Wars in Ukraine and Gaza and broader global tensions boosted sales by major arms makers last year, with marked increases for manufacturers based in Russia and the Middle East, a leading think-tank said Monday.

Sales of arms and military services by the world's 100 biggest defense equipment makers increased by 4.2% in 2023 to $632 billion, according to a report by the Stockholm International Peace Research Institute (SIPRI).

The rise followed a 3.5% dip in 2022, which SIPRI has blamed on labor shortages, supply-chain disruptions, and rising costs, which made it hard for many companies to meet increased demand driven by Russia's invasion of Ukraine.

But many of them managed to increase production last year.

In a sign of a surge in demand, all 100 companies tracked achieved sales in excess of $1 billion last year for the first time.

"There was a marked rise in arms revenues in 2023, and this is likely to continue in 2024," Lorenzo Scarazzato, a researcher with the SIPRI Military Expenditure and Arms Production, said in a statement.

Sales from the world's top 100 arms companies "still did not fully reflect the scale of demand, and many companies have launched recruitment drives, suggesting they are optimistic about future sales," Scarazzato added.

Smaller producers have been more effective in meeting the demand linked to the wars in Gaza and Ukraine, growing tensions in East Asia and rearmament programs in other regions, the institute said.

"A lot of them specialize in either a component of something or build systems that require one set of supply chains," allowing them to react more quickly, Nan Tian, director of SIPRI's Military Expenditure and Arms Production Program, told Agence France-Presse (AFP).

Among the leading producers, U.S. companies recorded a 2.5% increase in their sales last year and still account for half the world's arms revenues, with 41 American weapons producers in the world's top 100.

Lockheed Martin and RTX, formerly Raytheon Technologies, the world's two largest arms makers, on the other hand, reported a fall in revenue of 1.6% and 1.3%, respectively.

Such behemoths "often depend on complex, multitiered supply chains, which made them vulnerable to lingering supply chain challenges in 2023," Tian said.

Turkish firms' sales up 24%

Earlier this year, SIPRI reported a 7% increase in global military spending in 2023, the steepest annual increase since 2009.

In Europe, home to 27 of the top 100, arms makers, on average, saw an increase of just 0.2% and had combined sales of about $133 billion.

But European groups manufacturing complex weapons systems were still in the process of honouring old contracts last year, so the revenues do not reflect the influx of orders since then.

"At the same time, a number of other European producers saw their arms revenues grow substantially, driven by demand linked to the war in Ukraine, particularly for ammunition, artillery and air defense and land systems," SIPRI noted.

The figures for Russia, though incomplete, give a clear signal of an economy increasingly geared toward war.

Sales by the two Russian groups in the ranking rose by 40%, mainly thanks to a 49% increase in sales for state-owned conglomerate Rostec, according to the report.

Three Turkish defense companies based in Türkiye, namely the famed drone producer Baykar, Aselsan and the Turkish Aerospace Industries (TAI), saw their sales jump by 24% to around $6 billion.

That, the report said, was boosted by exports prompted by the war in Ukraine and from the Turkish government’s continued push toward self-reliance in arms production.

Baykar, the manufacturer of battle-proven unmanned aerial vehicles, saw its sales rise 25% to about $1.9 billion, the report said. Exports accounted for around 90% of its arms revenues in 2023.

Sales by defense electronics manufacturer Aselsan and the state-run aerospace and defense giant TAI jumped by 12.4% and 45.3% to $2.4 billion and $1.7 billion, respectively.

Manufacturers in the Middle East were buoyed by the war in Ukraine and by Israel's relentless offensive on Gaza – and saw, on average, an 18% lift in sales.

The three Israeli manufacturers in the ranking posted record sales of $13.6 billion, up 15% from the year before.

"The biggest Middle Eastern arms producers in the Top 100 saw their arms revenues reach unprecedented heights in 2023 and the growth looks set to continue," said Diego Lopes da Silva, a senior researcher with the SIPRI Military Expenditure and Arms Production Program.

"In particular, as well as taking in record arms revenues in 2023, Israeli arms producers are booking many more orders as the war in Gaza rages on and spreads."

In Asia, the trend toward rearmament was particularly evident in the growth in sales by the four South Korean manufacturers, with revenues rising 39% on average, and five Japanese firms that saw an average increase of 35%.

The nine Chinese producers meanwhile saw revenue increase by only 0.7% "amid a slowing economy," but their sales still totaled $103 billion.

That was their smallest year-over-year percentage increase in arms revenues since 2019.