Wednesday 30 Jul 2014

Jane's Annual Defence Report

IHS Jane's Annual Defence Report reviews the 2013 state of defence for several key regions; The Americas, Europe, Asia-Pacific, the Middle East and Africa, with outlook into the year ahead in 2014.

The 40-page guide also highlights changes and trends within the worldwide industry, including:

  • Top-level consolidation
  • Mergers and acquisitions
  • Markets
  • Trends
  • Forecasting

The military-geopolitical year in review.

The past 12 months have certainly served to reemphasise that the post-Cold War global paradigm continues to shift – and not to a safer state. We thus head into 2014 with an ongoing and bloody conflict in Syria, and the potential for an Israeli attack on Iran’s nuclear facilities. The prospect of the latter, during that closing window of opportunity when it could still make a difference to whether Tehran becomes a nuclear-armed state or not, now seems to be beyond mere rhetoric. Of  the military geopolitical red lines in the world, this is certainly one that is most clear cut.


The Americas

The US military in 2013 has weathered a difficult budget scenario that included a last-minute sequester, civilian furloughs, a government shutdown, and a still-uncertain future.  Meanwhile, officials have also been transitioning the security lead in Afghanistan and rebalancing efforts towards the Asia-Pacific region.

The halls of the US military’s massive Pentagon complex have throughout 2013 mainly been filled with chatter about the highly uncertain budget issues facing the Department of Defense (DOD).

Congress and the White House remain locked in a three-year-long imbroglio over how to reduce the US public debt: a situation that has caused historic upheaval in the budget approval process. Democrats control the presidency and Senate and believe taxes should be raised and government spending mostly continued, while republicans control the House of Representatives and believe taxes should remain low and government spending cut.

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While many of the traditional major European defence markets continued to suffer falling budgets in 2013, Turkey and Poland cemented their place as emerging European defence players.  Meanwhile, Russia continued apace with its massive military rejuvenation efforts.

Defence budgets continued to fall in Western Europe, while even the growing economies in Eastern Europe saw their growth levels slow in 2013, leading to consequent trimming of budget plans.

The most notable cuts of the year came in August from France, whose Projet de Loi de Programmation Militaire (LPM) 2014-2019 saw widespread cutting of force numbers, similar to that announced by the UK’s 2010 Strategic Defence and Security Review.  Even Poland, which has been significantly increasing defence spending in recent years, had to slightly trim its overall defence budget this year – even if procurement was unaffected.  Budget growth continues to escalate rapidly in Russia and Turkey, albeit at a slightly lower than expected pace.

The end of the year promises a meeting of EU leaders to discuss defence policy, with many holding out hopes for tangible measures on streamlining European defence processes, industry, procurement, and co-operation.  For a number of  Western nations, co-operation through NATO and in particular ‘Smart Defence’ efforts continue to play a large part in their plans – although several countries remain sceptics.  As great a priority for NATO’s European nations is maintaining their levels of interoperability, which are currently at an all-time high following 12 years of coalition warfare in Afghanistan.

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Asia Pacific

Maritime territorial spats, Indian procurement hits and misses, uncertainty in Afghanistan, arms build-ups in Southeast Asia, and the continuing rise of China: regional trends stayed the same in 2013 even as the situation on the ground changed.

The Asia-Pacific region’s status as the world’s most populous and dynamic economic zone is tempered by the fact that it is riven with unresolved territorial disputes.  These – as well as continued concerns over China’s military development – are driving defence spending across the region.  This has been characterised by some as an arms race, although it may be better viewed as a region-wide material upgrade propelled by resource competition, rising government revenues, and declining markets elsewhere in the world.  

Expect more of the same in 2014.  It is unclear whether any of the governments with interests in the region have answers to the big strategic questions: China’s rise, Afghanistan’s future, North Korea’s nuclear weapon programme, and myriad territorial disputes.

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The Middle East and Africa

War’s coups, military intervention and terrorism made 2013 another eventful year for the Middle East and Africa.  It was also a year that saw diplomacy triumph – at least for the time being – over military options, as Syria committed itself to disposing of its chemical weapons and Iran agreed to freeze its nuclear programme.

The situation in the Middle East looked increasingly grim in 2013.  As Iran and its Lebanese ally, Hizbullah, continued to prop up President Bashar-al Assad in Syria the regions’ Sunni-Shia power struggle became even more pronounced, while various Gulf States fuelled the insurgency and foreign jihadists poured into the country.

It was also a year that saw two potentially historic agreements to neutralise Syria’s chemical weapons and Iran’s ability to produce weapons.  Yet US efforts to find a peaceful resolution to the Iranian stand-off, its reluctance to facilitate Assad’s demise, and its attempts to encourage Egypt back to democracy after a military coup provoked a backlash from some of its regional allies.

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In 2013 the challenges of budget cuts and the need to restructure to survive were largely met with stoicism in the Western world, while industry in the East increasingly looked to international expansion.

For the US and European defence sector, 2013 was one of the more significant of recent years.  The fog of uncertainty that shrouded the industry as 2012 drew to a close thickened as the New Year dawned.  Fears over the impact of US sequestration were realised, leading to a frenzied atmosphere on Capitol Hill, and a sense of confusion about the future of the defence industry reigned.

In times past, European contractors would have watched with a sense of detachment.  Heaving investment in the US defence market over the preceding decade, however, and reliance on US spending to bolster weak domestic demand, served to spread the fear across the Atlantic.

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