ARUNDEL HOUSE, LONDON05 FEBRUARY 2014

Welcome to the launch of The Military Balance 2014, the annual assessment of global military capabilities and defence economics from the IISS.

Joining me to answer your questions today are James Hackett, Mark Fitzpatrick, Dana Allin, Brigadier Ben Barry, Eneken Tikk-Ringas, Douglas Barrie, Christian Le Mière, Virginia Comolli and Giri Rajendran.

This year’s Military Balance is, as ever, packed with facts, figures, tables and maps analysing military organisations, inventories and defence funding. There is extensive and detailed assessment of defence matters, not only in Europe, Asia and the Middle East, but also in Latin America, Russia, North America and Africa. Specialist essays focus on: trends in conflict analysis, notably lessons from modern conflicts in terms of threats and required capabilities; unmanned systems, increasingly prevalent in many armed forces and likely to proliferate further; and the cyber domain. Here, our analysis sets out ways of measuring cyber capability, developing recent work at the IISS and reflecting our broader research programme on cyber power. Meanwhile, the chart of conflict is updated for 2014. The chart usefully illustrates the distribution and duration of conflicts that dominate life for governments and societies across the world.

Press Statement

REMARKS BYDr John Chipman, Director-General and Chief ExecutiveThe International Institute for Strategic Studies, London

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THE MILITARY BALANCE 2014

INTRODUCTION

THE ASIA-PACIFIC

During 2013, Asian tensions were seen in familiar forms, like territorial disputes and maritime incidents. These conflicts have become more acute as nationalist sentiment has grown and as initiatives such as Beijing’s announcement of an air-defence identification zone over part of the East China Sea

We launch this year’s Military Balance at a time when defence planners globally are confronted by a fractured and increasingly complex security environment.

During 2013, fighting in the Middle East and North Africa worsened. Al-Qaeda allies resurfaced in Iraq and the civil war and humanitarian crisis intensified in Syria. Conflict in Mali and the Central African Republic inspired outside intervention and highlighted the need for flexibility in planning and capability. Last year was, we said, ‘the year of living tactically’. There is little sign so far that 2014 will be greatly different, but while living tactically, defence establishments are still charged with thinking strategically and are doing so, particularly in the Asia-Pacific.

In Asia, the growth of defence budgets is accelerating and military procurements are rising. The shift in the global distribution of military power towards Asia, highlighted by the IISS in recent years, has continued. Meanwhile, most national defence budgets in the West contracted further and governments grappled with the need to balance financial imperatives against the reality of an uncertain strategic environment.

sparked controversy. Tensions between China and Japan have risen substantially and there will be a need for some mechanism to manage military-to-military consultations to reduce the risk of tactical encounters at sea or in the air leading to a strategic crisis between the two.

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Iraqi security forces. Should violence increase still further, their ability to maintain control could be imperilled.

In 2013, the Syrian regime’s use of chemical weapons provoked the threat, though hesitant, of international force and, following Russia’s initiative, eventual agreement on the destruction of Syria’s chemical stockpile was reached. Having realised that much of the territory it had lost was effectively irretrievable, the Syrian regime has sought to adapt military strategy to shrinking resources and manpower. The armed forces began to transform, organisationally and doctrinally, to fight an insurgency in a largely urban environment. Still, the regime has not seen a major victory in the last nine months.

For its part, the opposition is unable to strike a decisive blow. Some rebel brigades have agreed to form alliances and pool resources, and there has been a rise in the activity of Salafi-jihadi groups heavily dominated by foreign fighters. The prospect of organised foreign intervention to bring an end to the fighting is virtually zero, while the diplomatic track through the Geneva process has yielded nothing of substance yet.

Iran’s nuclear programme, and Tehran’s support for the Assad regime, continued to provoke regional and international concern. The interim deal on Iran’s nuclear programme, concluded in November and due to last six months, did not come into effect until 20 January as negotiators from the six major powers and Iran wrangled over the details. Deep divisions between Iran and the West, and attitudes among hardliners on both sides, could mean that the best diplomats can achieve later this year is a continuation of the interim deal.

For Gulf states, Iran’s nuclear programme is not the only worry. Tehran’s missile arsenal – assiduously developed in recent decades – adds to their security concerns. As such, missile defence remains a key priority area for Gulf states. There is an emerging recognition of the need to coordinate regional capabilities in this area. Qatar, Saudi Arabia and the UAE have bought, or are buying, Western missile- and air-defence and strike systems, including stand-off air-launched munitions. These and other Middle Eastern states have spent significantly on defence in recent years. As the regional strategic environment evolves, an important question is whether GCC states are able, particularly in the air-defence sphere, to work towards greater coordination.

While some Middle Eastern and Asian defence-procurement deals have generated headlines, countries in other regions are also developing and purchasing more advanced weapons. States in Latin America and Africa are buying more sophisticated equipment. Russia, despite

Beijing’s latest defence White Paper emphasised the need for blue-water naval capabilities, and reflected China’s drive to become a major maritime power. By late 2013, the Chinese aircraft carrier Liaoning had embarked on its third set of sea trials. While it will be some years before China can deploy a fully operational aircraft carrier battle group, the deployment of Liaoning and its escorts into the South China Sea evidently provoked considerable US interest, leading to a close encounter last December between Chinese ships and a US Navy vessel.

