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Defense Economics. Frank Killelea National Security Analysis Department Johns Hopkins University Applied Physics Laboratory March 2005. Note: Additional explanatory material can be found in the Notes view. Distribution Statement A – Approved for Public Release; Distribution is Unlimited.

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defense economics

Defense Economics

Frank KilleleaNational Security Analysis DepartmentJohns Hopkins University Applied Physics Laboratory

March 2005

Note: Additional explanatory material can be found in the Notes view

Distribution Statement A – Approved for Public Release;

Distribution is Unlimited

abstract
Abstract

This analysis identifies economics factors and conditions that are important to a nation-state’s ability to develop, acquire and sustain significant military forces and capabilities. It examines readily available economic data which influence the size and direction of a country’s defense spending. It is less applicable to subnational and transnational threats whose financial and arms requirements tend to get lost in the background noise.

This report is an occasional paper of the APL National Security Analysis Department

Its ideas are intended to stimulate and provoke serious thinking.

Not everyone will agree with them. Therefore it should be noted that this

report reflects the views of the author alone and does not necessarily imply

concurrence by APL or any other organization or agency, public or private.

executive summary 1of 4
Executive Summary (1of 4)

This analysis identifies economics factors and conditions that are important to a nation-state’s ability to develop, acquire and sustain significant military forces and capabilities. It examines readily available economic data which influence the size and direction of a country’s defense spending. It is less applicable to subnational and transnational threats whose financial and arms requirements tend to get lost in the background noise.

The base year for this update is 2002, the latest year for which data were available. Where available, pertinent data on subsequent years have been included.

This analysis addresses:

 Economic factors that support or inhibit defense spending

 Defense and military R&D spending and trends

 Weapon costs and trends

 Arms transfers and trends

 Defense industries and trends

 Defense economics impact on military capabilities

 Defense economics impact on US military spending

 An economically influenced view of global threats. (Asymmetric threats are included to remain consistent with data contained in the previous external environment assessment.)

executive summary continued 2 of 4
Executive Summary Continued (2 of 4)

Since last updated:

  • Global defense and R&D spending has trended upward led by the US, China, and Russia to a lesser degree. Other countries spending more include India, Iran, Brazil and South Korea. Most countries spending, however, has either remained flat or increased/decreased slightly.
  • The value of global arms transfers, which decreased over 70% from the mid-80s through 2002, has shown no signs of leveling off.
  • Escalating weapons costs have continued to outpace defense budget growth making it difficult (actually impossible) for nations, including the US, to replace aging systems with new models on a one-for-one basis. Few countries can afford to purchase large numbers of modern combat systems.
  • Global defense industries have continued to contract and consolidate via mergers and acquisitions, with current trends favoring national and cross-border collaborations (teaming) in an effort to share development and production costs, and gain market access.

Some insights:

  • Defense economics analysis remains useful as a means of identifying countries capable of acquiring significant military capabilities that could challenge US forces.
  • It can alert decision-makers to countries with changing military aspirations, and in effect provide years of early warning to developing threats.
  • Defense economics can also help decision-makers prioritize weapons spending based upon global weapons development and acquisition efforts.
executive summary continued 3 of 4
Executive Summary Continued (3 of 4)

Findings:

  • Developing military capabilities in nation states is largely a function of defense spending. In 2002, 73% of the countries worldwide spent under $2B on defense. Eleven countries besides the US spent in excess of $10B, including four over $30B (China ~ $62B). Among the countries spending over $4B, Syria, Iran, Russia and China are probably the only ones that could be considered potential adversaries. (By way of comparison, the US defense budget in FY2002 was $344.8B.)
  • Escalating costs of all things military including weapons development and acquisition, personnel, operations and maintenance, and infrastructure have led many countries to smaller forces with mixed inventories, retaining older systems longer.
  • The high cost of military R&D has significantly limited the number of countries capable of developing and producing modern, sophisticated combat systems. Few new state-of-the-art systems, in all major weapon categories are being developed worldwide.
  • Many countries rely on others to develop the new systems and hope they can afford a few. Unfortunately, the cost of the latest models has escalated beyond the reach of most countries, resulting in a growing market for less costly used and/or upgraded combat systems.
  • The ratio of defense spending and escalating weapons costs is the most significant influence affecting acquisitions, force size and mix, arms sales, and the global defense industry.
executive summary continued 4 of 4
Executive Summary Continued (4 of 4)

Findings Continued:

  • Without the amortization of weapon costs across large unit buys, there is little hope to reduce the cost of new sophisticated combat systems to affordable levels.
  • It will become increasingly difficult to prevent sensitive technology transfers because of industrial offsets related to arms sales, and cross-border industrial collaborations to develop, produce modern weapon systems.
  • In the US, large federal budget and trade deficits, growing national debt and related servicing costs, and increasing social, welfare, health, infrastructure and domestic security costs will likely pressure non-war related defense spending downward as early as FY2006.
  • Defense modernization (R&D, Acquisition) will like absorb most cuts as military personnel, medical, and O&M accounts continue to grow as a share of the defense budget. Expensive programs will likely be reduced, stretched or cancelled to accommodate the reduced funding. Likely candidates include the F/A-22, Joint Strike Fighter, National Missile Defense, DD(X), Littoral Combat Ship, Airborne Laser, Army Future Combat System (FCS), and space systems.
  • Transnational threats are not dependent on large budgets to further their aims. Their employment of asymmetric tactics and inexpensive and readily available weapons and explosives make them a continuing and dangerous threat.
current and near term geo pol overview unsettled and challenging
Current and Near-Term GEO-POL OverviewUnsettled and Challenging
  • Post Cold War Period Unsettled and Dangerous
  • Regional Conflicts Could Involve US
  • TransnationalThreats More Prominent
  • Russia’s National Interests StillUncertain
  • China Perceives Greater Regional Role
  • NATO’s Future Role Unclear – Europe More Introspective
  • USEngaged
    • Countering Transnational Threats
    • Supporting Developing Democracies
    • Will Preempt to Defend Interests
  • Emphasis on Coalition OPS
  • Conflicting National Interests Challenge Coalition Solidarity, Effectiveness
international defense economics overview
International Defense EconomicsOverview
  • Economics Analysis Applicable to Nation-States; Much Less To Transnational Threats
  • Defense Economics Analysis
    • Identifies Countries Able to Acquire Significant Capabilities, Develop Sophisticated Systems
    • Provides Early I&W of Countries’ Changing Military Aspirations
  • Understanding the Economically Feasible Threat – That Which is Available, Affordable and Sustainable – Can Help Defense Planners
    • Focus on Potential Adversaries with Significant Capabilities
    • Prioritize Weapons Spending Based on Global Weapons Development and Acquisition Efforts
      • Few State-of-Art Systems in All Major Categories Being Developed
  • Not As UsefulAssessing Transnational/Terrorist Threats
    • Other Than WMD, Most Arms Are Low Tech, Inexpensive and Available
    • Data Not Readily Available
international defense economics cont d overview
International Defense Economics (Cont'd)Overview
  • Global Defense Spending
    • Affected by Strategic and Economic Considerations
    • Driven by Big Spenders, i.e., US, Western Europe, Japan, Russia, China
    • Unlikely to Return to Cold War Levels in Foreseeable Future
  • Defense Forces
    • Smaller Personnel- and Equipment-wise
    • Mixed Inventories, with Fewer Modern Systems
    • Growing Personnel and Operating Costs Pressure Procurement
  • Military R&D
    • Investment Driven by US; Western Europe to Lesser Degree
    • Few Can Afford
    • Few New Sophisticated Combat Systems Being Developed Worldwide
    • Europe Needs to Consolidate R&D Efforts to Reduce Duplication and Achieve Greater Investment Mass
  • Arm Sales
    • Fewer Domestic Sales for National Forces
    • Stiff Competition Among Defense Industries for Shrinking Foreign Sales
    • Prohibitive New Weapons Costs Increasing Market for Cheaper, Used, and Upgraded Systems
      • Upgrades and Maintenance are Not Cheap; Pool of Used Systems Growing Smaller
    • An Area in Distress and In Need of Realistic Market Analysis
international defense economics cont d overview10
International Defense Economics (Cont'd)Overview
  • Ratio of Defense Spending and Escalating Weapons Costs the Single Most Significant Influence on Acquisitions, Force Size and Mix, Arms Sales, and the Global Defense Industry
  • Previous Efforts to Reduce Costs Largely Unsuccessful
    • Major Defense Industrial Restructuring Has Not Slowed Price Escalation
    • Streamlined Acquisition Procedures, Including Less Oversight, Use of Commercial Products, Capabilities-Based Process Not The Answer
    • Still Waiting for Significant Hi-Tech Solutions
  • Without Significantly Lower Weapon Costs, Foreign Sales Will Continue to Decrease
  • Without Foreign Sales and Significant National Demand, Production Runs Will Be Short, Fewer Units Produced, and Unit Costs Will Continue To Outpace Defense Budgets
  • Amortization of Weapons Costs Critical To Lower Prices
    • Easy Answer is to Reduce Costs and Sell More – But – The Devil is in the Details
defense economics summary global defense spending
Defense EconomicsSummaryGlobal Defense Spending
  • Defense Spending Decline Bottomed in ’98 – Slow Climb Since
  • Military R&D Spending Also Bottomed in ’98
  • Arms Transfers Trend Still Down Since Mid-80s
  • Higher Priority Economic Considerations Gaining Greater Share of National Budgets
  • Sophisticated Weapons Cost More Than Systems Being Replaced
  • Fewer Costly New Hi-Tech Systems Being Acquired, Developed
  • Greater Competition For Fewer Arms Sales
  • Leaner Defense Industries
  • Sophisticated Systems Available, but Few Can Afford Many
  • Transnational/TerroristThreats Don’t Need Large Budgets, Expensive Weapons
notional worldwide defense spending trends

