first Gulf War marked a definite shift as Western states reduced their contracts and expenditures. Not only was the arms industry becoming surplus to requirements, but it also seemed unable to extricate itself from a continuous pattern of corruption scandals. Matrix Churchill’s sale of parts to Iraq necessary to build a ‘supergun’ in breach of an arms export ban is one example. Another was the numerous controversial deals made between BAE systems and Saudi Arabia which have found their way into the judiciaries of both UK and US governments.  Throughout the nineties these scandals, often involving MP’s, helped to steadily bring the arms industry’s necessity into disrepute.
The accession of Labour to the political fore in 1997 came with a promise to engage in ethical foreign policy and to, “make Britain once again a force for good in the world”. The opportunity for this re-invention of the business came in 2001, and not only for the UK market. Al’Qaeda’s attacks in New York presented world leaders with a new challenge, global in its extent and serious in the threat it posed. Regimes and states all over the world now sought the means to defeat and suppress militant terror networks within their borders. The US and Britain have risen to this growth in demand, sizeably increasing their market share. In the last 5 years Britain has risen to a clear second place with $53 billion of sales behind the U.S.’s $63 billion and leaving their nearest rival, Russia, with only $33 billion.
Both Britain and the U.S. have been keen to attract custom in many states considered more moderate, especially in the Middle East. In the hope of containing such viable threats as Iran and Syria, nations must be equipped with the capabilities, not only to rout out internal extremism, but also to present a bolstered resistance to so-called ‘rogue’ states. With the significant oil wealth of the region, regimes are often keen to become a strategic ally of the U.S. if it allows them to acquire the latest defense technology.
The effects of the global economic downturn may pose some risks to the continuation of this model. Despite the wealth of the region, and the regimes’ appetite for arms, their reliance on oil may prove decisive. The fall in oil prices from $150 a barrel at the peak of last year to a mere $40 is reflective of the falling demand as many consuming countries downsize their expenditures. This is likely to have a damaging effect on sales as Middle Eastern states seek to balance their budgets. The military intelligence specialists ‘Jane’s’ have argued that although large contracts ($5 billion) were concluded at the IDEX exhibition in Abu Dhabi, many of these are to be paid over several years and were arranged some time ago. Other arms suppliers however have questioned this. According to the Middle East chief of Raytheon P.T. Mikolash, the regional tensions will continue to fuel demand and, ‘there is every confidence in their ability to drive on their acquisition schemes.’ The suggestion appears that states will continue to trump calls for decreases in defense expenditure as economies contract with issues of national security and counter-terrorism. With the definitional characteristics of the War on Terror so loosely defined, and no specific end in sight, it is likely that sales will continue to increase well into the future.
A poignant example of the ability of governments to maintain loyal to their arms suppliers is that of Iraq. Despite the internal turmoil and significant costs of rebuilding, the government has approached U.S. firms such as Lockhead Martin with a wish-list including Abrams tanks, attack helicopters, hellfire missiles and f-16 fighters. The prospective order of fighter planes alone would cost $3.6 billion with a further $12.5 billion of prospective orders in 2008. Whilst these sales are defended by arms suppliers and the U.S. government alike on the grounds that they will reduce reliance, the fact that Saddam himself had previously been equipped with U.S. weaponry should not be forgotten.
With the arms industry’s predilection for broadening its market horizons it is likely that Iraq will be by no means the most worrying case of defense sales. As the scale of globalization increases, companies are presented with ever greater opportunities to flout restrictions on sales. Embargoes and control laws can be bypassed through outsourcing and offshore business registration. Despite the place which many of these companies are claimed to hold in bolstering the allies in the War on Terror, it may be that their eagerness for sales may extend to the other side of the conflict. The ‘Arms without Borders’ report by Oxfam and Amnesty International has reportedly found evidence that in the Palestinian conflict, British arms found their way onto both sides. Companies flouted regulations to supply Israel with helicopter parts at the same time as selling equipment to Iran which was later found in the possession of Hizbollah.
The fight against global terrorism and militancy has clearly provided many companies with new opportunities. Some of these opportunities, presented by the eradication of regimes and the two sided nature of conflict, may not be so beneficial to the aims of peace and security. It is clear however, that as long as conflict continues to intensify, arms suppliers will be significant beneficiaries.