Arms Race, Round 2

A “New World Order” is being built. “Peace dividends” are being declared.

In fact, confirms Ian Anthony, an arms expert at the Stockholm International Peace Research Institute, “the single most crucial development in the global arms trade was the end of the Cold War. You no longer have the two superpowers willing to subsidize arms purchases for strategic or ideological reasons. . . . There’s no question the market has shrunk.”

Still, global spending on weapons of destruction is awesome. The developing world continues to shell out, on average,nearly $70 million daily for arms, ammunition and military hardware, according to the latest figures available. And with the collapse of the Soviet Union, the United States is the world’s biggest arms seller.

Moreover, while global arms spending is on the wane, two regions are running counter to the trend. One seems perpetually among the world’s most unstable areas. But the other is arming even as it enjoys a period of relative peace and prosperity.

Here are two reports on the world’s booming regional arms bazaars, the different forces that are fueling them and their prospects for the future.

As the Pentagon shuts down its big bases, Asian nations rush to fill the void. The result: more military spending.

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It wasn’t supposed to happen this way. The end of the Cold War was supposed to produce a “peace dividend,” allowing countries throughout Asia, as well as the United States, to achieve major savings on defense spending.

Washington has cut back, by pulling out of its two biggest bases in the region at Subic Bay Naval Base and Clark Air Base in the Philippines. But some Asian countries appear to have taken the U.S. pullback as a signal to steeply increase their military spending.

Indonesia has purchased 39 ships of the old East German navy and two new submarines. Malaysia is buying front-line fighter planes and naval frigates. Thailand is buying a helicopter carrier. Taiwan has placed a huge order for U.S. and French warplanes, and China is boosting its military spending by 15%.

“Whether you want to call it an arms race is an emotive term, but there is certainly a continued buildup taking place in Asia,” said Paul Beaver, publisher of the respected Jane’s Defense Weekly. “There is definitely no peace dividend and everyone in the region is increasing their defense spending.”

According to Jane’s, military spending in Southeast Asia, Taiwan and South Korea increased by 12.5% in 1991 and is believed to have followed the same pattern last year as well. In most other regions, defense spending has declined 20% or more.

According to Jane’s, Asian countries are in the market for 572 military helicopters, more than the rest of the world combined.

Viewed on a global basis, arms spending in Asia as recently as 1981 accounted for only 15% of the world’s total, excluding the United States and the Soviet Union, according to figures compiled by the Economist magazine. By 1991, the figure had reached 25% of the global total.

Perhaps the most surprising aspect of the buildup is the realization that unlike the Middle East,where Iraq and the Arab-Israeli conflict continue to fuel instability, Asia is now enjoying its most peaceful days since the end of the Vietnam War in 1975.

“I think there is a lot of uncertainty created by the changed political conditions,” said Ian Anthony of the Stockholm International Peace Research Institute. “A lot of countries in the Asia region are not looking at the immediate future, but they’re looking 10 to 15 years down the road and saying: ‘What’s the regional environment going to be like if you assume a significant reduction in the U.S. regional presence?’ ”

While the region is relatively peaceful, potential flash points abound. War between North and South Korea tops most lists of potential crises, but there are also territorial disputes over the Spratly and Paracel islands, which are believed to sit atop huge reserves of oil, the simmering Cambodian conflict, and a host of recurring border disputes involving Myanmar, India, Thailand and Malaysia.

Local military analysts also point to some unusual economic conditions that help account for the military sales at this time. The Asian Pacific region is in the midst of a general economic boom that has lasted a decade, and many countries have accumulated large cash reserves. Taiwan, for example, has more than $50 billion in reserves to help pay for its recent acquisition of 150 F-16 fighter aircraft from the United States--a deal worth $6 billion.

With military spending on the decline in the United States, Russia and Western Europe, arms merchants are increasingly anxious to complete deals in export markets such as Southeast Asia.

For example, Indonesia in January announced the acquisition of 39 ships from the East German navy at the bargain basement price of $30 million. It also bought two new submarines from German shipyards.

While the purchase made Indonesia one of Asia’s largest naval powers overnight, Indonesian officials said they don’t expect to put more than 10 of the used German ships to sea.

“I don’t think there is an arms race, it’s just a valid acquisition for defense purposes,” said Jusuf Wanandi of Jakarta’s Center for Strategic and International Studies. “It’s just a great time to acquire arms because they are dirt cheap.”

In another example of the desperation of big arms suppliers, the United States and Russia have been wooing tiny Malaysia in hopes of winning a contract to provide a squadron of advanced fighter planes. Both countries have slashed prices in hopes of clinching the deal.

