Types of Arms Markets

Konstantin MAKIENKO

At present, the vast majority of reports about the arms trade focus on the mere description of their regional structure and product range. How­ever, this does not comprise a comprehen­sive and in­sightful analysis, as very often such reports ig­nore the motives and patterns of be­havior as de­scribed by Max Weber, that stand behind im­porter's deci­sions. To bridge this gap, this arti­cle offers a range of definitions of the arms markets derived from the types of behavior demonstrated by im­porters. We also have to understand that these types tend to work in combination, with one or the other being dominant.

Types of behavior patterns will be considered in this article as applied to regular and occasional markets.

Regular markets

Such markets are characterized by regular arms acquisitions made in line with planned replace­ment of obsolete and/or aging armaments. In general, one can forecast demand on the regular market given the time of previous arms pur­chase, the service life of a particular generation of ar­mament, and the financing allocated for arms procurement in the country involved. The supplier is selected on the basis of a complex combination of financial, technical, political and economic factors as well as the ability of the exporter to offer delivery guarantees and at­tractive offset programs. Under offset programs, the customer may import technologies and re­ceive other eco­nomic benefits.

As a whole, regular markets are shaped on the basis of peacetime acquisitions by countries that are not facing an immediate military threat.

Occasional markets

Occasional acquisitions are usually made in cases where the importer is involved in a mili­tary con­flict or is facing a serious threat of such con­flict. The ability of the exporter to deliver arms to a tight deadline is a predominant factor on such markets. Moreover, occasional markets are dominated by the demand for relatively sim­ple and inexpensive arms systems. Another key factor is ensuring the adequate combat potential of weapons systems and the ability of the armed forces of the recipient country quickly to learn how to use them effectively.

Types of importer motives/behavior

The structure of the objective requirements of the importer country overlaps with a more com­plex system of motivations held by its adminis­trative, military and financial bureaucracy. If demand simply reflects the requirements in arms acquisi­tion, motivation can reflect either corpo­rate or/and individual interests and viewpoints of the parties involved. The diversity of these mo­tives is manifested mainly on the regular market while the occasional market, is influ­enced by subjective factors to a lesser extent, and allows for decision-making only on a ra­tional and even formal basis. Therefore, the five motives listed below apply mainly to regular markets. How­ever, in theory, the structure of decision-making for occasional markets should be close to the fifth (i.e. ration­ally pragmatic) type of motivation.

Below we suggest the following types of moti­va­tion inherent with arms importers:

The Corruption-related model. This type of motivation is characterized by the fact that, at the time of purchase, the corporate or personal financial gain of the importer coun­try's leader­ship prevails over its government or national se­curity interests. This model is pri­mar­ily typical of the Muslim countries and Latin America. In addition, it is quite strong in India and in South and Southeast Asia. With commis­sion payments to mediators banned by law in the United States, it is primarily this motivation constrains US technological, financial and po­litical domi­na­tion. There are serious reasons to believe that the corruption-related model of motivation pre­vails among importers.

The Dependent customer model. As part of this model, arms and other military hardware that are being traded as an intermedi­ate com­modity are designed to conceal the true subject of the trade. Under the guise of arms de­liveries the importer is in fact buying guaran­tees for its national security. This type is pri­marily typical of countries with excessive capi­tal, which are, however, unable to ensure their own na­tional security due to demographic or cultural reasons. The Persian Gulf oil monar­chies repre­sent the best example of such a model. Traces of depend­ency can also be de­tected in the arms ac­quisi­tions of Japan, Israel and to a lesser extent in Taiwan and South Ko­rea. Therefore, in order to operate successfully in this market, the ex­porter country should have a relevant political weight behind it. Moreover, the reliability of its mili­tary and political guar­antees should not be ques­tioned. Having a mu­tual security treaty as well as the deployment of troops and/or the presence of military advisors of the exporter country in the importing state, the importer's status as an ally, partner or a friendly nation can serve as formal signs of the dependency pat­tern.