1998

Notional Worldwide Defense Spending Trends

DEFENSE BUDGETS

WEAPON COSTS

R&D

WEAPONS

TRANSFERS

$

MID-80s

2010

2002

CONSTANT 2000 $

TIME

VG#7

defense spending economic factors
Defense Spending Economic Factors
  • Economic Factors Impact World-Wide DefenseAspirations
    • Increasing Social, Welfare, Infrastructure Competition for Limited Revenues
  • Varying Combinations of Stagnant Economies, Budget Deficits, Large External Debt, Currency Devaluation, High Inflation, Trade Deficits, Limited Foreign Reserves, and Growing Population Drive Defense Budgets Down. Autocratic Regimes Can Delay This For Awhile.
defense spending key economic data
Defense SpendingKey Economic Data
  • Economic Factors That Affect Defense Spending
    • Gross Domestic Product (GDP)*
    • Population/Growth Rate/Literacy Rate
    • Per Capita Income
    • Natural Resources
    • Industrial/Agricultural/Output
    • Exports/Imports – Balance of Payments
    • Revenues*
    • Budget Surplus or Deficit*
    • External Debt*
    • Inflation*
    • Currency Devaluation*
    • Defense Budget/Allocation*

*Major Influences

macro economic factors inhibit defense budgets
Macro-Economic Factors InhibitDefense Budgets
  • Sustained annual Gross Domestic Product (GDP) growth below 3%, ornegative growth
  • Sustained annual inflation rate over 15%
  • External debt equal to or greater than annual gov’t revenues
  • External debt equal to or greater than 50% of GDP

More $

Current defense

budget level

Less $

Current year

+1

+2

+3

+4

Economic Factors

Note: Presence of more than one factor increases negative pressure on defense budget.

worldwide gdp defense spending trends
Worldwide GDP & Defense Spending Trends

Index: 1986 = 100

140

GDP

120

100

80

60

DEFENSE SPENDING

40

20

0

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Note: Over this period, worldwide GDP, excluding the U.S. increased by around

36 percent while defense spending decreased by over 30 percent.

Source: DIA DI-1912-15-00, Defense Intelligence Reference Document, “Worldwide Defense Expenditures, 1999(U),” Jun 2000

The World Bank: “2004 World Development Indicators”

SIPRI Yearbook-2003

World Bank Development Indicators Data Bank, 4 Jun 2004 query

VG#11

2002 economic data 1of 4
2002 Economic Data (1of 4)

Source: The World Bank “World Development Indicators – 04” SIPRI Yearbook – 2003 CIA “The World Factbook 2003” IISS “The Military Balance 2003/2004”

Note: *Range of values reflect differing defense budget estimates in source documents.

2002 economic data 2 of 4
2002 Economic Data (2 of 4)

Source: The World Bank “World Development Indicators – 04” SIPRI Yearbook – 2003 CIA “The World Factbook 2003” IISS “The Military Balance 2003/2004”

Note: *Range of values reflect differing defense budget estimates in source documents.

2002 economic data cont d 3 of 4
2002 Economic Data (Cont’d) (3 of 4)

Source: The World Bank “World Development Indicators – 04” SIPRI Yearbook – 2003 CIA “The World Factbook 2003” IISS “The Military Balance 2003/2004”

Note: *Range of values reflect differing defense budget estimates in source documents.

2002 economic data cont d 4 of 4
2002 Economic Data (Cont’d) (4 of 4)

Source: The World Bank “World Development Indicators – 04” SIPRI Yearbook – 2003 CIA “The World Factbook 2003” IISS “The Military Balance 2003/2004”

Note: *Range of values reflect differing defense budget estimates in source documents.

defense spending overview
Defense Spending Overview
  • Worldwide Defense SpendingBottomed in 1998
    • Fewer Producers of High End systems
    • More Emphasis on Affordability and International Collaboration and Consolidation in Production and R&D
    • US, Western Europe, Japan, Russia Produce High Technology Systems; ROW Countries Don’t
    • R&D Down 60% from 1986 to 1998; Up 12% from ’98
    • System Upgrades, Software Modifications, Dual Use Technology, Asymmetric and Terrorist Threats Emphasized
  • Arms Transfers Down over 70% Since Mid 1980s
    • Greater Competition for Fewer Sales as Industries Fight for Survival
    • Major Suppliers: US, Russia, France, UK, Germany
defense spending smaller inventories and upgrades
Defense SpendingSmaller Inventories and Upgrades
  • New Weapon Systems 2-5 Times More Costly Than Older Systems. Few One-for-One Replacements
  • Most Weapon Sales Require Hard Cash, Pay-Back Loans, or Barter at Market Prices. Few Discounts or Grant-Aid. Many Countries Lack Foreign Reserves to Buy New Systems.
  • Sophisticated Weapon Systems Available But Few Can Afford Them
  • Seventy-Three Percent of Countries 2002 Defense Budgets Under $2B in US 2000$
    • Under $800 Million For Procurement
    • Emphasis On System Upgrades, and More Capable Used Systems
  • Sustained Defense Spending Over $2 Billion Buys Some Sophisticated Systems
worldwide defense budgets 2002
Worldwide Defense Budgets – 2002

