Country survey XVI the defence sector in the economy of a declining superpower: Soviet Union and Russia, 1965-2001

The Soviet Union was able to develop a large military-industrial complex and become the world's second superpower despite deficiencies in its centrally planned economy because defence was given high priority status and special planning, rationing and administrative mechanisms were used to attain national security objectives. However, in the period 1976-85 the effectiveness of priority protection diminished and defence institutions experienced more of the problems typical of the shortage economic system. The heavy defence burden also created growing difficulties for the civilian economy. The attempts by the Gorbachev government to reform the defence sector and improve defence-economic relationships during perestroika (1985-91) uniformly failed. For most of the transition period, the Russian military-industrial complex has been adversely affected by its low priority status, cuts in defence spending, instability of the hybrid politico-economic system, and negative growth of the economy. The armed forces and defence industry have been reduced in size and their outputs of military services and equipment have fallen to low levels. Nevertheless, the Russian armed forces still have over one million troops, significant stocks of sophisticated conventional weapons, and a large nuclear arsenal. The government of President Putin has raised the priority of the defence sector, increased real defence spending, and adopted ambitious plans to revive Russian military power. It is likely, though, that tight resource constraints will hamper efforts to reform the armed forces and to upgrade weapons. By 2010 Russia will be an important, but not dominant, military power in Eurasia.     

The financing factor in military trade

Available sources value transfers of weapons irrespective of whether they are paid for and how. Data from the U.S. indicates that the shares of arms given for free or on credit are high. If other arms exporters, all military aid and all credits used for military purposes are considered, which is done here on the basis of rough estimates and an opportunity cost model, the true cash costs of weapons in the year of the actual transfer are small. On the other hand, the financial burden of earlier arms imports via debt service has grown over time. It most probably exceeded the true cash cost of imports of arms in the late 1980s. Large differences between arms transfer data and the actual true costs of arms transfers means that analysis of the economic effects of arms imports without considering these financial aspects makes little sense.     

Optimal versus required defence expenditure: The case of the Greek-Turkish arms race

The aim of this paper is to indicate the extent to which the arms race against Turkey, in which Greece and Cyprus have been entangled, imposes a defence expenditure burden that is tough for the two allies to bear. To do so we have resorted to evaluating the optimal military expenditure for the two countries, allied in the context of the Integrated Defence Doctrine, which is compatible with the constraints imposed by the resources of their economies. All experiments and scenarios examined lead to the conclusion that the current defence burden of the two allies seems to be driving their economies beyond capacity limits. The fact remains, however, that under the circumstances, a one-sided disarmament policy like the one currently followed by Greece, is a risky choice given that the long-term armament programmes pursued by Turkey, whose role in this arms race has been proven as leading, leave very small room to the Greek and Cypriot sides to reduce their own defence expenditure.     

The Cyprus puzzle and the Greek - Turkish arms race: Forecasting developments using genetically evolved fuzzy cognitive maps

The scope of this paper is to forecast the extent to which a settlement of the Cyprus issue may be possible given the decisions taken during the Copenhagen EU summit. It aims, in addition, at investigating the possibilities of improvement in Greek-Turkish relations which may lead, in turn, to reducing the arms race between the two countries. The paper uses a Genetically Evolved Certainty Neuron Fuzzy Cognitive Map algorithm to consider a number of scenarios examining the possible reactions of all sides involved in the Cyprus issue, namely Greece, Turkey, Cyprus, the Turkish-Cypriot community and the international environment. All simulation exercises suggest that the Greek and the Cypriot side should not necessarily rely on the decisions taken during the Copenhagen summit conference. The forecasts point out, in addition, that the optimism of the Greek government concerning the outlook of its relations with Turkey, and a subsequent reduction of the arms race against it, is far from being justified.     

An Empirical Analysis of the Arms Race Between South and North Korea

This study analyses an arms race between South and North Korea over the period 1963–2000. Despite the strategic importance of the Korean Peninsula, the arms race between South and North Korea has rarely been studied. In this study, the South–North arms race is empirically estimated using Richardson’s action–reaction model. The pattern of South–North arms race between the Cold War (1963–1989) and the post‐Cold War eras (1990–2000) as well as the existence of an arms race is examined comparing both countries’ defence spending, number of military personnel and tactical aircraft.     

DETERMINING THE DEFENCE INDUSTRIAL BASE

This paper models the determination of the defence industrial base – the number of different military systems a country decides to maintain. High R&D costs means that few countries can afford to produce major weapons systems and the producers also import systems. Non‐producers rely on imports and we assume their demand is driven by regional arms races. Military capability is determined by the number of systems and the quantity and quality of each. We examine how the defence industrial base is influenced by military expenditures, R&D costs, export controls, the nature of regional arms races and a variety of other factors.     

An analysis of the Washington naval agreements and the economic provisions of arms control theory

During the Cold War, two contending hypotheses dominated theories concerning the economic impact of anus control. The first suggested that when certain prerequisites were fulfilled, arms control agreements served to promote lasting reduction in military spending. The second asserted that instead of promoting savings, arms control encouraged diversion of resources to more advanced and expensive weapons, thus driving defense spending higher. Through the examination of the impact of the Washington Naval Agreements on naval expenditure during the 1920s, this paper provides empirical evidence to support the latter of these competing hypotheses. The United States, Great Britain, and Japan all realized economic savings after signing the Washington Naval Agreements. However, these savings soon eroded as the powers developed more advanced weapons‐systems.     

A PRODUCTIVITY AND EFFICIENCY ANALYSIS OF THE SECURITY AND DEFENCE TECHNOLOGICAL AND INDUSTRIAL BASE IN SPAIN

This study analyses the performance of the productivity of the main industrial subsectors composing the security and defence technological and industrial base (SDTIB) in Spain from 1996 to 2009. Accordingly, we have used the non-parametric data envelopment analysis and bootstrapping techniques to compute Malmquist productivity indexes that allow us to split productivity growth into efficiency change and technical progress. The results obtained show productivity improvement in the SDTIB as a whole due mainly to advances in technology and to a lesser extent to the contribution of technical efficiency. The bootstrap approach yields further evidence, as for many cases, productivity growth or decline, is not statistically significant. This is the first time a study of this kind has been carried out on the production process of this sector in Spain.     

Export controls,market structure and international coordination

We look at the different ways of aggregating the exports of dual use products to give the security perception of exporter countries and their consistency with the relevant export control regimes. Also, we analyze different models of export controls highlighting the role of the perception of security, market structure and competition between exporting firms in determining the existence of multiple equilibria and therefore, the need for coordination between countries in setting export controls.     

UNITED STATES—SOUTH AFRICA RELATION

Abstract

The article evaluates the security challenges that are likely to occur along international borders in East Africa with the advent of the East African Community Common Market in July 2010. In an attempt to illustrate the porosity of borders and the likelihood that criminals could take advantage of the situation, the author describes the ease with which transnational crime could thrive (in the absence of efficient border security measures) under the guise of informal cross-border trade that derives its basis largely from the customs and historical linkages in the region. Border towns in the region are considered zones of risk but also opportunities for quick money-making ventures and deals that tend to attract a variety of criminals. While the danger is not alarmingly high, there is a likelihood that with the opening up of the East African Community to the free movement of goods and people, criminals will exploit this freedom to commit crimes such as human trafficking, drug smuggling and moving terrorists and contraband goods unless mechanisms are put in place to curtail these activities. Should this not happen, the mission of the East African Community could be jeopardised.