Austria-Hungary was one of the world's major manufacturers of arms. The Skoda company in Bohemia was the largest single arms producer, fully meeting the empire's requirements with considerable output available for export. Under the Second Republic, from 1945 to the presenÍÍÍÍt, Steyr-Daimler-Puch, the largely privately owned firm has accounted for the bulk of Austria's production. Its manufacturing facilities are divided among three divisions. The first, Steyr-Mannlicher, produces small arms, notably the 5.56mm assault rifle, the standard weapon for both readiness and militia forces and a popular export item to military and police forces in many countries of the world. It is also available in carbine and light machine gun versions. The second, Steyr-Allradtechnik in Graz, is a producer of all-wheel drive vehicles and trucks. The third Steyr division, Spezialfahrzeuge AG, has developed the Austrian Spanish Cooperative Development (ASCOD) family of mechanized infantry combat vehicles in conjunction with a Spanish firm. The basic version is equipped with a 30mm machine gun and carries eight infantry soldiers in addition to a three-man crew. The firm has also designed the Pandur armored vehicle for the Austrian army as an antitank-missile-launcher platform.

Noricum, previously a subsidiary of the state-owned United Austrian Iron and Steel Works (Vereinigte Österreichische Eisenund Stahlwerke--VÖEST commonly known as VÖEST-Alpine), manufactures artillery ordnance as well as the GHN-45 155mm gun. In 1991 fourteen defendants, including leading executives of Noricum and VÖEST-Alpine, were sentenced to prison terms for violating Austrian neutrality laws by selling 200 GHN-45 howitzers and large quantities of munitions to Iran during the Iran-Iraq War of 1980-88. Noricum is also reported to have marketed the guns illegally to Iraq. Noricum and Hirtenberger Patronenfabrik, another state-owned company implicated in the transactions, were later sold to the private firm of Emmerich Assmann, ending the government's involvement in arms manufacture. The Austrian armaments industry is heavily dependent on export markets because the requirements of the country's forces are limited, and domestic procurement is open to competition from foreign suppliers. Production has to be set at far higher levels than can be absorbed domestically in order for manufacture to be economically feasible. Shrinking world demand and mounting sophistication of weaponry impose serious pressures on the industry. The United States Arms Control and Disarmament Agency has estimated that during the 1981-91 period, arms exports peaked in 1981 at US$430 million. They declined minimally until 1987, when they dropped sharply to US$60 million and later declined further to US$10 million. In only one year, 1981, did arms exports amount to as much as 2 percent of total exports. In 1987 and 1988, they amounted to 0.2 percent of total exports and to even less in the next three years.

During the first years after its formation in 1955, the Austrian army depended heavily on the United States for light 845weapons,s, trucks, uniforms, and even helmets, with some additional equipment transferred from the former British occupation forces as well. The first aircraft were older Soviet models. The army was initially supplied with American M-24 light tanks, which were replaced by the M-47. Since the 1970s, the main battle tank has been the M-60, which Steyr modernized to A3 standard beginning in 1986, using engines and other equipment from the United States. Austria also made a major purchase of self-propelled howitzers from the United States. Nevertheless, the importance of the United States as an arms supplier declined in the 1980s. During the 1985-89 period, estimates suggested that Austria imported military equipment valued at US$240 million. The United States was the source of US$70 million worth of equipment, and Western Europe accounted for US$160 million worth of equipment. Very little came from France and Britain, and restrictions in the State Treaty precluded arms imports from Germany. Sweden--the primary source of aircraft and missiles--was believed to be the predominant supplier. Austria's purchases of Saab and Draken fighters from Sweden were largely offset by Swedish orders for Austrian munitions.

Data as of December 1993