World military expenditure reaches new record high as European spending surges

Total global military expenditure increased by 3.7% in real terms in 2022, to reach a new high of US$2,240 billion. Military expenditure in Europe saw its steepest YoY increase in at least 30 years. The three largest spenders in 2022—the United States, China and Russia—accounted for 56% of the world total, according to new data on global military spending published by the Stockholm International Peace Research Institute (SIPRI).

World military spending grew for the eighth consecutive year in 2022 to an all-time high of US$2,240 billion. By far the sharpest rise in spending (13%) was seen in Europe and was largely accounted for by Russian and Ukrainian spending. However, military aid to Ukraine and concerns about a heightened threat from Russia strongly influenced many other states’ spending decisions, as did tensions in East Asia.

‘The continuous rise in global military expenditure in recent years is a sign that we are living in an increasingly insecure world,’ said Dr Nan Tian, Senior Researcher with SIPRI’s Military Expenditure and Arms Production Program. ‘States are bolstering military strength in response to a deteriorating security environment, which they do not foresee improving in the near future.’

Military expenditure by states in Central and Western Europe totaled US$345 billion in 2022. In real terms, spending by these states for the first time surpassed that in 1989, as the cold war was ending, and was 30% higher than in 2013. Several states significantly increased their military spending following Russia’s invasion of Ukraine in February 2022, while others announced plans to raise spending levels over periods of up to a decade.

‘The invasion of Ukraine had an immediate impact on military spending decisions in Central and Western Europe. This included multi-year plans to boost spending from several governments,’ said Dr Diego Lopes da Silva, Senior Researcher with SIPRI’s Military Expenditure and Arms Production Program. As a result, we can reasonably expect military expenditure in Central and Western Europe to keep rising in the years ahead.

Some of the sharpest increases were seen in Finland (up 36%), Lithuania (up 27%), Sweden ( up12%) and Poland (up 11%).

‘While the full-scale invasion of Ukraine in February 2022 certainly affected military spending decisions in 2022, concerns about Russian aggression have been building for much longer,’ said Lorenzo Scarazzato, Researcher with SIPRI’s Military Expenditure and Arms Production Program. ‘Many former Eastern bloc states have more than doubled their military spending since 2014, the year when Russia annexed Crimea.’

Russian military spending grew by an estimated 9.2% cent in 2022, to around US$86.4 billion. This was equivalent to 4.1% of Russia’s gross domestic product (GDP) in 2022, up from 3.7% of GDP in 2021.

Numbers released by Russia in late 2022 show that spending on national defence, the largest component of Russian military expenditure, was already 34% higher, in nominal terms, than in budgetary plans drawn up in 2021.

‘The difference between Russia’s budgetary plans and its actual military spending in 2022 suggests the invasion of Ukraine has cost Russia far more than it anticipated,’ said Dr Lucie Béraud-Sudreau, Director of SIPRI’s Military Expenditure and Arms Production Program.

Ukraine’s military spending reached US$44.0 billion in 2022. At 640%, this was the highest single-year increase in a country’s military expenditure ever recorded in SIPRI data. As a result of the increase and the war-related damage to Ukraine’s economy, the military burden (military spending as a share of GDP) shot up to 34% of GDP in 2022, from 3.2% in 2021.

The United States remains by far the world’s biggest military spender. US military spending reached US$877 billion in 2022, which was 39% of total global military spending and three times more than the amount spent by China, the world’s second largest spender.

The 0.7% real-terms increase in US spending in 2022 would have been even greater had it not been for the highest levels of inflation since 1981.

“The increase in the US military spending in 2022 was largely accounted for by the unprecedented level of financial military aid it provided to Ukraine,” said Dr Nan Tian, SIPRI Senior Researcher. “Given the scale of US spending, even a minor increase in percentage terms has a significant impact on the level of global military expenditure.”

US financial military aid to Ukraine totaled US$19.9 billion in 2022. Although this was the largest amount of military aid given by any country to a single beneficiary in any year since the cold war, it represented only 2.3% of total US military spending.

In 2022 the US allocated US$295 billion to military operations and maintenance, US$264 billion to procurement and research and development, and US$167 billion to military personnel.

China and Japan lead continued spending increase in Asia and Oceania. The combined military expenditure of countries in Asia and Oceania was US$575 billion. This was 2.7% more than in 2021 and 45% more than in 2013, continuing an uninterrupted upward trend dating back to at least 1989.

China remained the world’s second largest military spender, allocating an estimated US$292 billion in 2022. This was 4.2% more than in 2021 and 63% more than in 2013. China’s military expenditure has increased for 28 consecutive years.

