Saudi Arabia has replaced India as the largest defense market, according to “Global Defense Trade Report,” a study from U.S. IHS Inc. Already the largest importer of weapons, Saudi Arabian imports increased by 54% between 2013 and 2014 and, based on planned deliveries, imports will increase by 52% to $9.8 billion in 2015. One out of every $7 spent on defense imports in 2015 will be spent by Saudi Arabia.

In 2014, global defense trade increased for the sixth straight year to $64.4 billion, up from $56.8 billion. “Defense trade rose by a landmark 13.4% over the past year,” said Ben Moores, senior defense analyst. “This record figure has been driven by unparalleled demand from the emerging economies for military aircraft and an escalation of regional tensions in the Middle East and Asia-Pacific.  When we look at the likely export addressable opportunities at a global level for the defense industry, five of the 10 leading countries are from the Middle East. The Middle East is the biggest regional market, and there are $110 billion in opportunities in coming the decade.”

Saudi Arabia and UAE together imported $8.6 billion in defense systems in 2014, more than the imports of Western Europe combined. The biggest beneficiary of the strong Middle Eastern market remains the U.S., with $8.4 billion worth of Middle Eastern exports in 2014, compared to $6 billion in 2013.

The second tier of exporters to the Middle East is led by the UK with $1.9 billion, the Russian Federation with $1.5 billion, France with $1.3 billion and Germany with $1 billion. In 2014, China jumped from the world’s fifth to the third largest defense importer. “China continues to require military aerospace assistance from Russia, and its total defense procurement budget will continue to rise very quickly,” said Paul Burton, Director of Defense Industry and Budgets.

IHS forecasts that fast-emerging exporter South Korea will become a regional leader in the coming decade. Some $35 billion in new contracts will come online within the next decade and the South Korean defense industry is forecast to win $6 billion in new business within East Asia. South Korea looks set to be the rising star of the Asia-Pacific defense industry.

Russia exported $10 billion in 2014, an increase of 9% from 2013. China was the largest recipient of equipment ($2.3 billion) followed by India ($1.7 billion), and Venezuela and Vietnam ($1 billion each). After years of sales growth, Russian industry exports now face challenging times. A drop-off in exports is forecast for 2015 as major programs draw to a close, a trend that could be accelerated by sanctions.

Furthermore, declining oil prices are set to have a devastating impact on some lead Russian clients, who are vulnerable to low oil prices, such as Venezuela and Iran. This problem is compounded as Chinese industry becomes increasingly less dependent on Russian technology.

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