100

90

90

80

70

60

Number of Countries

50

40

KUWAIT

COLOMBIA

BELGIUM

POLAND

NORWAY

PAKISTAN

30

IRAN

BRAZIL

TAIWAN

CANADA

SPAIN

ISRAEL

20

S. ARABIA

GERMANY

RUSSIA

ITALY

CHINA 61.5

JAPAN 46.7

U.K. 36

FRANCE 33.6

NETHERLANDS

SYRIA

AUSTRALIA

GREECE

N. KOREA

INDONESIA

TURKEY

S. KOREA

INDIA

EGYPT

SWEDEN

SINGAPORE

14

13

10

9

6

4

6

4

4

3

2

0

0

$0.5

1.0

2.0

3.0

4.0

5.0

7.0

10.0

15.0

30.0

>30.0

Defense Budgets in Billions Constant U.S. 2000 Dollars

Notes: Includes all countries less the U.S.,

Sources: “SIPRI Yearbook 2003” and “The Military Balance 2003/2004”

VG#19

Ref: 9800648B_UK.PPT-4

10 year defense budget growth 1993 2002

>$10B

$5-10B

$2-5B

$1-2B

$0.5-1B

<$0.5B

10-Year Defense Budget Growth (%)1993 → 2002

25

CONSTANT U.S. 2000 $

S. KOREA

SAUDI ARABIA

TURKEY

GREECE

IRAN

ISRAEL

SYRIA

MEXICO

CHILE

PORTUGAL

OMAN

BANGLADESH

SRI LANKA

IRELAND

JORDAN

TUNISIA

BOTSWANA

BURUNDI

KENYA

PANAMA

CAMBODIA

CYPRUS

SLOVAKIA

BAHRAIN

20

15

JAPAN

PAKISTAN

DENMARK

NORWAY

POLAND

SWEDEN

EGYPT

MOROCCO

HUNGARY

ROMANIA

LEBANON

GHANA

NICARAGUA

MALTA

Number of Countries

U.K.

GERMANY

CANADA

SWITZERLAND

PERU

MOZAMBIQUE

RWANDA

SEYCHELLES

ZIMBABWE

BRUNEI

MONGOLIA

ALBANIA

KAZAKHSTAN

USA

RUSSIA

SPAIN

NETHERLANDS

AUSTRALIA

BELGIUM

AUSTRIA

FINLAND

SENEGAL

EL SALVADOR

BULGARIA

YEMEN

INDIA

BRAZIL

COLOMBIA

SINGAPORE

LETHOSO

MALI

NAMIBIA

NIGERIA

TANZANIA

ECUADOR

ARMENIA

LUXEMBOURGE

TAIWAN

ARGENTINA

VENEZUELA

N. KOREA

THAILAND

ANGOLA

CHAD

SIERRA LEONE

GUATEMALA

URUGUAY

PARAGUAY

AZERBAIJAN

10

ITALY

KUWAIT

MALAYSIA

CZECH REP.

PHILIPPINES

BURKINA FASO

CAMEROON

MADAGASCAR

BOLIVIA

5

CHINA

ALGERIA

SUDAN

UGANDA

NEPAL

UKRAINE

ETHIOPIA

ESTONIA

LATVIA

LITHUANIA

LIBYA

BELARUS

CROATIA

ZAMBIA

0

10 Year Growth -100% -50% -25% -10% 0% +10% +20% +50% +100% +150% +250%

Avg. Ann. Growth -10% -5% -2.5% -1% 0% +1% +2% +5% +10% +15% +25%

Source: SIPRI 2003; Military Balance 2003-2004

VG#20

estimated worldwide defense modernization funding 2002
Estimated Worldwide Defense ModernizationFunding – 2002

100

90

90

80

70

60

Number of Countries

50

40

KUWAIT

COLOMBIA

BELGIUM

POLAND

NORWAY

PAKISTAN

30

IRAN

BRAZIL

TAIWAN

CANADA

SPAIN

ISRAEL

CHINA 61.5

JAPAN 46.7

U.K. 36

FRANCE 33.6

S. ARABIA

GERMANY

RUSSIA

ITALY

20

NETHERLANDS

SYRIAI

AUSTRALIA

GREECE

N. KOREA

INDONESIA

TURKEY

S. KOREA

INDIA

EGYPT

SWEDEN

SINGAPORE

14

10

13

9

6

6

4

4

4

2

3

0

0

$0.5

1.0

2.0

3.0

4.0

5.0

7.0

10.0

15.0

30.0

>30.0

Defense Budgets

$ @ 20% $0.1 0.2 0.4 0.6 0.8 1.0 1.4 2.0 3.0 6.0 >6.0

$ @ 40% $0.2 0.4 0.8 1.2 1.6 2.0 2.8 4.0 6.0 12.0 >12.0

Defense Funds for Force Modernization @20 and 40%

Notes: Modernization includes all forces (Ground, Air, Naval Platforms, Weapons, Sensors) $ in billions of constant U.S. 2000 dollars Includes most countries less the U.S.

Primary Sources: “SIPRI Yearbook 2003” and “The Military Balance 2003/2004”

VG#21

Ref: 9800648B_UK.PPT-4

defense spending trends
Defense Spending Trends
  • Trending Upward Since 1998,Led By US (+46B), China (+13.3B), Iran (+8.1B), Russia (+4.3B), India (+3.5B), Brazil (+2.1B)
  • Likely to Continue Upward Near-Term, Influenced By US, China, Russia, South Korea, and India. Economic Developments Could Slow or Reverse Trend

Worldwide Defense Spending in Billions US 2000$

1988199319982002

909 762 690 784

Sources: SIPR1 2001, 2002, 2003

IUSS Military Balance 2003-2004

defense spending cont d trends
Defense Spending (Cont'd) Trends
  • Fewer New High-Technology Weapon Systems Likely to be Developed and Fielded Over Next 10-20 Years Because of Costs
  • Most Countries’ Defense Spending Flat or Negative Over Time Unless Involved in or Preparing for Conflict, Insurgencies, or the War on Terrorism

Sources: SIPRI Yearbooks – 2001, 2002, 2003

The Military Balance – 2003-2004

worldwide military r d spending overview
Worldwide Military R&D Spending Overview
  • R&D Down 60% from 86 to 98: Up 12% from 98 to 2002
  • 2002 Estimated Spending at $66 Billion in 2000$
    • $50.6 B by US; $57.4 B by NATO
    • Most for Aircraft Related Programs
  • Nine Besides US Spending Over $500 Million on R&D
  • US, Russia, China* Spending More in 2002
  • R&D Budgets Compete with Procurement, Personnel, Maintenance and Operational Readiness Accounts
  • Aggregate Worldwide Defense R&D Spending Likely to Increase Near-Term as US, Russia, China* Spend More
  • European R&D Likely to Decrease Somewhat as Major Aircraft Programs (RAFAEL, EUROFIGHTER, A400 Transport) Transition to Production

Note: *China Has Made R&D a Priority; Chinese R&D Funding Figures Are Best Estimates

Sources: SIPRI Yearbooks – 2001, 2002, 2003

IISS “The Military Balance 2003-2004”

estimated worldwide military r d spending 2002
Estimated Worldwide Military R&D Spending - 2002

10

9

PAKISTAN

8

SWITZERLAND

7

U.S. @ $50.6B

66.3B in 2004

NORWAY

6

NETHERLANDS

5

Number of Countries

POLAND

ITALY

GERMANY

4

UKRAINE

SPAIN

SINGAPORE

INDIA

3

ISRAEL

AUSTRALIA

BRAZIL

IRAN

CHINA

2

ARGENTINA

S. AFRICA

TAIWAN

FRANCE

JAPAN

1

GREECE

CANADA

SWEDEN

S. KOREA

RUSSIA

U.K.