Japan’s military spending increased by 5.9% between 2021 and 2022, reaching US$46.0 billion, or 1.1% of GDP. This was the highest level of Japanese military spending since 1960. A new national security strategy published in 2022 sets out ambitious plans to increase Japan’s military capability over the coming decade in response to perceived growing threats from China, North Korea and Russia.

“Japan is undergoing a profound shift in its military policy,’ said Xiao Liang, Researcher with SIPRI’s Military Expenditure and Arms Production Program. “The post-war restraints Japan imposed on its military spending and military capabilities seem to be loosening.”

Even one American in Iraq is too many, says Iranian President

The United States is an unreliable friend, and Iraq should not allow any US troops on its territory, Iran's Supreme leader Ayatollah Ali Khamenei told visiting Iraqi President Abdul Latif Rashid on Saturday.

Iran, which has strong ties with Iraq, opposes the US military presence on its borders in Iraq and the Gulf, saying Western military intervention is the root of insecurity in the region.

"Americans are not friends of Iraq. Americans are not friends with anyone and are not even loyal to their European friends," state media quoted Khamenei as saying.

US national security agencies are investigating after a leak of classified documents has suggested the United States spied on allies including Ukraine.

"Even the presence of one American in Iraq is too much," Khamenei told Rashid, who was in Tehran with a delegation to boost ties between the two neighbours.

The United States has some 2,500 troops in Iraq to help advice and assist local troops in combating Islamic State, which in 2014 seized territory in the country.

"Iraq's main effort is to deepen relations with Iran and resolve certain remaining issues between the two countries," Rashid was quoted as saying, without referring to Iraq's ties with the United States.

Armenia and Azerbaijan to hold peace talks in Washington on Sunday

Armenia and Azerbaijan will hold a new round of talks in Washington on Sunday to try to normalize relations, Yerevan said on Saturday, after weeks of rising tensions over the disputed Nagorno-Karabakh region.

Armed forces from the two Caucasus neighbors have frequently exchanged fire amid disputes over the mountain enclave, which is internationally recognized as part of Azerbaijan but populated mainly by ethnic Armenians.

Azerbaijan set up a new checkpoint last Sunday on the Lachin corridor, a road to Karabakh that passes through Azeri territory, in a move that Armenia that called a gross violation of a 2020 ceasefire.

"From April 30 Minister of Foreign Affairs of Armenia Ararat Mirzoyan will be in Washington DC on a working visit. The next round of discussions on the agreement on normalization of relations between Armenia and Azerbaijan is scheduled," the spokesperson, Ani Badalyan, said on her official Facebook page.

Later on Saturday, the Armenian defence ministry said one of its soldiers had been injured by shot fired by Azeri forces near the village of Tegh in Armenia's southern Syunik province, Tass news agency said.

Tegh is the last village on the Lachin Corridor in Armenia before it enters Azeri territory.

Russian peacekeepers were deployed in 2020 to end a war, the second that Armenia and Azerbaijan have fought over the enclave since the 1991 collapse of the Soviet Union.

Despite years of attempted mediation between them, Armenia and Azerbaijan have yet to reach a peace agreement that would settle outstanding issues such as the demarcation of borders and return of prisoners.

Turkish plane comes under attack in Sudan

A Turkish evacuation plane coming into land at an airbase outside Sudan's capital, Khartoum, has been fired at, Turkey's defense ministry confirms.

No-one was injured and it landed safely at Wadi Seidna, where it was being checked.

Sudan's army blamed paramilitary fighters for firing at the aircraft and damaging its fuel system.

The Rapid Support Forces (RSF) denied the allegation, saying it was committed to the extended humanitarian truce.

The rival military factions agreed to an extension of their ceasefire at midnight local time (22:00 GMT on Thursday) for a further three days.

It has had only a limited effect, with army jets continuing to pound RSF positions in Khartoum during the night.

The previous truce allowed thousands of people to attempt to flee to safety, while dozens of countries organized evacuations.

Turkey's Defence Minister said efforts would continue to rescue Turkish citizen from Wadi Seidna and the city of Port Sudan on the Red Sea coast.

Since the clashes began 14 days ago, hundreds of people have been killed and tens of thousands forced from their homes.

The fighting is devastating the capital and its surrounds, which until recently had a population of around 10 million - leaving people without supplies of food, water and fuel. 

Pakistan Stock Exchange benchmark index posts 1.4%WoW gain

The week ended on April 28, 2023 was marred with political uncertainty. The United States asked Pakistan to move ahead on stalled reforms by the IMF, while promising technical help in worst economic times. The IMF awaits clarity on the cross fuel subsidy scheme. In addition to this, foreign exchange reserves inched by US$30 million to US$4.5 billion as on April 20, 2023, culminating to an import cover of less than a month.

