The region's Arab nations, particularly those in the energy-rich Gulf, remain avid buyers of military hardware. In its latest Middle East market analysis, Forecast International anticipates that the six Gulf Cooperation Council (GCC) members will combine to spend $385 billion toward defense and security through 2016. Over the same period, Iraq is expected to invest $65 billion in its security forces.

With the Middle East accounting for about 20 percent of the world's arms imports during the latter half of the previous decade, arms producers increasingly set their sites on this lucrative market. The rise in regional arms purchases corresponded with several developments in the security environment of the Arabian Peninsula. These included an increasingly assertive Iranian regional posture, a spike in oil prices that topped out at $147 per barrel in July 2008, and energy infrastructure concerns heightened by a failed terrorist attack on Saudi Arabia's Abqaiq oil-processing facility in 2006.

Today, military modernization programs that include expansions in air, air-defense and naval capabilities are the principal drivers of procurement policy in the GCC states. Cushioned from the drop in international oil prices between late 2008 and mid-2010 by their sovereign wealth funds, the GCC members – led by Saudi Arabia and the United Arab Emirates – have continued to invest in weaponry and advanced platforms, with little sign of a slowdown.

With oil prices now hovering around $100 per barrel and security anxieties in several Gulf Arab kingdoms heightened, there is little reason to expect a slowdown in the defense procurement tendencies of the region, according to Forecast International’s Middle East Military Market analyst, Dan Darling.

Home to an already tenuous security environment now perceived as that much more fragile in the wake of the Arab Spring events in Egypt and Syria, Israel, too, is intent on pressing forward with projects in the areas of missile defense, cyber warfare, tactical mobility, and precision firepower. FI expects Israel to spend over $77 billion over the coming five-year period despite the pressures placed upon the Netanyahu government to expand social welfare spending, partially by reallocating funds from the defense budget.

"No matter where you look, the fragility of the political situation in many countries translates to increased security anxiety, driving procurement policy forward," Darling notes. "This is the same whether it relates to Iraq, Jordan, Israel or the UAE. Security worries combined with force modernization programs equals a ripe export market for foreign suppliers."

A turbulent and transitioning political environment would seem to portend a more cautioned Western approach to arms sales, yet all signs indicate that the competition for the Middle Eastern market will remain intense as producers look to offset shrinking orders at home. Despite the controversy it generated at home, a June 2011 decision by Germany's Federal Security Council to clear the way for a potential multibillion-dollar sale of Leopard tanks to Saudi Arabia is indicative of the lengths some governments are willing to go to achieve the objective of providing strategically aligned partners with modern weaponry while also bolstering their respective national defense industries in the process.

The United States stands at the head of the line of suppliers to the Middle East. Washington already provides Israel and Egypt with annual foreign military financing (FMF) of $3 billion and $1.3 billion, respectively. Iraq has also been the beneficiary of U.S. funding, receiving some $20.5 billion in congressionally approved appropriations since 2005 for the Iraqi Security Forces Fund (ISFF) aimed at rebuilding the Iraqi forces from the ground up.

But it is through its government-to-government Foreign Military Sales (FMS) channel that the U.S. secures much of its business with the region. While the U.S. had established itself as a leading supplier of weaponry to the region decades earlier, in 2007 the Bush administration announced a combined $20 billion FMS package targeted toward the Gulf Arab states. The sales aimed to enhance GCC defense capabilities and interoperability. Greater military coordination between GCC members would, the thinking went, bind together a pro-U.S. strategic bulwark that would help contain Iran.

Since then, the Obama administration has continued this policy, green-lighting a combined $60 billion FMS package for Saudi Arabia in the fall of 2010. Meanwhile, a rumored $20 billion bundle of sales aimed at modernizing the Royal Saudi Navy remains under consideration.

"The upheaval in the Middle East may slow the pace of U.S. arms deals with Arab nations," Darling says, "but until events on the ground dictate otherwise, it is unlikely to bring them to a halt. Military assistance and government-to-government orders give Washington a sense of wielding influence within the armed forces and policy-making circles of recipient nations. This leverage, real or imagined, is not an element the U.S. will hastily forfeit."

Though the U.S. remains the dominant defense provider to the region, by no means have other supplying nations been shut out of the market. France still hopes to garner an export sale of its Rafale combat aircraft in one of the several countries – Kuwait, Qatar and the UAE – considering jet fighter replacements. The British are hoping to lock down an order for the Eurofighter Typhoon in Oman. Meanwhile, concerns regarding over-reliance upon U.S. material may prompt some nations such as Saudi Arabia and the UAE to diversify and shift away from single-source purchasing. Such moves would open up opportunities for suppliers beyond Europe, including Russia, China, South Korea and Turkey.