0

$50M

100M

200M

500M

1.0B

2.0B

5.0B

R&D Spending in Constant 2000 U.S. Dollars

Notes: Includes only countries spending >$50 million

Sources: SIPRI Yearbooks – 2001, 2002, 2003 Defense News, 2 Feb 04

Ref: 9800648_UK.PPT-7

worldwide military r d spending
Worldwide Military R&D Spending

Billions of US Constant 2000$

*1995$

**1994$

***1996$

****1997$

Source: SIPRI “Yearbook 2001, 2003”

IISS “The Military Balance” 2003-2004

Various Defense News Editions

worldwide r d sophisticated systems costly
Worldwide R&D Sophisticated Systems Costly
  • High Technology Weapons Development Programs Costly
    • Most in US, Western Europe, Japan, and Russia
  • Situation Not Expected to Change Because of High R&D and Manufacturing Infrastructure Costs Associated with High Technology Development Programs
  • Most ROW Countries Rely on Foreign Acquisition of Complex Weapon Systems
    • State-of-the-Art Combat Aircraft, Naval Combatants, Main Battle Tanks, IADs, etc.
worldwide r d cont d sophisticated systems costly
Worldwide R&D (Cont'd)Sophisticated Systems Costly
  • Most ROW Countries Can’t Develop High Tech Systems
  • Main Impediments to High Technology Development:
    • Funding
    • Technical Education and Pool of Scientists and Engineers
    • Well-Equipped Research, Laboratory, and Test Facilities
    • Natural Resources
    • Manufacturing Facilities and Capabilities
    • Skilled Work Force
    • Quality Control
    • Technology Base and Infrastructure
worldwide r d cont d sophisticated systems costly35
Worldwide R&D (Cont'd)Sophisticated Systems Costly
  • Some ROW Countries Produce Low to Medium Technology Systems Based on Co-Production and Reverse Engineering of Acquired Systems
    • Ground Force Weapons, Vehicles, MLRS, Small Patrol Craft, Training Aircraft
  • Some Produce Niche High Technology Systems with Foreign Assistance
    • TBMs, WMD, Helicopters, UAVs, Anti-Ship Cruise Missiles, Diesel Subs
  • Industrial Offsets, Collaborations and Consolidations Future Wild Cards?

Source: SCCS

worldwide high technology weapon design and development capabilities
Worldwide High Technology Weapon Design andDevelopment Capabilities

Ref: 0400346_UK.ai

None

Very limited. Dependent on foreign weapons acq. and related co-production, reverse eng, and tech transfer to produce a few low to medium technology systems.

Some low to medium tech. design, development, production capability. Needs foreign assistance in some areas.

Few niche high tech. capabilities. Relies on foreign weapons acquisition and related co-production, reverse engineering and tech. transfer. Broad low to med. tech. capabilities.

Broad med-tech. capabilities; capable of designing, developing, producing many high-tech systems; external assistance required for high performance aircraft and other complex systems.

Broad high-tech. design, development and production capabilities. Indigenous capability to develop, produce high performance combat aircraft, missiles and other highly complex systems.

worldwide military r d trends
Worldwide Military R&D Trends
  • Without a Clear Technologically Advanced Threat, or a Market for Costly High Tech Systems, R&D Investment Will Decrease, and the Pace of Technology Development Will Slow
    • More for Counter-Terrorism, Homeland Defense, Asymmetric Threats
  • Fewer High Tech Weapon Systems Will be Developed in all Major Categories
  • Development and Availability of New Generation Systems Delayed
  • Fewer Producers of High-End Systems
  • More Cross-Border/International Cooperation, Pooling of R&D Resources
worldwide military r d trends cont d
Worldwide Military R&D Trends (Cont'd)
  • Emphasis on Affordability, Technologies that Reduce Development, Manufacturing Costs
  • Emphasis on Dual-Use Technologies, COTS, System Upgrades
  • Future Threats Include Fewer High-Tech, Many Low-Medium Tech Systems
  • Adversaries Can Leverage Small Defense Budgetswith Less Costly Asymmetrical Threats, i.e., IW, TBMs, C/B Weapons, Mines, CCMs, Small Boats, Terrorism, etc., to Complicate, Impede US Military Ops
  • Caution: A Resurgent Near-Peer Type Threat Would Negate Some of These Trends
foreign science technology overview
Foreign Science & TechnologyOverview
  • Technology “Haves” and “Have Nots” Persist
  • Technology Increasingly Dual Use
  • Technology’s Economic Impact More Important Than Military’s
  • Nations and Industries Will Sell Technology for Political and Economic Reasons
  • Credible Asymmetric Threats Can Offset Some Technological Advantage
foreign s t areas of interest
Foreign S&TAreas of Interest
  • Areas of Foreign Technological Interest:
    • Anti-Navigation/GPS Systems
    • Remote Sensors and Weapons
    • Standoff Weapons and Penetration Aids
      • Ballistic Missiles
      • Cruise Missiles
    • Information Systems and CM
      • Data Transfer and Interoperability
      • Data Blocking/Corruption
      • False Target Generation
      • High-Power Microwave (HPM)
      • Encryption
    • Antiterrorism Systems
      • Aircraft Protection
      • Harbor Protection
      • Helicopter Protection
      • Improvised Explosive Device Detection, Neutralization
      • Precision Airdrop Systems
      • CBR and Nuclear Weapons Detection, Protection and Defeat Systems
      • ISR and Target Acquisition Systems to Counter Terrorists
      • Explosive Ordnance Disposal
foreign s t cont d areas of interest
Foreign S&T (Cont'd) Areas of Interest
  • Areas of Foreign Technological Interest:
    • Nanotechnology
    • Robotics
    • Low Observable and Masking Technologies and CM
    • Diesel Submarine Endurance
    • Biotechnology
    • Increased Lethality
      • Conventional Explosives
      • Weapons of Mass Destruction
foreign s t trends commercial technologies available to all
Foreign S&T TrendsCommercial Technologies Available to All
  • Technology Available to Buyers
  • Commercial Sector Drives Technology Development
  • Emphasis on Technologies That Make Things Happen
  • Micro-Miniaturization More Important
  • Biotechnology A Breakthrough Area
  • Ubiquitous Access to Communications
  • Greater Access to Space Based Sensors, and Related CM
  • Broader, More Timely Access to Information
  • Sophisticated/Interdependent Systems Increasingly Vulnerable To Single Point Failures
weapon system costs few can afford to develop or buy
Weapon System CostsFew Can Afford to Develop or Buy
  • Sophisticated SystemCostsEscalate Faster Than Annual Inflation Rates
    • Techinflation Affects Development Costs of Aerospace, Ship, Submarine, Armor Systems
  • Major Program Initial Costs Underestimated
  • Cost Overruns Lead to Stretched Schedules, Smaller buys, increased unit costs
  • Sophisticated Programs Expensive – Not Many Countries Can Develop Them
  • Representative Program Costs
  • F-35 JSF ~200B
  • *F/A-22 Raptor ~72B
  • *V-22 Osprey ~46B
  • *RAH-66 Commanche ~39B
  • *Evolved Expendable Launch Vehicle ~31.8B
  • Eurofighter Up $20B since ’96; ½ fewer a/c
  • *Space Based Radar ~30B
  • Multi-Mission Maritime Aircraft ~26B
  • European A-400M Transport ~23.7B
  • *SBIR ~8B
  • Kinetic Energy Interceptor ~4.5B
  • *Airborne Laser Program more than doubled