Russia sent Vice President Alexander V. Rutskoi to Kuala Lumpur with a reported offer to sell 18 MIG-29 fighter aircraft and six MI-35 helicopters for $800 million. Rutskoi reportedly offered to take half the purchase price in palm oil and sweetened the deal by offering to set up spare parts manufacturing in Malaysia.

The United States mustered John F. McDonnell, chairman of the McDonnell Douglas Corp., to fly to Malaysia to make a new offer. Malaysia is considering the F-16 fighter and F/A-18 fighter-bomber as an alternative to the MIG-29s. Both McDonnell Douglas and General Dynamics Corp. have reportedly agreed to cut up to $8 million from the asking price of each aircraft Malaysia agrees to buy, but they have balked at taking agricultural products in trade.

The Malaysian purchase raises regional concerns because the other members of the Assn. of Southeast Asian Nations (ASEAN)--Indonesia, Singapore, Thailand, Brunei and the Philippines--are all equipped with F-16 fighters. If Malaysia opts for the Russian planes, ASEAN’s efforts to coordinate the region’s security strategy by harmonizing arms purchases could be dashed for a generation.

Both the Indonesian and the Malaysian arms deals reflect a new trend in the region’s military spending--shifting emphasis from fighting internal insurgency to protecting borders, especially at sea. Both fighter-bombers and fast warships have the ability to project power beyond a country’s land borders.

“The majority of spending in Asia is going on maritime and air assets rather than land forces, which is rather a worrying development,” said Andrew Duncan of the International Institute of Strategic Studies in London. “They give you reach.”

Soetrono, a senior Indonesian maritime official (who uses no first name), noted for example that “more force . . . more powerful means are necessary to curb piracy.” Malaysian Deputy Defense Minister Wan Abu Bakar bin Wan Mohamed announced the purchase of two frigates from Britain, saying, “The government is aware that the navy is under-equipped and is taking steps to overcome it.”

Thailand has also announced its intention to buy a helicopter aircraft carrier from a Spanish supplier by 1995. And Thailand has purchased six frigates from China, the last two of which will be delivered by the end of 1995. It also has agreed to buy a second squadron of 18 F-16s valued at $540 million.

Some analysts believe that many Southeast Asian nations are being increasingly spooked by China’s reported decision to base 24 SU-27 fighter-bombers on Hainan Island in the South China Sea, athwart key shipping lanes and within striking distance of the Spratly Islands.

Beijing has reportedly concluded a deal with Moscow to provide 70 SU-27s and 50 MIG-31 high-altitude interceptors, as well as Russian Kilo-class submarines.

China announced last week that it is increasing its defense budget by 15%, with Prime Minister Li Peng promising that China would “constantly increase its combat effectiveness and defense capabilities under modern warfare.”

Even isolated Myanmar, formerly known as Burma, has been on a huge arms-buying spree lately, spending an estimated $600 million to beef up its armed forces.

Myanmar has purchased 20 Hoplite attack helicopters from Poland, which may be used against insurgent rebels, as well as Hainan-class gunboats and F-7 fighter planes from China.

Because of the steady buildup of arms in the region, efforts have been quietly under way in ASEAN to take regional steps to improve security without having a formal agreement such as those that exist in Western Europe. A meeting of top defense officials from the Pacific region is scheduled to be held in Singapore in May in an effort to agree on terms for a broad debate about regional security policy.

Worldwide Imports of Major Conventional Weapons*

Weapons deliveries overall took a nose-dive in 1988, reflecting the Cold War thaw. But the trade is still worth billions, and some regions are buying more. In billions of dollars

1982: $43.4

1991: $22.1 * The numbers reflect average or estimated costs of production as opposed to actual purchase prices for weapons. SOURCE: SIPRI Yearbook, 1992: World Armaments and Disarmament

The Regional Picture

Mideast arms deliveries generally dropped after the Cold War, but since 1991 there has been an explosion of orders, too recent to chart. By contrast, Asia has gradually claimed a larger share of the market. Imports of Major Conventional Weapons (as % of World Total)

Mideast

1982: 31.6%

1991: 21.3% Asia

1982: 15.5%

1991: 21.3%

SOURCE: SIPRI Yearbook 1992: World Armaments and Disarmament

The Top Sellers

The United States replaced the Soviet Union as the No. 1 arms supplier to the Third World after the Cold War subsided.

Arms Transfer Agreements With the Tird World, 1991 (in millions of U.S. dollars)

U.S.: $14,161

Soviet Union*: 5,000

Britain: 2,000

Czechoslovakia**: 600

Germany: 400

France: 400

Belgium: 300

China: 300

Spain: 300

North Korea: 200

Australia: 200

* Dissolved as a nation at the end of 1991. ** Divided into two states on Jan. 1 Source: U.S. Government. In this report, “Third World” includes all nations except the United States, the Soviet Union, Europe, Canada, Japan, Australia and New Zealand.