Thales is a major player on the Rafale team. Thales reports that the company provides equipment and systems that account for approximately one third of the total value of each aircraft. The Rafale combat aircraft is equipped with the Thales RBE2 radar. Thales is currently working on an RBE2 active electronically scanned array (AESA) variant.

One year ago, Thales announced that a production model RBE2 AESA radar had been validated on the Rafale aircraft. This announcement followed a three-month flight test program with an RBE2 AESA-equipped Rafale. During the test program, Dassault Aviation confirmed that all aspects of the radar's performance complied with the technical specifications of the French defense procurement agency (DGA).

The Spectra electronic warfare system for the Rafale provides identification, location, jamming, and decoying against an extensive range of electromagnetic, infra-red, and laser threats. Thales is the prime producer and integrator of Spectra; other companies provide the subsystems, such as missile warning systems and chaff/flare dispensers.

Thales also manufacturers the Damocles multi-function targeting pod. Damocles gives the Rafale day and night, all-weather, laser-guided weapon capabilities. According to Thales, Damocles' powerful laser and high resolution imagery provide the aircraft with a long stand-off range and tactical ground and air defense system survivability.

Damocles is in service with French Air Force and Navy Rafale aircraft. Recent press releases have not disclosed if India will be purchasing targeting pods. India may equip a portion of its new fleet with Damocles pods.

Forecast International prepares market intelligence reports on Damocles, the RBE2 radar, and Spectra that are part of the Electronic Systems Service.

"While increased modernization and retrofit remains transparent to our analysis of new-production tanks, this factor has become a significant force in the international market," said Dean Lockwood, Forecast International senior military vehicles analyst. "Through ongoing maintenance, RESET (repair of battle damage), and upgrades, the U.S. Army intends to maintain its M1 Abrams tanks in active service through 2050."

Between 2004 and 2009, U.S. Department of Defense spending on the maintenance, RESET, and upgrade of existing M1 Abrams tanks was, on average, equivalent to 41.24 percent of what the entire international market spent on new-production main battle tanks annually. In 2010, U.S. DoD spending on the maintenance, RESET, and upgrade of existing M1 Abrams tanks experienced a reduction of more than 67.2 percent since the previous year – with a corresponding drop in the equivalent market share, to 10.69 percent. In 2011, U.S. DoD spending on the M1 Abrams fell 42.77 percent from 2010. Since 2004, the M1 Abrams program has lost nearly 82 percent of its market share.

The expense associated with the modernization and retrofit of high-end main battle tanks pales in comparison with the prospect of new tank procurement. Thus, Forecast International expects new production of high-end tanks to remain relatively low, accounting for 22.79 percent of all production, worth 36.05 percent of the market, through 2021.

In terms of sheer numbers, the Type 98 of the People's Republic of China, Pakistan's Al-Khalid, and the Russian Federation's T-90 (including India's licensed T‑90S) will continue to dominate the market, accounting for 54.73 percent of all new tanks rolling out worldwide, worth 43.79 percent of the market, through 2021.

Second only to infantryman in terms of combat effectiveness, the "Mailed Fist" of heavy armor remains the arm of decision on the modern battlefield. Further, as Operation Iraqi Freedom/Operation New Dawn (2003-2011) evolved from a war of movement into a security operation, the main battle tank proved surprisingly adaptable. In the congested streets of Iraqi cities, the Abrams served as a significant force multiplier, fully up to meeting the challenges of an asymmetric warfare environment.

The objective of the program is to develop simulation facilities and approaches that will allow planners to evaluate the effectiveness of EW in real-world engagement situations and support the introduction of modern, effective systems into naval aviation. Simulation is an important method in assessing foreign technology threats. The technique also helps prepare pilots and planners deal with those threats.

In addition, new platforms such as the EA-18G and F-35 require testing and evaluation, which ensures that the EW systems on those aircraft will be able to protect the aircraft from both current and future threats.

As laid out in the FY12 U.S. defense budget, $113 million has been budgeted for program activities through FY16. Based on a projection of this budget, $199 million is likely to be spent on the program through 2021.

While the expected trend is not entirely negative, as it still projects growth, the decrease does reflect a shift in priorities for the foreseeable future, according to FI's "The Military Market for Africa" report.

