Last October, in a private ceremony held at a stately mansion on the campus of the California Institute of Technology, the Aerospace Historical Society awarded the reclusive, 78-year-old CEO of General Atomics, Neal Blue, with the prestigious Von Karman Wings Award, a sort of Nobel Prize in the field, for “pioneering novel applications" of military drones.



For Blue, whose life reads like a thriller of private jets, oil profits and secret sorties to the Nicaraguan jungle, and whose company makes military drones with names like Predator and Reaper, the award capped the dominance of profits from drone manufacturing for his company and for the US drone industry at large.

That boomtime of drones – a decade-long celebration of war technology – was all largely fueled by the US military’s appetite for stealth and surveillance. Now the US military is backing off, and the drone industry is starting to look elsewhere to profits – even to some of the United States' deep-pocketed, warmongering adversaries.



For drone manufacturers, it doesn't seem to matter where the profits come from, as long as they keep rolling in. Dominated by four major US companies – Northrop Grumman, Boeing, General Atomics and Lockheed Martin – the global drone-making sector is expected to reach a market value of $82bn by 2022, according to internal PowerPoint slides provided to the Guardian by a senior analyst at the leading defense and security agency IHS Jane’s.

The thorny thing is: those billions of dollars in profits are likely to be coming from some unsavory quarters.



The US market for drones is shrinking because the biggest buyer – the US government – is dropping its purchases because of budget pressures and the end of large-scale wars in Afghanistan.

To respond to market pressures, the largest four private US drone manufacturers are now actively courting foreign buyers for business, said the analyst, who requested anonymity for this article in order to speak candidly on issues related to agency clients.

A US military predator drone. Photograph: Sipa Press/Rex Features Photograph: Sipa Press/Rex Features

“The United States has been using drones as a weapon of warfare for a decade and it was only a matter of time before other nation-states were going to do the same,” says University of Utah law professor Amos Guiora, an international law expert on drone warfare.

“Right now, there is no policy anywhere in the world to stop drones from getting into the hands of anyone who wants them, so the possibilities for profits are endless,” Guiora says. “It’s essentially become a sort of wild west.’”

The majority of the growth in drone buyers will come from the Asia-Pacific Region, according to IHS Jane's. China, India and Japan lead the pack, with Japan expected to expand its now virtually non-existent military drone program by roughly 600% in the coming decade.

US security analysts say the expected moves to large-scale investments in military drones are a natural phenomenon given the geopolitical and economic rivalries in Asia, which are expected to only intensify as Beijing and Tokyo aggressively pursue their interests in the South China Sea.

The capitalist center of gravity is shifting on drones. The huge profits companies can make in the coming decade in the production and sale of drones are all coming from abroad. Any regulations put into place here in the United States or at the international level will be fighting the tide of profits.

“The market dictates where you sell. It’s clearly not containable,” said Trevor Timm, co-founder and executive director of the Freedom of the Press Foundation who has written extensively on drones. “You can look at who wants them and who has them. And as the country that has the most, who are we to change the rules of the game?”

Not that the international community is likely to act. There is no established international convention at the United Nations to regulate armed predator drones – just one reason that critics say there is a high probability that drones will end up in the hands of rogue states and problematic actors.

Drones may enter the contest between Japan and China over the disputed Senkaku islands in the East China Sea. Photograph: Japan Pool/AFP/Getty Images Photograph: Japan Pool/AFP/Getty Images

This is what happens when your biggest market shrinks, and with it, your profits.

“The growing competition that these suppliers have is the issue, the world market is evolving and the US is under pressure. It’s got a reducing home market that will reach a low point in 2016 and in order to maintain the supply base, they [suppliers] need to look outward,” said the analyst at IHS Jane’s. “Russia and China are projected to invest significant amounts in research and development, which will account for large parts of those sales.”

The International Institute for Strategic Studies identifies only 11 countries – the US, France, Germany, Italy, Turkey, the UK, Russia, China, India, Iran and Israel – who currently possess armed military drones.

The United States operates the most sophisticated predator drone fleet in the world, but the huge market advantage that American-made predator drones have enjoyed for over a decade will be significantly reduced in the coming years, according to the IHS Jane’s analyst.

“Russia and China’s capabilities are quickly developing. By the end of the decade, if certainly not before, we have intel that shows they’ll have the potential to develop the capability to produce a predator drone on par with American standards,” said the analyst.

A pilot's heads up display from the view of a camera on an MQ-9 Reaper during a training mission. Photograph: Ethan Miller/Getty Images Photograph: Ethan Miller/Getty Images

Despite the cutbacks on orders for drone production, there is still considerable money to be made for America’s top defense contractors. One such lucrative military drone program is the MQ-9 Reaper system, made by General Atomics.

The MQ-9 Reaper is an armed, multi-mission, remotely piloted aircraft that has completed missions in Afghanistan and Iraq. Because of its capabilities to reach over 300 mph and its pinpoint accuracy, it is known within Washington as the crown jewel of the government’s drone fleet. The US air force currently owns 104 of these aircraft, which has cost US taxpayers nearly $6bn since production began in October 2007, according to public records. The program is slated to end in 2018.

After several attempts to reach General Atomics, company representatives refused to comment for this article.

One way General Atomics and its competitors could substantially increase these billion-dollar profits in the coming years is if the US State Department relaxes its current restrictions on arms exports, said the analyst. Under the International Traffic in Arms Regulations, operated by the State Department’s Directorate of Trade Controls, armed military drones are not approved for exports.



“The pace and development of the market is going to have to be absolutely tied to these ITAR rules and regulations,” said the analyst. “It’s not absolutely clear how these regulations will evolve.”

• This article was amended on 22 June, 2014 to say the global drone-making sector is expected to reach a market value of $82bn by 2022.