The Political model. The decision to import this or that type of arms depends largely on the po­litical orientation of the importer country. This pattern is mostly typical of the post-Com­munist countries in Eastern Europe and coun­tries like Malaysia and Britain. Political moti­vation differs from the dependent motivation in that the im­porter coun­try is not facing any real threat to its security. Its arms ac­quisitions dem­onstrate the country's political and cultural preferences rather than efforts to ensure security guarantees. Preferences can be pro-West­ern (Central and Eastern Europe), anti-Islamic (In­dia), anti-American (China) or pluralistic (Ma­laysia). In most cases a country would rely mainly on one or two exporters. In the case of Malaysia, which demonstrates geopolitical and economic plural­ism, on the contrary, there is a deliberate diversi­fication of sources of arms de­liveries.

The Blockade model. A large number of coun­tries that are in urgent need of upgrading their hard­ware live in condi­tions of either an official or en­forced siege. Here, Iraq is the best ex­ample. Libya, Syria and Iran also have elements of this model in deliver­ies of up-to-date conventional weap­ons. Taiwan represents a special case. Though Taiwan's type of motivation should be regarded rather as de­pendent, it still has some clear signs of the blockade type as well. The United States as Tai­wan's main arms supplier pursues a policy of per­forming its deliveries in doses just like a pre­scription, in order to prevent an escalation of tension with continental China. As a result, Tai­wan has a shortage of offensive weapons such as long-range attack aircraft, non-nuclear attack submarines and high-tech tactical missiles. Paki­stan is close to the this model.

The Rational-pragmatic model. A decision to import arms is made depending on how the price, effectiveness and adequacy of a weapons system corresponds with the require­ments of the national armed forces of particular countries. Here, the decision-making process is especially evident in countries with a competent bureaucracy and low corruption levels such as Western Europe, China, and to a certain extent, India. Within this type we can single out the industrial-technological motivation, whereby preference is given to the exporter who offers the best offset arrangement or transfer of tech­nology rather than just the best commodity. Exporters that have a stake in leading defense companies of the importer country have the best chance in this sub-type. For instance, such an arrangement ex­ists in the consortium of French companies own­ing 20 percent in Brazil's Em­braer, and U.S. Lockheed Martin having a stake in South Korea's aerospace KAI company. In this market segment the main competition is for the right to get a stake in national defense companies, mainly in the aerospace sector.

The market motivation typology is summarized is Table.

Table 1. Types of arms markets

Type	Main features	Formal indicator	Predominant markets	Predominant exporters	Key export strategy
Corruption-related	Aimed at satisfy­ing corporate or private financial interests	Low CPI* index of the government bureaucracy in the im­porter country	Muslim coun­tries, India, Greece, South­east Asia, South America, Africa	Russia, France, Ukraine	Identification of ef­fective mediator, gen­erous commission of­fer
Dependent	Arms imports only an element of im­porting of com­prehensive mili­tary security	Mutual secu­rity treaty, deployment of troops and/or advi­sors in the importer country having for­mal status of ally, partner or friendly nation	Arab Persian Gulf monar­chies, Israel, South Korea, Taiwan, Japan	USA, UK, France	Formal or informal security guarantees, deployment of troops in the importer coun­try
Political	Geopolitical and/or cultural orientation of the importer		Central and East Europe, China, India, Malaysia	USA, Europe, Rus­sia	Enhancement of the competitiveness and attractiveness of the socio-political and cultural model
Blockaded	The importer tries to circumvent an embargo and get access to necessary arms systems	Existence of international and/or na­tional arms embargo to particular country	Iraq, Iran, Libya, Syria, Pakistan	China, North Korea, Ukraine, Belarus	Most exporters ignore such markets
Rational pragmatic	Choice on the ba­sis of rational, of­ten formal crite­ria, primarily cost effectiveness and the competitive­ness of offset and license programs.	High CPI rates	West, Central and East Europe, Chili, Brazil, China	USA, France, in some cases Russia	The reduction of the product price, the improvement of its technical parameters, formation of indus­trial alliances, attrac­tive offset programs and technology trans­fers

* CPI (Corruption Perception Index) is annually calculated by Transparency International on the basis of expert polls. It reflects the perception of the degree of corruption in a country by the respondents. High figures mean a low level of corruption of the bureaucracy in a particular country, low rates - a high degree of corruption.