The past year has been particularly eventful for Africa, with the Arab Spring revolutionary wave to the north, an increase in Islamic fundamentalism activity, and several elections that led to political crises. Though a number of those conflicts are expected to carry into 2012, the majority were short term and are now in the recovery stages.

"Conflicts within several African countries at the end of 2010 and throughout 2011 have had a negative impact on those nations' political, economic, social, and military institutions," said Forecast International Africa Military Markets Analyst Nicole Loeser, author of the report. "This suggests that national budgets will be using funds to restore countries to pre-conflict conditions, leaving less funding for defense spending."

Although Africa may not offer the scope of opportunities presented by other, larger markets, the true value of the African arms market is drawn from those issues that mirror the global security climate. However, major military procurement purchases are not a priority at this time because several countries are in the midst of recovering from recent conflicts.

The drop in defense spending can also be accredited to African countries with energy-based economies. These nations have been key players in Africa's overall market growth in the past five years, with exportation profits driving defense spending. Algeria, Angola, Libya, Nigeria, and Sudan (which had a combine average compound annual growth rate (CAGR) of 20.52 percent in the 2006-2010 period) will only grow 0.23 percent per year between 2011 and 2015.

Most notably Libya, which had one of the highest CAGRs in defense spending from 2006 through 2010 at 33.27 percent – now at -1.7 percent – has the lowest projected CAGR for 2011 through 2015. This plunge stems from Libya's recent civil war battle that successfully ended Col. Muammar al-Qadhafi's regime. The complete halt of oil exportation during that time has experts predicting it will take Libya years until it is able to produce substantial amounts again. Furthermore, if Libya's Transitional National Council decides not to follow through with billions in arms agreements Qadhafi had with Russian and European firms, the African defense spending market as a whole may actually face a more significant contraction than predicted.

"In recent years, some of the large defense budgets have increased to the point of being unsustainable. Trends show that Algeria, Morocco, and South Africa are shying away from large defense budgets and opting to position themselves to support major military acquisition efforts through the forecast period." Loeser said. These big spenders have made major weapons purchases in the last few years, and new equipment is unlikely in the near term. By keeping their defense budgets modest in upcoming years, they are setting themselves up for a new wave of weapon acquirement.

Some smaller defense spending markets, such as Gabon, Ghana, and Kenya, have expressed the desire to allocate their defense expenditures more toward enhancing military proficiency and professionalism within the service, and are overlooking major arms purchases for the time being. A handful of countries, such as Ethiopia and Nigeria, are becoming more interested in peacekeeping operations, and in response, training for such deployment has moved up in priority.

The majority of funds for professionalism training, including promoting good governance, combating corruption within African armed forces, and peacekeeping deployment training, will be derived from international funding rather than the country's own defense budget. Not surprisingly, the U.S. continues to provide military assistance in these areas, an estimated $113.7 million between FY10 and FY12.

Forecast International, Inc. is a leading provider of Market Intelligence and Analysis in the areas of aerospace, defense, power systems and military electronics. Based in Newtown, Conn., USA, Forecast International specializes in long-range industry forecasts and market assessments used by strategic planners, marketing professionals, military organizations, and governments worldwide.

The DoD's fiscal situation is dire news for a force attempting to rebuild and modernize after a decade of war, according to Forecast International's latest analysis of the U.S. defense market. "The budget debate raises some serious questions about many of the department's costly acquisition programs, as well as the overall size of the military and the manner in which the force will be utilized in future conflicts," said Shaun McDougall, Forecast International's North America Military Markets Analyst and author of the report.

The Pentagon is already implementing over $150 billion worth of efficiency savings under an effort launched by former Defense Secretary Robert Gates, and budget planners anticipate that the debt ceiling agreement will result in cuts of more than $450 billion over the next decade. Furthermore, a joint committee recently failed to identify $1.2 trillion worth of additional federal budget cuts, triggering a legislative mechanism that would automatically split those cuts between security and non-security programs.

"This second round of defense budget cuts is not set in stone, however, because lawmakers still have a number of options for reversing course or modifying the legislation they passed earlier in the year," McDougall said. Nevertheless, service leaders are preparing for the worst as they attempt to shield their prized acquisition efforts from the budget axe.

Even as the DoD completes a strategic and budgetary review to guide future budget cuts, deciding which programs to end or curtail will be a monumental undertaking.