Note: *Significant cost overruns

Multiple Sources

weapon system costs few can afford to develop or buy45
Weapon System CostsFew Can Afford to Develop or Buy
  • Sophisticated SystemCostsEscalate Faster Than Annual Inflation Rates
    • Techinflation Affects Development Costs of Aerospace, Ship, Submarine, Armor Systems
  • Major Program Initial Costs Underestimated
  • Cost Overruns Lead to Stretched Schedules, Smaller buys, increased unit costs
  • Sophisticated Programs Expensive – Not Many Countries Can Develop Them
  • Representative Program Costs
  • F-35 JSF ~200B
  • *F/A-22 Raptor ~72B
  • *V-22 Osprey ~46B
  • *RAH-66 Commanche ~39B
  • *Evolved Expendable Launch Vehicle ~31.8B
  • Eurofighter Up $20B since ’96; ½ fewer a/c
  • *Space Based Radar ~30B
  • Multi-Mission Maritime Aircraft ~26B
  • European A-400M Transport ~23.7B
  • *SBIR ~8B
  • Kinetic Energy Interceptor ~4.5B
  • *Airborne Laser Program more than doubled

Note: *Significant cost overruns

Multiple Sources

weapon system costs few can afford to develop or buy46
Weapon System CostsFew Can Afford to Develop or Buy
  • Sophisticated SystemCostsEscalate Faster Than Annual Inflation Rates
    • Techinflation Affects Development Costs of Aerospace, Ship, Submarine, Armor Systems
  • Major Program Initial Costs Underestimated
  • Cost Overruns Lead to Stretched Schedules, Smaller buys, increased unit costs
  • Sophisticated Programs Expensive – Not Many Countries Can Develop Them
  • Representative Program Costs
  • F-35 JSF ~200B
  • *F/A-22 Raptor ~72B
  • *V-22 Osprey ~46B
  • *RAH-66 Commanche ~39B
  • *Evolved Expendable Launch Vehicle ~31.8B
  • Eurofighter Up $20B since ’96; ½ fewer a/c
  • *Space Based Radar ~30B
  • Multi-Mission Maritime Aircraft ~26B
  • European A-400M Transport ~23.7B
  • *SBIR ~8B
  • Kinetic Energy Interceptor ~4.5B
  • *Airborne Laser Program more than doubled

Note: *Significant cost overruns

Multiple Sources

f a 22 program

800

80

700

70

600

60

500

50

400

40

300

30

200

20

100

10

0

F/A-22 Program

$257M

(GAO)

260

750

240

$72B

220

200

#a/c

$179M

180

160

a/c Cost

140

Unit Cost $M

Program Costs $B

Number of Aircraft

Program $

120

$38B

277

100

$100M

218

80

Number a/c 

a/c cost 

Program Cost 

60

50

40

30

20

1980

85

90

95

2000

2005

Note: Program chg to F/A-22 in 2002

DoD Estimate #a/c

Sources: Multiple

f a 22 program acquisition numbers

2

1

3

F/A-22 Program Acquisition Numbers

800

750

762

700

600

500

400

Number Aircraft

381

300

277

226

218

200

180

100

0

1981

85

90

95

2000

2005

YEAR

Notes: 1 USAF requirement for 381-762 aircraft

2 USAF Plan

3 Affordable within Funding ceiling Black figures/lines are DOD Blue figures/lines are USAF

Sources: Defense News, “Beyond F-22 Decision” 2 Aug 99 Defense News, “Meet the F/A-22”, 16-22 Sep 2002 Inside Defense, “Rumsfeld Staff Moves Closer to AF Size of F/A-22 Fleet”, 31 Oct 02 Inside Defense, “GAO Doubts DOD’s Readiness to Make F-22 Production Decision”, 15 Mar 04

weapon systems cost trends new systems cost more
Weapon Systems Cost TrendsNew Systems Cost More
  • Trends Upward
  • Most Prominent Microeconomic Force Affecting Defense Industries is The Rapidly Rising Cost of Weapons R&D and Production
  • New SystemsCost Far MoreIn Real TermsThan Units Being Replaced
  • Smaller Production Runs Resulting From Smaller National Requirements and Fewer Export Sales Increase Unit Costs
  • Inflation and Currency Devaluation in Buyer Countries Raise System Costs Accordingly
  • Typically, Weapon Costs Increase About 10% Per Year, Doubling Every 7.25 Years
  • Ratio of Increasing New Unit CostsToDefense Budgets Affects Numbers Acquired
  • Sources:
  • “Hand Book of Defense Economics, Vol. I”; K.J. Arrow and M.D. Intriligator, 1995
  • “Global Arms Trade – Commerce in Advanced Military Technology and Weapons”, Congress of the US – Defense News, LGEN M. Davison, USA, US Defense Security Assistance Agency, 9-15 Feb 1998
  • SIPRI Yearbook – 2003
worldwide arms transfers overview

Time Frame

1981 – 88

1989 – 91

1992 – 93

1992 – 96

1994 – 98

1995 – 99

1998 - 02

Average Annual Transfers

$66B in 91$

$40B in 91$

$21B in 91$

$23.8B in 90$

$22.5B in 90$

$22.3B in 90$

$18.5B in 90$

Comment

Cold War

Post Cold War

Worldwide Arms TransfersOverview
  • Arms Transfers Down 72% Since Mid-80s
  • US (41%), Russia, France, Germany, UK, Ukraine Account for 86% of Worldwide Transfers During 98-02
  • Major Recipients, China, Taiwan, India, Turkey, Saudi Arabia, Greece, South Korea, Egypt, UK, Israel, Pakistan, Japan, UAE, Australia, Account for 83% of Total Deliveries During 98-02
  • Greater Competition for Fewer Arms Sales
  • Many National Arms Industries Need Arms Exports to Survive
    • Leads to Creative Financing to Close Sales