Meanwhile, construction by other Asian nations of aircraft carriers and similar ships continued. China may be in the early stages of constructing a second ‘flat-top’, while 2013 saw India launch the hull of its first domestically built carrier and Japan launch its new so-called ‘helicopter destroyer’, the Izumo.

Air-force programmes are also prominent. Japan has ordered the F-35 Joint Strike Fighter, and it seems likely that Singapore and perhaps South Korea will eventually do the same. India is collaborating with Russia on the T-50 advanced combat-aircraft programme, while China is continuing to re-equip its air force and develop new combat aircraft such as the J-20 and J-31, and strategic transport aircraft such as the Y-20.

Asian states are developing and procuring advanced military equipment of types previously monopolised by the West and Russia. Beijing’s recent confirmation of a hypersonic test vehicle places China with Russia and the United States as the only countries actively testing such military technologies. Beijing seems engaged in a pattern of developing test-beds to match existing Western defence technologies, and the possibility grows that China might at some point display new and innovative defence technologies.

The growing importance of security- and military-related competition in cyberspace was highlighted by the reported activities of China’s PLA in this sphere. Other states in Asia and elsewhere are also increasing their investment in both defensive and offensive cyber-warfare capabilities. The leaks by Edward Snowden are likely only to reinforce the rationale for such investments.

In the Middle East, while Syria and Iran still dominate regional security calculations, instability persists in other quarters. Militia groups in Libya still wield substantial influence, and Iraq is drawing attention once more. The confrontation in Iraq’s Anbar province underlines continuing sectarian tensions and increased violence across the country. Internal population transfers are taking place in Iraq on a scale reminiscent of the start of civil war in 2004–05. With elections due in April, continuing violence places a greater burden on the capabilities of the

THE MIDDLE EAST

ADVANCED MILITARY TECHNOLOGIES PROLIFERATE

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shortcomings in defence-industrial capacity, has a long history of complex weapons research and development, and remains a major supplier.

Advanced military technologies are proliferating owing to rising budgets, lower technical barriers to entry, increasing application of dual-use technology and states’ willingness to sell such technologies. These include capabilities previously seen almost exclusively in Western armed forces, such as unmanned systems.

With pressured defence budgets and contracting defence ambitions, some Western states may look to retain a capability edge through the pursuit of even more advanced military technologies: hypersonics is one example; low-observable research is another. But with falling budgets in the West, maintaining investments in research and development will prove increasingly difficult. Even in advanced technology areas, some non-Western countries are catching up with the West. Furthermore, recent experiences of conflict may temper expectations regarding the results that advanced technologies can deliver.

This year will be significant for many armed forces in the West, as they withdraw combat troops from Afghanistan and reflect on the experience of 12 years of war. Defence spending is shrinking in most European countries at a time when the US rebalance places on them a greater share of the burden for security in Europe’s fragile neighbourhoods to the south and the east.

Total European defence spending continues to fall in real terms – by an average of 2.5% per year since 2010.

As a result, finding the resources to support existing and future military capabilities will become more difficult. For instance, European combat aircraft fleets have contracted – in some cases dramatically – over the past 30 years. Europe’s aerospace industry does not have a manned combat-aircraft programme in prospect after current types like the Typhoon and Rafale finish production. Other sectors of Europe’s defence industry are under pressure from falling domestic orders and increased competition from foreign firms. European states face reduced capability, and possibly diminished influence, making all the more pressing initiatives – such as those from within NATO and the EU – to maximise value from defence budgets through closer cooperation.

For NATO, the end of combat operations in Afghanistan marks the end of an intense period of operational activity. Leaders meeting at the Alliance’s 2014 summit in the UK will face a range of pressing issues, notably the shape of a ‘post-operational alliance’. Although allies are now able to deploy and fight more effectively together, particularly as a result of Afghan operations, maintaining this level of interoperability will be challenging in the face of decreasing spending and the lower operational tempo expected to follow the 2014 ISAF drawdown.

On the plus side, NATO has further internationalised as a result of Afghanistan; it developed operational links with a number of non-NATO states, including Australia and Singapore. However, notwithstanding NATO’s Connected Forces Initiative, and its attempt to rejuvenate the NATO Response Force, keeping member states and partner nations engaged could prove difficult after Afghanistan, as defence-policy aspirations potentially contract.

a Estimated spending; b Includes US Foreign Military

Assistance

Note: US dollar totals are calculated using average market exchange-rates for 2013, derived using IMF data. The relative position of countries will vary not only as a result of actual adjustments in defence spending levels, but also due to exchange-rate �uctuations between domestic currencies and the US dollar. The use of average exchange rates reduces these �uctuations, but the effects of such movements can be signi�cant in a small number of cases.

