BERLIN — Revenue from German arms export licenses fell to €3.97 billion (US $4.49 billion) in 2014, down from €5.85 billion in 2013 and the lowest level since 2007, the Economics Ministry said. The decline is due to a number of factors, not least the government's tighter arms exports policy in a bid to reduce Germany's role in the global weapons trade.

"I think it's rather pleasing that German arms exports declined notably last year, particularly to the Arabic region," said German Economics Minister Sigmar Gabriel. Germany has been known for being the third-largest exporter of weapons in the world behind the US and Russia, a status that Gabriel previously described as "a disgrace."

The government's clampdown on arms exports is putting pressure on the country's defense companies. The German Defense Industry Association (BDSV) said that industry is in "constant dialogue" with the ministry regarding export control policies, but added that the recently published figures could be subject to change.

"We will wait for the publication of the final version of the arms export report by the federal government before we interpret the figures for 2014," said Georg Wilhelm Adamowitsch, CEO of the BDSV. "What is already foreseeable is the decline of German exports to EU or NATO member states."

He added that Companies that solely produce weapons are more affected by the decrease in export authorizations, he said.

However, independent analyst Otfried Nassauer of the Berlin Information Center for Transatlantic Security said most of the big German companies active in the defense sector are mixed companies that which also manufacture products for the civil sector. He says they've likely adopted a "wait and see" approach over the past year and been able to adjust their business accordingly — not just because of the government's export policy, but also because of lengthy deliberations in 2014 by Germany's highest court following an appeal for greater transparency on arms deals.

"During these deliberations, the government stockpiled most of the incoming applications for weapons exports, as it didn't want to make any mistakes before the court's opinion was made public. This also contributed to the lower export figures for 2014, as well as a huge pile of applications that have not yet been processed," Nassauer said.

In October, the court ruled that while the government is not obligated to inform parliament about prospective weapons deals in their early stages, it does have to provide details on request once specific deals are approved.

Some companies have indicated that they will try to sidestep the government's approval process by moving business abroad. Rheinmetall, AG, Germany's biggest defense company in terms of revenue, said that it plans to invest in a new munitions development center in South Africa, for example.

But Nassauer said it's not simply a matter of moving a production line to a foreign subsidiary. "The technology has to get licensed as well, and if the ministry doesn't grant the license, they can't just move production to another country," he said. "Technology transfer politics might also become more restrictive in the future."


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