The Air Force may be hard-pressed to afford every F-35 that it currently plans on buying, and fiscal pressure could impact the development of a new long-range bomber.

The Navy must decide whether to stand by its requirement for a 313-ship fleet, which some estimates suggest is unattainable given current budget trends and unaffordable under even the best-case scenarios. The projected cost of the SSBN(X) ballistic missile submarine will only add to the pressure on the Navy's shipbuilding accounts down the road. Naval aviation also faces uncertainty as larger budget cuts loom, with the F-35B and V-22 standing out as potential targets.

The Army may face a particularly difficult time moving forward. As its footprint in the Middle East dwindles and the size of the Army declines, the service will lose some of the momentum behind its budget requests. Yet the Army still intends to develop a new family of ground vehicles under a program that has already been delayed because of cost concerns, while it recovers from two failed efforts to develop a new armed scout helicopter.

Pentagon leaders have echoed the sentiment that defense strategy should not be driven by budget cuts, but that it must be informed by budget constraints. These constraints will be a decisive factor in the DoD's acquisition pipeline moving forward, and have already made an impact in the form of more fixed-price contracting, the canceling or restructuring of programs that are underperforming or over budget, and the pursuit of more off-the-shelf solutions in place of complicated and expensive development efforts.

What is unclear at this time is how far the Pentagon will have to go to adapt to this new fiscal reality.

Forecast International, Inc. is a leading provider of Market Intelligence and Analysis in the areas of aerospace, defense, power systems and military electronics. Based in Newtown, Conn., USA, Forecast International specializes in long-range industry forecasts and market assessments used by strategic planners, marketing professionals, military organizations, and governments worldwide.

Dean Lockwood, Weapons Systems Analyst at Forecast International, notes that new production of the top high-end vehicle – the Igel/Puma – will account for only 10.09 percent of unit production through the forecast period. Yet, Lockwood states, "We estimate this program will own 57.57 percent of the total value of the light tracked vehicle market through 2020." Lockwood adds, “For most nations, the expense associated with the modernization and retrofit of high-end light tracked vehicles pales in comparison with the prospect of new procurement.”

The U.S. Army plans to spend over $2.77 billion on Bradley Fighting Vehicle upgrades through FY16. Indeed, the U.S. Army intends to maintain the Bradley Fighting Vehicle system in active service for another 45 years. The ongoing U.S. Army investment in the maintenance and upgrade of the existing Bradley fleet through FY16 is now equivalent to 13.5 percent of the value of all new-production light tracked vehicles scheduled to roll out worldwide through 2020. “While transparent to this market analysis, maintenance of the existing Bradley Fighting Vehicle fleet in U.S. Army service is effectively the second most valuable light tracked vehicle program on the international market,” Lockwood said.

In terms of sheer numbers, the Type 90 armored personnel carrier (APC) and the Type 90 mechanized infantry combat vehicle (MICV) of the People’s Republic of China represent the most significant light tracked vehicle production runs of the forecast period. As the People’s Liberation Army (PLA) standardizes its mechanized forces around the Type 90 APC and MICV, Forecast International expects that combined production of these two vehicles will account for some 42 percent of all new light tracked vehicle production worldwide, worth 9.2 percent of the market, through 2020.

Although the light tracked vehicles in service today are all products of the Cold War, they are far from relics destined for the scrap heap. Since the U.S. 3rd Infantry Division (Mechanized) executed its "Thunder Run" to Baghdad in 2003, the light tracked vehicle has soldiered on as a significant force multiplier on the modern asymmetric battlefield.

Forecast International, Inc. is a leading provider of Market Intelligence and Analysis in the areas of aerospace, defense, power systems and military electronics. Based in Newtown, Conn., USA, Forecast International specializes in long-range industry forecasts and market assessments used by strategic planners, marketing professionals, military organizations, and governments worldwide.

More specifically, this dollar amount will be allocated for the development, procurement or maintenance of multimission communications systems or technology.

The company's “The Market for Multimission Communications Systems” analysis further projects that over the next decade, defense departments throughout the world will purchase some 480,468 individual units from among the 18 multimission communications products covered in the analysis.

“The excessive costs of and setbacks in development of the U.S. Pentagon’s Joint Tactical Radio System and the restocking of communications equipment used in military operations in Afghanistan and Iraq are the primary factors driving current expenditures for multimission communications systems,” said Greg Giaquinto, Forecast International Senior Analyst.

