Weapon trade: the multibillion-dollar business - February 05, 2017

Weapon trade: the multibillion-dollar business

Approximately 2.6% of global GDP is spent on arms, so it’s safe to say that weapon industry is one of the biggest of the World. Now a data scientist looked deep into it to see the international relations behind the multibillion-dollar business.

Hai Nguyen Mau used data from Stockholm International Peace Research Institute (SIPRI) and figured out that between 2011 and 2015 weapon trade totalled at $135 billion. He also created a graph to visualize how countries trade with each other. As he wrote on his page: “arms trade can offer an interesting and quantifiable perspective on global influence and international relationships”.

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He might be very well right. As we can see from the chart, the biggest exporters are the United States and Russia. There are other participants on the market, though not many. China and the EU (lead by Germany) also have parts of global exports. Altogether the US, Russia, China and the EU almost account for 95% of exports, while the US and Russia alone have close to 62% of the billion-dollar trade.

But there is another interesting thing to notice: most countries are importing from either the US or Russia, and there are only a few countries that import from both. Hai Nguyen Mau believes that clustering countries this way shows a lot about international relations as most governments must agree upon selling arms to other countries, even if the business is made by independent companies. Altogether: western and eastern countries are usually staying in their own clusters, as it was in the past during the era of the Soviet Union.

Some things are changing, though. The US and Europe is cutting back its military expenditure while Asia and Oceania is spending more and more. The numbers also show that “Russia and China are catching up to the military supremacy of the US with an unprecedented speed since the Cold War”. Hai Nguyen Mau believes that the end of western supremacy may come to an end.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving high returns on their investments.