United States Defence and Security Report Q4 2009

The US has entered into two very expensive wars as part of the so called Global War on Terror (GWOT), which shows little sign of ending in the next five years. There is a danger that US armed forces will become overstretched in human, financial and operational terms if the GWOT is extended beyond its current theatres of operations. Operations in Iraq and Afghanistan are estimated to cost US$170bn for 2009 alone. The gradual handover of US forces to Iraqi authorities, with total pullout scheduled for mid- 2012, is being hampered by security problems and bomb attacks in the north and other areas in the latter half of 2009.

The defeat of the Taleban in Afghanistan is the US government’s top military priority. Improvised explosive devices (IEDs) continue to be the main threat. In January and February 2009 alone, 32 coalition troops were killed by IEDs of growing sophistication. General A. McChrystal is requesting in his September 2009 report an increase in troops from the 68,000 already approved by President Obama to as many as 45,000. The military is still getting to grips with the problems of asymmetric warfare, getting bogged down in conflicts prolonged by protracted and unpredictable insurgencies and innovative terrorism.

The current Obama administration, which is set on changing procurement methods, may not be able to sustain previous (Bush administration) levels of defence project funding – upon which the industry depends. The major challenges faced by this administration will have a direct impact on procurement – the ongoing quagmire of the Afghan operation currently being the biggest immediate challenge.

According to US Department of Defense national defense budget estimates, spending will reach US$552.3bn in 2013, down from US$568.2bn in 2008, as the US gradually withdraws from Iraq.

It is likely, however, that the defence industry will continue to grow and increase sales largely independent of the economic state of the country. Predicted blips are delayed start-ups of larger-scale weapons programmes – the most expensive to fund and the longest to come to fruition. There are also warnings that payments for long-term, currently contracted programmes will fall to a future administration. Much depends on how government funding is divided up among immediate war needs and more ambitious projects, and if extra funding will have to come from the base budget.

The US defence industry is the world’s richest and is greatly boosted by maintaining, on the whole, the world lead in advanced research and development (R&D) in defence and security. The US, regardless of changes in government and domestic politics, accounts for 50% of the world’s total defence expenditure (US$1.158trn in 2006). The US earns hundreds of billions of dollars as the world’s leading defence exporter, which provides many thousands of jobs, and is one of the world’s most advanced R&D sectors.

The GWOT has given a huge boost to the industry since defence spending in 2002 was set at US$355.1bn – the biggest increase in 20 years. The US as the ‘world’s policeman’ is evolving a concept of ‘hybrid warfare’ to prime its defence policy-makers and military planners for a growing range of force capabilities and flexibility. Military planners want smarter weapons and fewer tanks, jets and surface ships.

In FY09, US arms sales – to over 200 countries – are expected to approach US$4bn, up from US$36.4bn in 2008, despite the recession, and which account for 63.5% of world military spending. Emerging markets are key drivers of growth. Current strong markets are Israel, Saudi Arabia, South Korea, Egypt, UAE, Morocco, India and Poland.