Wars in Afghanistan, Iraq, and Lebanon, the Israeli-Palestinian conflict and more broadly speaking, the ‘War on Terror', have meant significant shifts in state conceptions of defense. Armies that were unprepared for this new environment have been forced to make changes in their strategy and technologies. Today, we are going through the first quarter of this difficult process. Armies that are resisting change and defense firms that use outdated modes of production are under increasing stress. While the modern world is fiercely battling terrorism, parts of the defense industry simply fail to keep up with the emerging 21st century circumstances and demands. Today, armies are evolving from cumbersome military structures with thousands of soldiers to systems that are faster, more specialized and wield high firepower.
NATO took the first step in this direction by establishing the NATO Response Force (NRF), envisioned to have the strength of an army corps. All states that provide troops need the necessary weapons systems and ammunition to meet the requirements of this initiative. However, today, NRF's capabilities are undercut by the capacities of participating states' armies.
According to NATO officials, the NRF, which consists of land, air and sea components provided by NATO members, can deploy units to respond quickly to "threats wherever they arise" within the scope of 5 to 30 days. However, there are infrastructure related challenges, as well as the potentially more debilitating political ones. NATO is trying to close the capability gap via joint production and development of weapon systems. The F-35 Joint Strike Fighter (JSF) program is the most well-known example. However, military experts have expressed performance concerns, claiming that an F-22 can easily shoot down an F-35. Some of the partner states also have doubts about the F-35, which is expected to be completed in 2012. The foremost concern is whether or not source codes will be shared with all partners.

The Middle East
In comparison to 1999-2003, the global share of arms deals in 2004-2008 went up by 21%. A significant increase in arms transfers to the Middle East took place over the last four years. Compared to 1999-2003, arms transfer to the region jumped by 38% during 2004-2008. The United Arab Emirates ranks third on the arms importers list. This is not a surprise. In 2007, 850 firms from 50 countries were present at the Dubai Air Show where agreements totaling 155 billion dollars were signed. Despite the economic crisis and low oil prices, it is certain that sizeable agreements will be signed again at the 11th Dubai Air Show in November. Furthermore, military procurement by the Gulf Cooperation Council, which consists of Saudi Arabia, UAE, Kuwait, Qatar, Amman and Bahrain, is expected to reach 60 billion dollars over the course of 2009. Saudi Arabia is at the top of the list with investment at 39 billion dollars. According to Arab government sources, this spending will increase up to 49 billion dollars by 2013.
The UAE is second on the list with its 9 billion dollar defense budget. Without a doubt, the reason behind the Gulf's increased defense spending, beyond spending power enabled by high oil revenues, is the perceived Iranian threat.
The Far East
Since the occupation of Afghanistan, China and India's share of the arms import market has gained new significance. On an upward economic swing, both states enhanced their tanks and war planes after having made sizeable agreements with Russia. Now, China is nearing the point where it can produce long range anti-aircraft systems at home. Focusing more intensely on enhancing national production capacity since 2007-2008, China was able to reduce foreign spending by cutting back on military equipment purchases. Now, China is gearing up to replicate at home what it had has been buying from Russia.
The Russian-Indian partnership is in many ways more comprehensive. In the rivalry over 5th generation war planes, India stands with Russia against the F-35. There are other areas of cooperation such as on the RD-33 series of engines designed to power the MiG-29. In March 2009, the jointly developed BrahMos missile was successfully tested; and production of cargo planes is ongoing. Despite the civilian nuclear accord in place between the United States and India, the Indian administration has made similar overtures to Russia. Last December, Russia signed a key deal to build four nuclear power plants in India. The relationship also builds on arms supplies and progress has been made on leasing Russian Akula-class nuclear-powered submarines to India.
Latin America
Between 2004 and 2008 Russian arms transfers most notably to Asia, Africa and Latin America increased by 14%. As leaders in Latin America skeptical of free markets and a unipolar world have come to power, the region's interests have started to shift. In the last three years, defense agreements between Venezuela and Russia have reached 6 billion dollars, with 1 billion dollars of it in credit. With Daniel Ortega's return to power after 16 years, the modernization of the Nicaraguan army was entrusted to the Russians. Meanwhile, Brazil's decision to purchase 12 used Mirage jets from France in 2005, despite its air force consisting of predominantly of F-16s, had stirred much debate. However, it is clear that Brazil bought the Mirages for the purposes of an aircraft carrier. Brazil has the 6th largest uranium reserves in the world but is constitutionally forbidden to produce nuclear weapons. However, Brazil's civilian nuclear program, permitted by the IAEA in 2006, could end up secretly developing weapons in a move reminiscent of its old habits during its dictatorial past.
Iran-Turkey-Israel
Although the nuclear balance argument mostly used in association with the case of Iran maintains that "every one who aspires for a nuclear weapon should have one; thus the nuclear balance will be reached" causes great anxiety; it is quite possible that Saudi Arabia, Brazil, Egypt and Turkey could acquire nuclear weapons in the future. Turkey, which ranks among the top five arms importers every year and has the second largest army in NATO, has expensive procurement plans for the short term. Procurement of 4.5 billion dollars worth of high altitude and 4.5 billion dollars worth of medium and low altitude air defense systems are currently at the bidding stage. During the International Defense Industry Fair (IDEF'09) held in Istanbul from April 27-30, Turkish officials held important meetings with Russian and American firms. While one group of officials in the Turkish Armed Forces prefers procurement of the American Patriot, others favor an improved S-400 missile defense system. Russia has pointed to the case of Greece as a guarantee of the S-400's NATO compatibility. Furthermore, Turkey will make an important procurement of utility helicopters. Sikorsky and Agusta Westland are competing for this tender, but there are signs that Turkish officials may be more prone to the Sikorsky proposal.
In addition, the Turkish defense industry, which prioritizes indigenous development, joint development and/or technology transfer for weapon systems, continues to work on indigenous tank, ship and submarines.
Today, the European arms market holds 22% of global arms exports. But Europe could lose its share in the intermediate term. Declining demand among European militaries will likely cut national defense industry investments. Customers turning away from European firms will increasingly look to forge new partnerships like the examples of Russia-Israel, Russia-India and China-Pakistan. Israel is trying to enter the Caucasian and Central Asian markets via jointly developed technologies with Russia. Moreover, Israel backed down from a UAV deal with Georgia after the Georgia-Russia war.
We are entering a time where a new world order is emerging-and it will not be easily resolved. The pangs of change come with the risk of escalating or new conflicts and confrontation breaking out in various regions of the world. This will mean that armies will either clash directly or become entangled in asymmetric warfare. Africa and Asia-Pacific appear to be the most likely hotspots and the direction of the arms market is shifting towards these regions.