The KSE-100 index closed the week at 41,581 points, posting 1.40%WoW gain. Participation in the market was a pleasant surprise, daily trading volumes averaging a little above 208 million shares during the week as compared to around 105 million shares in the prior week depicting 98%WoW gain.

Other major news flows during the week included: 1) Saudi Arabia expected to sign deal for US$2 billion deposits after Eid, 2) GoP cuts growth rate to 0.8 percent, 3) profit repatriation during first 9 months of the current financial year plunges by 82% to US$233 million, 4) CPPA-G seeks positive adjustment of PKR1.17/unit, 5) regulator asks DISCOS to freeze capacity payments and 6) GoP bank borrowings surge 182% to PKR3 trillion.

Top performing sectors were: Vanaspati & Allied Industries, Tobacco, and Investment Banks, while the least favorite sectors included: Close End Mutual Funds, Leasing Companies, and Glass & Ceramics.

Top performing scrips were: POML, SRVI, DAWH, UBL, and MUREB, while laggards included: PGLC, HGFA, KAPCO, BOP, and PIBTL.

Flow wise, Companies were the major buyers with net buy of US$15.9 million, followed by individuals with net buy of US$14.17 million, while Mutual Funds were major sellers during the week, with a net sell of US$1.63 million.

According to media reports, Saudi Arabia and UAE have intimated IMF on financing support giving a relief on external financing shortfall of US$6 billion will dictate the market performance in near term. Moreover, political situation will be in limelight till general elections are held. Keeping that in view, analysts continue to advise scrips that have dollar-denominated revenue streams which hedges the investor against the currency risk, that include the Technology and E&P sectors.

Implications of Saudi-Iran deal for Pakistan

Implications of the apparent rapprochement between Saudi Arabia and Iran extend even further, with significant consequences for vital neighboring regions like South Asia and other populous Muslim countries, including, notably, Pakistan.

The recent announcement of a China-brokered peace deal between Saudi Arabia and Iran initially took the world by surprise. The debate persists concerning whether this deal will last, its potential implications for the United States, what it means for the Middle East region (including Israel), and what brokering this agreement indicates about China’s rising power.

Pakistan has for decades been an arena in the proxy war between Riyadh and Tehran that was sparked soon after the Iranian Revolution in 1979.

Saudi Arabia provided financial and ideological backing to many Sunni militant groups trained in Pakistan that the US Central Intelligence Agency (CIA) was arming to wage a jihad against the Soviets in Afghanistan. Some of these groups, such as Sipah-e-Sahaba, and its offshoot, Lashkar-e-Jhangvi, later turned their guns on the sizeable Shi’a minority in Pakistan.

Iran responded by offering support to Pakistani Shi’a militants to counter this Sunni militancy. Iran also began to cooperate with India in Afghanistan after the Soviets withdrew in 1989 and US attention shifted away from the region.

New Delhi and Tehran notably both supported the Northern Alliance — comprised of a mixture of ethnic minorities, including the Shi’a — in the latter’s resistance to the predominantly Sunni Pashtun Taliban, which enjoyed good relations with Riyadh and Islamabad.

The post-9/11 US-led intervention in Afghanistan caused a seismic shift in regional alliances. Motivated, in part, by its longstanding rivalry with the United States, Iran began cultivating ties with the Taliban as they waged war against the US and North Atlantic Treaty Organization (NATO).

Pakistan’s relations with Iran also improved during this time. Despite some friction along their shared border, Iran and Pakistan broached the possibility of regional energy cooperation, which ultimately led to the two countries signing a bilateral natural gas pipeline deal in 2013. Nonetheless, Pakistan continued dragging its feet on completing its portion of the pipeline, fearing both Saudi and American displeasure over cooperation with its heavily sanctioned western neighbor.

Pakistan’s relations with the US, meanwhile, have been tenuous at best, soured by their divergent strategic objectives in Afghanistan and America’s increasing reliance on India to counteract Chinese influence across South and Southeast Asia.

Pakistan has doubled down on its military and diplomatic ties with China, and the two have significantly boosted their economic ties by launching the US$62 billion China-Pakistan Economic Corridor (CPEC) in 2015, dubbed a flagship project of China’s ambitious Belt and Road Initiative (BRI).

China included many Middle Eastern countries in the BRI, and it inked a 25-year strategic trade and investment accord with Iran in 2021, estimated to be worth between US$200 billion and US$300 billion. China’s move to involve Iran in the BRI may partly have been prompted by its desire to undermine India’s investment in the Iranian Chabahar deep-sea port on the Indian Ocean, viewed as a rival to the Chinese-controlled Pakistani deep-sea port in Gwadar.