UnitedStates

Othertop 15

countries

Restof theworld

0

100

200

300

400

500

600

700

800

US$bn1. United States

600.4

2. China

112.2

7. Japan

51.0

5. United Kingdom

57.0

4. Saudi Arabiaa

59.6

8. Germany

44.2

11. South Korea

31.8

12. Australia

26.0

13. Italy

25.2

14. Israelb

18.2

15. Iran

17.7

10. Brazil

34.7

9. India

36.3

6. France

52.4

3. Russia

68.2

Comparative defence statistics. Top 15 defence budgets 2013† (US$bn)

a Estimated spending; b Includes US Foreign Military Assistance

Note: US dollar totals are calculated using average market exchange-rates for 2013, derived using IMF data. The relative position of countries will vary not only as a result of actual adjustments in defence spending levels, but also due to exchange-rate fluctuations between domestic currencies and the US dollar. The use of average exchange rates reduces these fluctuations, but the effects of such movements can be significant in a small number of cases.

†At current prices and exchange rates.

WESTERN DEFENCE CHALLENGES

© IISS

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While the West still spent over half of global defence outlays in 2013, this is down from two-thirds of global totals in 2010. Overall, although emerging economies continue to ramp up their defence-spending levels, defence-budget cuts in Western states and the drawdown of military operations in Afghanistan have meant that, globally, we estimate real defence spending fell in 2013.

These defence cuts accentuate the pace of global change, and there are sharp contrasts between the defence investment prospects for different regions of the world. Whereas defence spending in North America and Europe has stagnated or declined since the 2008 financial crisis, over the same period real defence outlays in China and Russia rose by more than 40% and 30% respectively.

In real terms, total Asian defence spending in 2013 was 11.6% higher than in 2010. The largest absolute spending increases over the past year occurred in East Asia, with China, Japan and South Korea accounting for more than half. China now spends about three times as much as India on defence, and more than neighbours Japan, South Korea, Taiwan and Vietnam combined.

These outlays are fuelling heightened military procurement in a region replete with conflicting territorial claims as well as long-standing potential flashpoints. Not least because of the Asia-Pacific’s central place in the global economy, the rapid pace of capability development and the potential for accidental conflict and escalation will continue to be of concern.

Overall, the scope for competition – and potential confrontation – is broad. It might develop in different

domains, such as space and cyber, through the development of new military technologies, such as directed energy weapons, or even in newly accessible regions, such as the Arctic.

For the West, what is clear is that the end of the Iraq War and the impending drawdown from Afghanistan mark neither an end to crises inviting Western military responses, nor a definitive end to Western intervention. Events on Europe’s periphery will continue to demand attention, and there remains substantial capacity to deploy force.

Whether Western states will be willing to act is a question that has acquired new poignancy. Debates over what to do about the conflict in Syria, sharpened by the chemical-weapons issue, have demonstrated that the past decade’s wars have left Western electorates – and legislatures – unsure of the need to intervene and of what might be achieved. Increased violence in Iraq simply underscores these concerns for Western states.

It is clear that, as well as balancing budgets, capabilities and risk, states wanting to retain the option of military intervention need now to develop more convincing justifications and explanations for parliaments and populations about the use of their armed forces in international crises.

The 2014 Military Balance contains the best available public information on defence capabilities, military trends and expenditure. There will always be debates on the wisdom of the use of military force; it is best that they are conducted on the basis of the objective facts about current capabilities, which The Military Balance lays out.

CONCLUSION

Afghan forces assume security lead

PAKISTAN

TURKMENISTAN

UZBEKISTAN TAJIKISTAN

IRAN

KABUL

BADAKSHANTAKHAR

BAGHLAN

KUNARLAGHMAN

KHOST

PAKTIKA

GHAZNI

KANDAHAR

HELMANDNIMRUZ

FARAH

HERAT

URUZGAN

DAY KUNDI

GHOR

FARYAB

JAWZJAN

BALKH

SAMANGAN

Mazar-e-Sharif

Herat

Lashkar Gah

Mehtar Lam

KUNDUZ

SAR-E PUL

WARDAK

BAMIYAN

PANJSHIR

KAPISA

ZABULLOGAR

PAKTIA

NANGARHAR

PARWANNURISTAN

BADGHIS

Afghan forces are gradually assuming the lead responsibility for security in Afghanistan. According to NATO, the aim is for them to have full responsibility, across the country, by the end of 2014. This has been undertaken in tranches of cities, districts and provinces, ‘drawing on the assessment and recommendations of the Afghan government and NATO/ISAF’. With Tranche 5 in June 2013, the last remaining provinces and districts have entered the transition process.

Tranche 1. 22 Mar 2011: �rst set of provinces, districts and cities to start transition announced.

Tranche 2. 27 Nov 2011: second set announced.

Tranche 3. 13 May 2012: third set announced, covering over 75% of the population.Tranche 4. 31 Dec 2012: fourth set announced. 23 provinces out of 34 had entered transition; 87% of the population in areas where ANSF is taking the lead on security.Tranche 5. 18 Jun 2013: �fth and �nal tranche announced. Once implemented, Afghan forces will take the lead on security across the whole country.

© IISS

Source: NATO