According to the analysis, the Joint Tactical Radio System (JTRS), the Bowman Tactical Radio, and the Single Channel Ground and Airborne Radio System (SINCGARS) will significantly impact the market for multimission communications in the coming decade.

JTRS is a U.S. Department of Defense program to develop and produce a single standard software-operated radio system for the United States armed services. This program is currently in research and development. Forecast International estimates that the DoD will spend about $2.15 billion from fiscal year 2011 to fiscal year 2015 on JTRS R&D activities.

The Bowman Tactical Radio program of the U.K. Ministry of Defence seeks to purchase a family of multimission communications combat radios for the British armed services. General Dynamics United Kingdom Ltd is the program’s prime contractor. General Dynamics UK has chosen ITT Corp and Harris Corp to supply the bulk of the multimission communications systems to be purchased under the Bowman program. Forecast International is estimating that the British armed services will buy approximately 16,000 tactical radios under the Bowman program from 2011 to 2020.

The software-driven Single Channel Ground and Airborne Radio System constitutes a family of manpack, vehicular, and airborne radios manufactured by ITT’s Communications Systems Division. The most popular member of the SINCGARS family of military radios is the PRC-119, which Forecast International expects the U.S. DoD to buy in sizable quantities over the next several years.

According to the analysis, Harris, General Dynamics, Rockwell Collins, ITT, and Thales will receive 46.42 percent of the total dollar amount that defense departments worldwide are forecast to spend on the 25 multimission communications products and programs covered in the analysis. Harris will lead with $1.99 billion in revenue. General Dynamics, Rockwell Collins, ITT, and Thales will follow with $962 million, $620 million, $419 million, and $294 million in revenue, respectively.

Forecast International, Inc. (www.forecastinternational.com) is a leading provider of Market Intelligence and Analysis in the areas of aerospace, defense, power systems and military electronics. Based in Newtown, Conn., USA, Forecast International specializes in long-range industry forecasts and market assessments used by strategic planners, marketing professionals, military organizations, and governments worldwide.

The Erieye system is capable of long-range sea and land surveillance, and is used for missions that include AEW, surveillance of national borders, search and rescue, and air policing. The system has equipped Saab 340s, the Saab 2000, and Embraer EMB 145s.

Sources have reported that Saab delivered the second of two Erieye AEW systems to the United Arab Emirates in mid-2011. Additionally, the Swedish Ambassador has offered to sell the UAE four more aircraft. Another international customer, Thailand, received its first Erieye AEW platform in December 2010, along with six Gripen fighters. Thailand has signed a follow-on contract for six additional Gripens and a second Erieye platform. Erieye faces fierce competition from other AEW radar platforms, most notably those produced by Northrop Grumman and Israel Aerospace Industries.

Forecast International is updating its Erieye market intelligence report that is included as a part of the Electronic Systems Service.

According to Forecast International, light military rotorcraft production will increase through 2012, representing a continuation of the market's growth track of recent years. After 2012, however, Forecast International expects that yearly production in the segment will enter a period of gradual, though erratic, decline through the 2018/2019 timeframe.

The company's projections indicate that production will total 193 units in 2011 and 215 units in 2012, decline to 186 units in 2013, increase to 204 units by 2015, and then decline to just over 165 units in each of 2018 and 2019. Production in 2020 is projected at 185 units.

"Current military helicopter acquisitions are running their course, and very few major procurements of light military helicopters have emerged that could help grow, or even maintain, production levels in the market," said Forecast International senior aerospace analyst Raymond Jaworowski.

The market momentum of recent years will not be sustained. The U.S. accounts for a large portion of demand in the market, and the present modernization cycle in U.S. military rotorcraft procurement is nearing an end. Meanwhile, defense spending is under intense pressure in the U.S. and many other countries that have contributed to much of the recent demand in the market.

The new Forecast International study includes projections of manufacturer market shares. These indicate that Eurocopter will be the leading manufacturer of light military rotorcraft during the 2011-2020 time period. AgustaWestland is projected to be second in unit production during this timeframe, followed by Hindustan Aeronautics Ltd (HAL) and Bell Helicopter. Each of these companies has a robust presence in the market but, as detailed in the study, pursue widely diverging strategies to protect and enhance their market share.

Forecast International, Inc. is a leading provider of Market Intelligence and Analysis in the areas of aerospace, defense, power systems and military electronics. Based in Newtown, Conn., USA, Forecast International specializes in long-range industry forecasts and market assessments used by strategic planners, marketing professionals, military organizations, and governments worldwide.