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Defense, this is how companies from Israel, Turkey and South Korea do business with the war in Ukraine

Defense, this is how companies from Israel, Turkey and South Korea do business with the war in Ukraine

Sipri's latest annual report shows that in the arms race in Ukraine, the revenues of companies in the United States are stalling while those of defense companies in Israel, Turkey and South Korea are increasing.

Despite solemn promises from both the US and the EU to support Ukraine's war efforts to the end, their defense companies are struggling to keep up with the needs needed to fuel a high-intensity war. And, as the new Sipri ranking of the main global armaments producers shows, the ones who benefit, at least for now, are companies from third countries such as Israel, Turkey and South Korea. Here is what Politico writes about this singular paradox.

THE PARADOXES OF THE SIPRI REPORT ON THE ARMS RACE

If it is the entire West that has promised to make every possible effort to arm Ukraine and strengthen its anemic defense systems, it is in reality companies in countries such as South Korea, Turkey and Israel that are reaping the benefits.

This is demonstrated by the latest analysis of the sales of armaments and military services by the one hundred main global contractors compiled by the Stockholm International Peace Research Institute (Sipri), which shows how the arms producers of those countries have increased their turnover in the months following the day on which the Russian invasion of Ukraine began.

Türkiye, ISRAEL AND SOUTH KOREA ON THE PODIUM

The largest Turkish defense companies, for example, saw their revenue increase by 22% in 2022 compared to the previous year, reaching $5.5 billion, much of which ended up in the coffers of the drone manufacturer Baykar.

In the same year, the aggregate revenue of the three Israeli groups included in the Sipri ranking increased by 6.5% compared to 2021, reaching 12.4 billion.

A slight decline (0.9%) was instead recorded in the revenues of the four South Korean companies included in the ranking, mainly due to an 8.5% drop in sales of the country's main manufacturer, Hanwha Aerospace; however, this decline is offset by massive new orders placed this year from Poland and the United Arab Emirates.

WHAT POLAND ORDERED

Poland has ordered a large number of K2 Break Panther tanks, K9 howitzers and FA-50 fighters. Warsaw is a historic US customer that was forced to turn to South Korea due to production delays by American companies.

This was confirmed by Polish Defense Minister Mariusz Blaszczak, who explained last year that “due to limited industrial capabilities, it will not be possible (to fulfill our orders) in a satisfactory time. Therefore we have started talks with South Korea."

DROP IN US TURNOVER

Meanwhile, the turnover of the 42 largest US companies fell by 7.9% to 302 billion in 2022. Although they remain at the top of the Sipri list, the three giants Lockheed Martin, Raytheon and Boeing all saw sales decline in 2022.

As researcher Sipri Nan Tian explained to Politico , “we are starting to see a flow of new orders related to the war in Ukraine and some large US companies , including Lockheed Martin and Raytheon, have received new orders. However, due to these companies' existing backlog and difficulties in increasing production capacities, the revenue from these orders will likely be reflected in the companies' accounts in only two or three years."

THE TRAB OF THE EU

The same situation was found by Sipri also for the European defense industries. As another Sipri researcher, Lucie Beraud-Sudeau, clarified to Politico , “many companies have faced obstacles in adapting to high-intensity warfare production. However, new contracts have been signed, especially for ammunition, and this should translate into higher revenues in 2023 and beyond.”

COMMON DIFFICULTIES IN THE US AND EU IN WEAPONS PRODUCTION FROM THE SIPRI REPORT

According to the researcher, both American and European groups have to deal with the same set of problems: difficulty in finding manpower, growing costs and bottlenecks in production chains.

The EU has vowed to strengthen its defense sector while seeking to ensure that new funding, both national and EU, benefits domestic producers. But as Estonian MEP Riho Terras bitterly noted, "Poland buys from South Korea, Estonia from Turkey, and we are not capable of allocating European products to our armed forces."

MEANWHILE RUSSIA…

The big loser in the new Sipri ranking is Russia: the only two armaments companies included in that list saw their revenues fall by 12%, reaching the figure of 20.8 billion.

According to Beraud-Sudeau, it can be hypothesized that the new contracts wanted by the Kremlin to support the war efforts have not yet been reflected in the company accounts because the government is delaying payments, forcing contractors to resort to bank loans to cover the costs.


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/difesa-ecco-come-le-aziende-di-israele-turchia-e-corea-del-sud-fanno-affari-con-la-guerra-in-ucraina/ on Tue, 05 Dec 2023 15:15:28 +0000.