On January 25, 2023, the Defense Security Cooperation Agency (DSCA) announced the U.S. arms transfer figures for FY 2022, showing that U.S. defense sales to foreign militaries bounced back after two years of decline. Arms transfers through the Foreign Military Sales (FMS) program increased year-over-year by 49% up to a total of $51.9 billion, and Direct Commercial Sales (DCS) transactions increased by the same percentage up to $153.7 billion.
These enormous single-year jumps in arms transfers reverse declining sales during the two preceding fiscal years, and arms transfers have now returned to nearly match FY 2019 levels. Unsurprisingly, Russia’s unprovoked invasion of Ukraine was a major driver, as Ukraine’s FMS transactions increased more than fivefold, and several European countries in close proximity to the conflict significantly increased their FMS purchases:
|Country||FY21 FMS Sales (in USD millions)||FY22 FMS Sales|
(in USD millions)
Some of the transactions contributing to these totals were long planned, but these significant increases across a number of countries suggest that the invasion had a material impact on the FMS program.
Another major factor was the increase in security cooperation between the United States and Australia. FMS sales to Australia increased from $937 million in FY 2021 to $6.67 billion in FY 2022. This increase was driven in large part by major defense systems sales, including sales of the CJ-130J Super Hercules military transport aircraft, the UH-60M Black Hawk helicopters, and HIMARS launchers.
In noting the decline in FMS transfers over the two preceding fiscal years, we wrote that two points do not make a trend, and similarly the bounce back in sales in FY 2022 may not be permanent. However, the FY 2022 figure of $51.9 billion in FMS sales is in line with the three-year average of $53.9 billion from FY 2018-2020, which may indicate the current volume of arms transfers may sustain or even grow. Indeed, there are indications that FMS transfers will continue to grow, as the United States has taken significant steps towards other major security cooperation initiatives, in addition to the signaling a continued and unwavering commitment to providing defense assistance to Ukraine. The National Defense Authorization Act for FY 2023 included authority for Foreign Military Financing (FMF) support for Taiwan for the very first time, and the United States has entered into a trilateral partnership with Australia and the United Kingdom for the development of Australia’s future nuclear-powered submarine. These initiatives, coupled with robust FMS transaction activity early in the current fiscal year, indicates that marked increase in foreign military sales may be sustainable.