For its part, Iran is trying to balance its relations with India and China. India used the Chabahar seaport to send shipments to Afghanistan, bypassing the need to cross Pakistani territory. Despite facing constraints due to the international sanctions regime, India had secured US waivers to buy Iranian oil and to invest in Chabahar.

Whether India will be able to maintain those relations with the Islamic Republic as its ties with the US continue to grow remains to be seen, but the increasing acrimony between China and India certainly makes it unlikely that Chabahar and Gwadar can become ‘sister ports’ to help enhance broader regional trade and connectivity.

Beijing’s attempt to simultaneously loop Iran and many of its arch-rival Arab states into the BRI may have been a key factor that informed its decision to step in to mediate one of the thorniest rivalries between Muslim nations in the Middle East. Other Muslim countries in the Gulf region and beyond, such as the United Arab Emirates, Turkey, and Pakistan, have applauded this high-profile Chinese diplomatic maneuver.

For Pakistan, in particular, the tempering of the protracted Saudi-Iran rivalry could not only help lessen long-running domestic sectarian frictions but also alleviate pressure on Pakistani decision makers to involve Islamabad in contentious proxy tussles elsewhere in the Muslim world, as happened in Yemen.

Even if the still fragile Saudi-Iranian rapprochement holds, Pakistan’s ability to improve its ties with the Islamic Republic will still be kept in check by concerns over further antagonizing the United States.

Biden administration officials have cautiously welcomed Chinese efforts to try to de-escalate tensions in the troubled region while expressing reservations about Iran’s likelihood to stick to the deal.

For many Muslim-majority countries, including Pakistan, Beijing’s diplomatic endeavors are more immediately relevant and beneficial than those undertaken by Washington to bring the Gulf states and Israel together to deter Iran.

Courtesy: Middle East Institute

Iranian exports to Turkey up 23%

The value of Iran’s export to Turkey increased by 23 percent in the past Iranian calendar year 1401, an official with Iran’s Trade Promotion Organization (TPO) announced.

Farzad Piltan, Director General of TPO's Office of West Asian Countries, said based on the data released by the Islamic Republic of Iran Customs Administration (IRICA), Iran exported commodities worth US$7.45 billion to its neighbor in 1401, while the figure was US$6.079 in 1400.

Turkey was Iran’s third top export destination in the past year, the official named natural gas, aluminum, urea, polyethylene, copper cathode and cathode parts, copper wires, iron and steel ingots, and polyethylene as the major products Iran exported to Turkey in the previous year.

Iran’s import from Turkey also rose 15% to about US$6 billion in 1401, from US$5.2 billion in 1400.

Turkey was the third source of import for Iran in the previous year, the official named sunflower seed oil, road tractors, corn, bananas, generators, barley, soybeans, synthetic fibers, crude soybean oil, and solid acrylic polymers as the main items Iran imported from its neighbor in 1401.

The value of Iran’s exports to neighboring Turkey increased by 19% to US$3.35 billion in 2022.

Turkey had imported over US$2.82 billion worth of commodities from the Islamic Republic in 2021.

Iran's trade balance with Turkey has been $280 million positive in favor of Iran in the past year.

In last July, Iran and Turkey discussed ways of expanding economic relations along with political ties at the Turkish-Iranian High-Level Cooperation Council in Tehran.

During the meeting, which was co-chaired by Iranian President Ebrahim Raisi and Turkish President Recep Tayyip Erdogan, the two sides negotiated the extension of the gas export contract between the two sides for the next 25 years.

In the meeting, President Raisi noted that the Islamic Republic of Iran is determined to expand economic relations with neighboring countries.

The president also evaluated Tehran-Ankara ties as positive and progressive, saying that the two countries should pursue appropriate policies to move towards increasing their annual trade exchanges to US$30 billion.

On the sidelines of the mentioned meeting, Iranian Energy Minister Ali-Akbar Mehrabian also held talks with Turkish Minister of Energy and Natural Resources Fatih Dönmez in which the two sides exchanged views on cooperation in energy fields.

Later on, Head of Turkey’s Small and Medium Enterprises Development Organization (KOSGEB) Hasan Basri Kurt met with Head of Iran Small Industries and Industrial Parks Organization (ISIPO) Ali Rasoulian to discuss ways of expanding cooperation between the small and medium-sized enterprises (SMEs) of the two countries.

In this meeting Rasoulian referred to the signing of a memorandum of understanding (MOU) between the two countries on cooperation between SMEs, saying, “President Raisi has emphasized setting up joint industrial parks in the country’s special economic zones, considering the good infrastructure for setting up such parks in the free and special economic zones and the active presence of economic enterprises in these areas.”