Sources: SIPRI Yearbooks 2001, 2002, 2003

Military Balance 2003-2004

Multiple Issues of Defense News, Armed Forces Journal 2001→2004

worldwide arms transfers more flexible financing
Worldwide Arms TransfersMore Flexible Financing
  • Major Market for Used and Modernized Systems
  • Most Post Cold War Period Sales for Cash
  • High Weapons Costs and Intensive Competition for Sales Lead to More Flexible Arms Transfer Arrangements
    • Grant Aid – Primarily by US – Egypt ($1.3B in 03), Israel ($2.1B in 03), and Jordan for Mid-East Peace Agreements; South, Latin American Countries for Counter-narcotics Ops; Pakistan, Philippines and Others for Counter- terrorism Support
    • Loans – US Loaned Poland $3.8B to Purchase 48 F-16s; Poland Paying Only Interest First 8 Yrs of 15-Yr Loan

– US FMS Reached ~$14B in 2003; at a Flat Fee of 2.5%

    • Barter – Russian a/c Sales to Malaysia, Indonesia for Commodities and Cash

– French Tanks to Saudi Arabia for Oil

    • Debt – Russian Exchange of Arms for Debt with China, South Korea, Czech Republic, Other Former East European Countries
    • Lease – Czech Republic, Hungary Leasing Gripen Fighters from Sweden; Italy F-16s from US; Denmark APCs from Finland; India an AKULA SSN from Russia for 3 Yrs at ~$100M/Yr

Sources: SIPRI Yearbook – 2003

Defense News – Multiple Issues

worldwide arms transfers offsets
Worldwide Arms TransfersOffsets
  • More Countries Purchasing Major Weapon Systems Demand Industrial Offsets or Compensation to Defray Purchase Cost, Increase Domestic Employment, Acquire Technologies and Develop Local Industries
    • Direct offsets Require Production of Some Weapon Components in the Buyer Country
    • Indirect Offsets Include Tech Transfer, Local Investment and Counter-trade
  • Offsets Becoming Increasingly Expensive – Some at 100% - 200% of Weapons’ Purchase Price
  • Offsets Controversial
    • House Armed Services Committee Would Ban Industrial Offsets
    • Without Offsets, US Defense Industries Would Lose Arms Sales to Foreign Competitors
    • Europe Views Offset Ban As Protectionist, Challenge to Free Trade
  • Despite Availability of More Flexible Arms Transfer Arrangements, Global Arms Transfers Remain Depressed

Sources: Defense News, 24 May 04, 14 June 04, 28 June 04

worldwide arms transfers offsets55
Worldwide Arms TransfersOffsets
  • More Countries Purchasing Major Weapon Systems Demand Industrial Offsets or Compensation to Defray Purchase Cost, Increase Domestic Employment, Acquire Technologies and Develop Local Industries
    • Direct offsets Require Production of Some Weapon Components in the Buyer Country
    • Indirect Offsets Include Tech Transfer, Local Investment and Counter-trade
  • Offsets Becoming Increasingly Expensive – Some at 100% - 200% of Weapons’ Purchase Price
  • Offsets Controversial
    • House Armed Services Committee Would Ban Industrial Offsets
    • Without Offsets, US Defense Industries Would Lose Arms Sales to Foreign Competitors
    • Europe Views Offset Ban As Protectionist, Challenge to Free Trade
  • Despite Availability of More Flexible Arms Transfer Arrangements, Global Arms Transfers Remain Depressed

Sources: Defense News, 24 May 04, 14 June 04, 28 June 04

worldwide arms transfer trends nearing bottom
Worldwide Arms Transfer TrendsNearing Bottom ??
  • Near Term:Likely to Increase Slightly if Asian Economic Problems Continue to Ease, European Economies Strengthen, Oil Prices Support Increased Spending
  • Mid Term:Probably Will Stabilize Around $20-25B in 1990$
  • Defense Industries’ Survival More and More Dependent on Foreign Sales
  • Continued Strong Competition for Fewer Sales

Sources: SIPRI Yearbooks 2001, 2002, 2003

The World Bank “World Development Indicators – 2004”

notional arms export market

1400

140

1300

130

1200

120

Combat Aircraft

Tanks

Naval Combatants

1100

110

1000

100

900

90

800

80

700

70

600

60

500

50

400

40

300

30

200

20

100

10

0

0

Notional Arms Export Market

5.0

4.0

3.0

2.5

2.0

1.8

1.6

Naval Combatants $M

Tanks $M

Combat Aircraft $M

1.4

1.2

1.0

.8

.6

.4

.2

0

100

5%

10

20

40

60

Market Access

defense industries overview
Defense IndustriesOverview
  • Post Cold War Search for Peace Dividends Led to Reduced Defense Spending
    • Diminishing National Requirements and Foreign Arms Sales
    • Industries Faced with Overcapacity, Obsolescence, Large and Underutilized Work Force
  • Worldwide Defense Industry Comprised of Public, Private, and Gov’t Owned/Controlled Companies
    • Most State Owned When Cold War Ended
    • More Public or Private Today
selected worldwide defense industries 2004 nationalized vs privatized
Selected Worldwide Defense Industries – 2004Nationalized vs. Privatized

State Owned/Controlled

State/Public Mix

Transitioning from State to Public/Private

Public/Private

15

CHILE

CHINA*

FINLAND

INDONESIA

IRAN

ITALY*

MALALYSIA*

N. KOREA

PAKISTAN

SPAIN*

SYRIA

TURKEY

UKRAINE*

10

COUNTRIES

AUSTRIA

CANADA

DENMARK

GERMANY

JAPAN

NETHERLANDS

NORWAY

SWEDEN

U.K.

AUSTRALIA

BRAZIL

GREECE

ISRAEL

POLAND

S. AFRICA

TAIWAN

5

EGYPT

FRANCE*

INDIA

PORTUGAL

RUSSIA

SINGAPORE

GOVT.

