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Upgrades and surplus weapons: Lessons from the UK disposal sales agency

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Release date: 1997-06

Military cutbacks in the 1990s have led to a decline in the purchase of new weapon systems: the global value of transfers of major conventional weapons, as measured by the Stockholm International Peace Research Institute (SIPRI, 1996) fell from a peak of US $46,535 million in 1987 to US $22,797 million in 1995 (at constant 1990 prices).1 Given the continuing demand for military security (albeit at lower levels in many parts of the world), the need to extend the operational life of existing systems, and to improve their operational performance in line with new technologies, is of growing importance to most modern armed forces. In many countries, exacting new safety and environmental regulations are also becoming an important requirement, although perceived operational needs remain the dominant reason for modernisation of weapons. As a result of these operational and regulatory requirements, spending on the modernisation and refurbishment of old equipment is generally thought to be taking a growing percentage of smaller defence budgets world-wide¾although the evidence for this remains largely anecdotal, as explained below. This paper examines the modernisation or upgrade market with a particular focus on UK surplus weapons. In Section 2 some of the definitional and methodological problems are discussed, and this is followed in Section 3 by a speculative look at the main global players in the upgrade market, on both the supply and demand side. Having set the context, the next two sections examine the global upgrade market for surplus weapons. Section 4 provides a brief overview of the market by looking at examples drawn from the specialist literature, and concludes with further speculation as to the motives for both suppliers and purchasers. Section 5 is a case study on the activities of the UK Disposal Sales Agency (DSA) and the associated upgrade work for UK defence companies. Analysis is hampered by the issue of commercial confidentiality which both the UK Government and private sector companies use to deny public access to information, such as the value of individual sales and work carried out on refurbishment and refitting. Our analysis concentrates, therefore, on the general relationship between surplus sales and the broader dynamic of UK arms export policy. Initially we look at the pattern of sales generated and the DSA's stated policy of using surplus sales to stimulate new exports for UK defence companies. We also assess the various motivations for selling surplus equipment and the role that the MoD has played in maintaining the quality of UK capital equipment, even where much of it is destined for surplus. Drawing on evidence from the sale of surplus ships, we argue that the issue is more complex than simply maximising financial returns to the DSA but involves using surplus equipment as a 'loss-leader' for private sector contractors. This in turn, has implications for the economics of the arms trade and the potential role of surplus equipment as a form of hidden subsidy for private sector defence exports.