Military hardware that translates into hard cash

The biggest earnings from international arms sales still come from big, expensive pieces of equipment sold by big, national arms companies with government support - combat aircraft which change hands for up to $40m, ships which can cost $200m, and $1m for a tank. The biggest arms purchasers among the developing countries, like Saudi Arabia, which spent $2.5bn last year, tend to buy this type of hardware. Chile is planning to buy $400m worth of F-16 jet fighters (right) from the US this year, for example. And with orders like this come valuable packages of training and support. Because developing countries have difficulty paying for such equipment, national governments need to under-write loans taken out by the companies selling the equipment, as the DTI's Export Credit Guarantee Department does for British firms.

However, systems like this are subject to export controls. Insurgent armies want light, portable and simple weapons like rifles, mortars and rocket launchers. These are subject to weaker export controls and are easily smuggled.

A small operator might find it easier to make money by brokering. The Mil-Tec scandal, which broke in November last year, involved a British firm organising the supply of arms to the former Rwandan government. Arms were moved from Israel and Albania via Zaire to Rwanda. Though the deal was organised from the Isle of Man, it was not subject to British export controls.

"Force multipliers" are another profitable area for a smaller operator. The Croatian victory over the Krajina Serbs in 1995 was aided by tactical radios, medical supplies and field rations, all largely exempt from controls. As international sanctions increase, smaller entrepreneurs are likely to switch to this type of trade.

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