Due to extensive media coverage, the widespread perception is that oil and gas exporters are the main beneficiary of the energy crisis resulting from the war in Ukraine. Exacerbating this view is the “weaponisation” of Russian gas and Western sanctions on Moscow. But another sector might be benefiting from the Ukraine war far more than the energy sector: defence industries.

Now in its tenth month and expected to drag on, the war has consumed a great deal of arms and ammunitions that led to high demand from arms manufacturers. According to Western intelligence reports, Moscow is struggling to replenish its reserves. Though Russia has an established defence industry, sanctions are making it difficult to produce some types of arms, especially those that need imported components. That is why Moscow turned to Iran, China and North Korea for supplies, as the Western media reports though Russia denies it.

As most arms manufacturers in Russia are government companies and factories, it might be fair to say they are benefiting from the war as much as their Western counterparts. Continuous military aid to Kyiv by US and European countries is pressuring the inventories of those countries’ militaries. Manufacturers’ orders are on the rise.

In an update to the markets last month, British arms manufacturer BAE Systems reported taking orders worth £28 billion  ($34 billion) in the last ten months. The company said in its statement: “Most major defence programmes tend to be long cycle in the build and subsequent support phases. As a result, contracts secured now will be executed and traded for many years to come, providing us with long-term growth visibility.”

Though the British defence industry group didn’t mention profits, it is expected to be in the billions. One order by the government a few weeks ago to build five Type-26 anti-submarine warships for the Royal Navy would create 4000 new jobs. Two weeks ago, the UK government produced a letter of intent to BAE Systems that orders are on the way. The signal of intent is a prelude to an official order for more rounds from the Ministry of Defence, allowing the company time to prepare.

Since September, British media carried repeated reports quoting Ministry of Defence sources that the army stocks of ammunition are running out due to being sent to Ukraine. The UK has sent more than 16 thousand artillery rounds to Ukraine since the start of the war and pledged to send more.

BAE Systems is the main producer of the 155 mm howitzer rounds. In the summer, Pentagon sources told the Wall Street Journal that US stocks of 155 mm ammunition had become “uncomfortably low” after it shipped 806 thousand rounds to Ukraine. This week, the London daily paper The Times reported that Germany “has got only two days of ammunition stocks”. It is the case with most NATO member countries that send military help to Kyiv.

Tens of millions of bullets, millions of hand grenades and tens of thousands of rockets have been shipped to Kyiv in the past nine months. To make up for the stock shortage in Western armies, more and more needs to be ordered from arms and ammunition manufacturers.

Many investors are now buying heavily into shares of big American defence industry companies like Northrop Grumman Corp, Lockheed Martin Corp and Raytheon Technologies Corp, which led to shares in these arms manufacturers to go up by 47 per cent, 37 per cent and 15 per cent, respectively this year. Meanwhile the S&P 500 index is down by nearly 18 per cent.

Defence analysts and observers suggest that America’s defence industry is poised to benefit more from arms consumption in the Ukraine war. It is worth noting that the tens of billions in US military assistance to Kyiv are mainly for contracts to produce arms and ammunition. Besides this, the US administration managed to increase its defence budget for next year to close to a trillion dollars. The biggest chunk goes also to the defence industry.

The production of warfare products from order to delivery takes months and sometimes years. So, even if the war in Ukraine stopped soon, those companies would still be making hefty amounts of money for years to come.

Earlier in the war, some media reports quoted Ukrainian fighters complaining about arms they received from the US and European countries supporting Kyiv. They claimed most of the weapons were old and sometimes not functioning properly.

If some NATO countries were just emptying their inventories of about-to-expire stocks, they are now keeping the defence industry busy to produce enough new stocks. This is clear from the increases in defence budgets of European countries frequently seen in the press headlines.

It might be difficult to estimate the cost of the Ukraine war losses while it is still an active war. But, despite the exclusion of military costs – in the hundreds of billions for both sides – Western officials keep putting figures against the cost of rebuilding of Ukraine in the hundreds of billions, even trillions of dollars. And the ultimate beneficiary from this rising cost is the arms manufacturers, especially big defence industry groups across the Atlantic.

*A version of this article appears in print in the 22 December, 2022 edition of Al-Ahram Weekly