PUBLIC/PRIVATE

OWNERSHIP/CONROL

Note: *Considering Privatization

Multiple Unclassified Sources

defense industries in transition
Defense IndustriesIn Transition
  • Supply, Demand and Profitability Issues Led to Major Restructuring
    • Rationalization Leading to Plant Closures and Downsizing of Work Force
    • Consolidation Via Mergers and Acquisitions with Competitors and Suppliers to Reduce Overcapacity and Redundant Production Lines – In All Major Weapons Categories – Especially Aerospace and Electronics
      • Cross-Border Consolidations More Difficult as Nations Protect Defense Industries from Foreign Control (UK an Exception)
    • Collaboration Among National and Cross-Border Companies Based Upon Workshares and Units Purchased
  • Future Will See More Collaboration and Consolidation, Especially in Naval Shipbuilding and Land Combat Systems
  • Issues Remain
    • Problem with Gov’t Owned/Controlled Companies
    • Protectionism vs. Free Trade
    • Tech Transfer
    • Does Less Competition Mean Less Innovation
    • Reducing Unit Costs
defense industries in transition62
Defense IndustriesIn Transition
  • Supply, Demand and Profitability Issues Led to Major Restructuring
    • Rationalization Leading to Plant Closures and Downsizing of Work Force
    • Consolidation Via Mergers and Acquisitions with Competitors and Suppliers to Reduce Overcapacity and Redundant Production Lines – In All Major Weapons Categories – Especially Aerospace and Electronics
      • Cross-Border Consolidations More Difficult as Nations Protect Defense Industries from Foreign Control (UK an Exception)
    • Collaboration Among National and Cross-Border Companies Based Upon Workshares and Units Purchased
  • Future Will See More Collaboration and Consolidation, Especially in Naval Shipbuilding and Land Combat Systems
  • Issues Remain
    • Problem with Gov’t Owned/Controlled Companies
    • Protectionism vs. Free Trade
    • Tech Transfer
    • Does Less Competition Mean Less Innovation
    • Reducing Unit Costs
defense industries in transition63
Defense IndustriesIn Transition
  • Supply, Demand and Profitability Issues Led to Major Restructuring
    • Rationalization Leading to Plant Closures and Downsizing of Work Force
    • Consolidation Via Mergers and Acquisitions with Competitors and Suppliers to Reduce Overcapacity and Redundant Production Lines – In All Major Weapons Categories – Especially Aerospace and Electronics
      • Cross-Border Consolidations More Difficult as Nations Protect Defense Industries from Foreign Control (UK an Exception)
    • Collaboration Among National and Cross-Border Companies Based Upon Workshares and Units Purchased
  • Future Will See More Collaboration and Consolidation, Especially in Naval Shipbuilding and Land Combat Systems
  • Issues Remain
    • Problem with Gov’t Owned/Controlled Companies
    • Protectionism vs. Free Trade
    • Tech Transfer
    • Does Less Competition Mean Less Innovation
    • Reducing Unit Costs
worldwide defense industry trends
Worldwide Defense Industry Trends
  • Privatization – Slow Process
  • Consolidation – More National and Cross-Border Mergers and Acquisitions
  • Collaboration – Sharing The Load (and Cost)
  • Cessation – Survival of Fittest
  • Fewer Developers, Manufactures of Air, Space, Land, Naval and Electronics Systems
defense economics summary impact on military capabilities
Defense Economics SummaryImpact on Military Capabilities
  • Sustained (2+ yrs) Combinations of Following Economic Conditions Will Pressure Defense Spending Downward
    • GDP Growth Less Population Growth <3%
    • Budget Deficit >3% of GDP
    • Defense Budget >20% of Revenues
    • Debt Interest Payment >10% of Revenues
    • Inflation >20%
    • Debt >50% of GDP
    • Debt ≥ Revenues
  • Many Countries, Especially in Europe, South America More Likely to Cut Defense Budgets Before Public Health, Schools, Welfare, Security and Infrastructure to Accommodate National Budget Deficits, Debt, Inflation and Other Impediments to Spending
  • Sustained Lower Defense Spending Leads to:
    • Reduced Force Levels – Russia, Spain, Greece, Netherlands, Switzerland, Belgium, Sweden, Germany, etc.
    • Retiring Older Systems Early to Reduce Maintenance Costs – UK, Canada, Belgium, etc.
    • Retiring Systems Because Can’t Afford to Upgrade Them
    • Canceling, Reducing, Delaying Planned Acquisitions – Argentina, Brazil, Singapore, UK, Sweden, Norway, Greece, Egypt, Turkey, etc.
    • Upgrading Rather Than Buying New Systems – Italy, Israel, India, Denmark, Finland, Greece, Germany, India, Turkey, Saudi Arabia, China, Germany, Algeria, Australia
    • Buying Used Systems – India, Pakistan, Algeria, Australia, Austria, Brazil, Canada, Chile, China, Czech Republic, Egypt, Greece, Indonesia, Israel, Saudi Arabia, Malaysia, etc.

Sources: The World Bank “World Development Indicators – 2004”

IMF “International Financial Statistics Yearbook – 2002”

IMF “Government Finance Statistics Yearbook – 2002”

Various Editions of Defense News and The Washington Post

defense economics summary impact on us military spending
Defense Economics SummaryImpact on US Military Spending
  • Increasing Competition for Defense Share of US Revenues
    • Balancing the Budget (FY 04 Deficit est. $413B)
    • Servicing and Paying Down Debt (FY04 Debt ~$7.4T; Interest Payment ~$159B)
    • Paying for Tax Cuts
    • Increasing Cost of Retiring Baby-Boomers Medical and Social Security Expenses
    • Homeland Defense
    • Infrastructure
    • HEW
  • Increasing Competition for Modernization Share of Defense Budget
    • Rising Personnel Pay, Benefits, Health Care Costs
    • Cost Estimates for 10-20 Thousand Troop Increase Range from $1.2 > $2B Per Yr
    • Afghanistan, Iraq, Other Peacekeeping Ops
    • Increasing O&M

Source: Washington Post OPED “A Bad Way to Cut the Debt”, Michael Kinsley, 2 Jul 04

defense economics summary impact on us military spending68
Defense Economics SummaryImpact on US Military Spending
  • Increasing Competition for Defense Share of US Revenues
    • Balancing the Budget (FY 04 Deficit est. $413B)
    • Servicing and Paying Down Debt (FY04 Debt ~$7.4T; Interest Payment ~$159B)
    • Paying for Tax Cuts
    • Increasing Cost of Retiring Baby-Boomers Medical and Social Security Expenses
    • Homeland Defense
    • Infrastructure
    • HEW
  • Increasing Competition for Modernization Share of Defense Budget
    • Rising Personnel Pay, Benefits, Health Care Costs
    • Cost Estimates for 10-20 Thousand Troop Increase Range from $1.2 > $2B Per Yr
    • Afghanistan, Iraq, Other Peacekeeping Ops
    • Increasing O&M

Source: Washington Post OPED “A Bad Way to Cut the Debt”, Michael Kinsley, 2 Jul 04

trends implications spending trends have wide impact
Trends ImplicationsSpending Trends Have Wide Impact
  • Fewer Producers of High-End Systems and Fewer New Systems Produced
  • More Cross-Border/International Cooperation,Sharing of R&D, Production and Acquisitions
  • Wider Access to Technologies
  • Increased Emphasis on Affordability Strategies, Technologies that Reduce Development, Manufacturing Costs
  • Small Market for Costly New Systems
  • Big Market for Less Capable, More Affordable Combat Systems
  • Increasing Competition for Foreign Sales
  • Emphasis on Dual-Use Technologies, COTS, System Upgrades
  • Escalating Weapons Costs Affect Military Forces, Capabilities
  • Future Conventional Threats Include Fewer High-Tech, Many Low-Medium Tech Systems
  • Adversaries Can Leverage Small Defense Budgets with Less Costly AsymmetricThreats, i.e., IW, TBMs, C/B Weapons, Mines, CCMs, Small Boats, Terrorism, Insurgencies and Urban Warfare, etc., to Complicate, Impede US Military Ops
worldwide threat overview smaller forces with mixed inventories
Worldwide Threat OverviewSmaller Forces with Mixed Inventories
  • 75% of Today’s Threats Are Older Systems
  • Potential Adversaries Will Replace Some With More Capable Systems
  • Technology Inserts During System Upgrades Complicate Threats, Extend Life 10-15 Years
  • Wide Variety of Modern Weapon SystemsAvailable for Those that Can Afford Them
  • Economic Factors Preclude One-for-One Replacements, Lead to Smaller Forces
worldwide threat overview cont d smaller forces with mixed inventories
Worldwide Threat Overview (Cont'd)Smaller Forces with Mixed Inventories
  • Year 2010 Threat Composition
    • 85% with Pre-1995 IOCs; 1960-1980 Technologies
    • 15% with Post-1995 IOCs; 1980-1995 Technologies
  • Coastal Countries that Consider the US a Threat Will Acquire Capabilities to Attack Forces in Littoral Waters
  • Asymmetric Threats are In Play – More Affordable – Can Complicate, Slow US Mission Accomplishment
year 2010 military systems

1950

1950

1960

1960

1970

1970

1980

1980

1990

1990

1995

1995

2000

2000

2005

2005

2010

2010

2015

2015

2020

2020

Year 2010 Military Systems

AIRCRAFT

MIG-21/23

F-4/F-5

A-4/A-7

MIRAGE F-1

SHIPS

FFG-7

KASHIN FF

KONI FFL

FF-1056

OSA PTG

KRESTA I/II CG

SUBS

FOXTROT

ROMEO

209 TYPES

MSLS

STYX

HARPOON

EXOCET BL 1

30%*

AIRCRAFT

MIG-25/29

Su-24/25/27

F-14/15

F-16/18

MIRAGE 2000

HAWK 100/200

SHIPS

KHUKRI FFL

KRIVAK FF

LEANDER FF

B’DSWORD FF

SOV*MNYY

SUBS

UPHOLDER

KILO SS

MSLS

SS-N-22 B1

35%

AIRCRAFT

MIRAGE 2000-5

Su-30/35

GRIPPEN

SHIPS

NEUST*MYY FF

JIANGHU III FF

LUHU DD

HALIFAX FF

FLYVEFISHLEN FFL

DELHI DDG

SAAR V FFL

LAFAYETTE FF

LOREAL FFL

SUBS

209 SS TYPE

COLLINS SS

AGOSTA B SS

KILO FO SS

MSLS

EXOCET BI-II

C801/C802

SS-N-22 BL 2

HARPOON

UPGRADES

SS-NX-25

20%

AIRCRAFT

F/A-18 E/F

RAFAEL

EFA

FSX (JA)

SHIPS

MALAY FF

KONGU DDG

(JA)

KDX DD (SK)

YS 2000

MSLS

SS-N-26

SS-N-27

10%

LEGEND

TECHNOLOGY

DEVELOPMENT

PRODUCTION

OPERATIONAL

UPGRADE

EXTENDED OPERATIONAL LIFE

AIRCRAFT

F-22

MFI

XF-10

SU-37

SHIPS

HORIZON FF

NEW GEN FF

COMMON FF

5%

*(U) NOTE: PERCENTAGE (%) IS ESTIMATED YEAR 2010 COMPOSITION.

Ref: 9800648_UK.PPT-4

year 2025 2030 military systems
Year 2025 – 2030 Military Systems

1950

1960

1970

1980

1990

1995

2000

2005

2010

2015

2020

2025

2030

2040

5%

TECH-NOLOGY

DEVELOP

PRODUCE

OPERATIONAL

UPGRADE

EXTENDED OPERATIONAL LIFE

A/C

MIG-21/23

F-4/-5

A-4/-7

MIRAGE F-1

SUBS

FOXTROT

ROMEO

209 TYPES

MISSILES

STYX

HARPOON

EXOCET BL 1

SHIPS

MIG 21/23

F-4/-5

A-4/-7

MIRAGE F-1

20%

A/C

MIG-25/23

Su-24/25/27

F-14/15

F-16/18

MIRAGE 2000

SUBS

UPHOLDER

KILO SS

MISSILES

SS-N-22 BL 1

SHIPS

KHUKRI FFL

KRIVAK FF

LEANDER FF

BDSWORD FF

SOV’MNYY DDG

40%

A/C

MIRAGE 2000

Su-30/35

HAWK 100/20

SUBS

209 SS TYPE

COLLINS SS

AGOSTA SS

KILO FO SS

MISSILES

EXOCET BL-II

C801/C802

SS-N-22 BL-II

SS-N-25

HARPOON UPGRADES

SHIPS

NEUST’MYY FF DELHI DDG

JIANGHU III FF SAAR V FFL

LHU DD LAFAYETTE FF

HALIFAX FF LOREAL FF

FLYVEFISHLEN FFL

20%

A/C

F/A-18 E/F

GRIPPEN

RAFAEL

EFA

FSX (JA)

SHIPS

MALAY FF

KONGU DDG(JA)

KDX DD (SX)

YS-2000

SUBS

MISSILES

SS-N-26

SS-N-27

10%

SHIPS

HORIZON NEW GEN FF

COMMON FF

DD(X)

LCS

A/C

F-22

MFI

XF-10

5%

?? ???? ??

NOTE: % REFLECTS EST. YEAR 2025-2030 COMPOSITION

threat summary
Threat Summary
  • Mixed Technology Forces in 2010
  • Wide Variety of Modern Weapon Systems Including WMD Available
  • Smaller Conventional Forces
  • Asymmetric ThreatsIn Play
asymmetric warfare target vulnerabilities
Asymmetric WarfareTarget Vulnerabilities
  • Exploits an Adversary’s Strategic, Tactical, Technical Vulnerabilities by Innovative, Unexpected, and/or Less Costly Means in Order to Deter Action, Deny Access and/or Delay Mission Accomplishment
  • An Attractive Option for National, Sub-National and Transnational Groups to Employ Against Stronger Adversaries

Source: Institute for National Strategic Studies, National Defense University; 1998 Strategic Assessment “Engaging Power for Peace”

asymmetric warfare applications
Asymmetric WarfareApplications
  • Exploits National Will, Public Aversion to Casualties
  • Targets Coalition Cohesiveness
  • Employs IW for Perception Management
  • Threatens US Homeland, Nationals, Allies
  • Attacks National Infrastructure, Civil Facilities, Population
  • Employs Low Cost, Low Technology Solutions to Counter High Cost, High Technology Threats
asymmetric warfare cont d applications
Asymmetric Warfare (Cont'd)Applications
  • Selectively Acquires, Uses, Threatens to Use Niche High Tech Sensors, Weapon Systems, i.e.,
    • WMD and Delivery Systems
    • Cyberweapons to Disrupt C4ISR Systems
    • IW Countermeasures
  • Fights in Environment Less Favorable to US Capabilities
asymmetric threats examples
Asymmetric ThreatsExamples
  • Naval, Land and Anti-Helo Mines
  • Cheap Aircraft with Explosives or Precision Guided Munitions
  • UAVs Equipped with Explosives
  • Terrorists with Small Arms, Rockets, Explosives, Chemical/Biological Agents
  • Remotely Controlled Explosive Devices
  • Swimmers with Limpet Mines, Explosive Charges
  • Pier-Side Attacks
asymmetric threats cont d examples
Asymmetric Threats (Cont'd)Examples
  • Chemical, Biological Warheads for Coastal Cruise Missiles, Anti-Ship Cruise Missiles (ASCMs), Theater Ballistic Missiles (TBMs), Artillery, Mines, Bombs
  • Urban Warfare
  • Information Warfare
  • Cyberwarfare
  • Satellite Interference, Denial
  • Etc.
2002 defense budgets us 2000 dollars
2002 Defense Budgets(US 2000 Dollars)

<$500M

$2B − <$5B

>$20B

$500M − <$1B

$5B − <$10B

$1B − $2B

$10B − <$20B

VG#70