Middle East arms fair, analysts point to 10% drop in Gulf spending

DUBAI, United Arab Emirates – Defense spending in the oil-rich Gulf countries – among the largest US arms buyers in the world – is expected to fall by almost 10% in 2021, after a significant increase the previous year.

This is thanks to tighter budgets due to falling oil prices during the coronavirus pandemic, defense intelligence firm Jane’s said in a new report.

“Defense spending in the Gulf Cooperation Council (GCC) countries is expected to decline 9.4% in 2021, as countries in the region face pressure due to the impact of Covid-19 and low oil prices,” he wrote. Jane’s in a report published on Friday, adding that she “expects a rapid recovery in the years to come” – but with no return to pre-pandemic levels until 2024. This is a significant change for a region whose arms imports increased 61% between 2015 and 2019, according to the Stockholm International Peace Research Institute.

“The significant drop in oil prices during 2020, coupled with a corresponding decline in demand from the manufacturing and transportation sectors, resulted in increased pressure on government budgets,” said Charles Forrester, chief analyst at Jane’s, in the report. He noted the decline in oil and gas revenues, as well as the decline in revenues from non-oil sectors such as tourism, finance and travel, as a result of blockages across the country.

In 2018, the company expected Gulf defense spending to increase consistently in the coming years and to reach $ 110 billion by 2023. Defense spending increased 5.4% in 2020 compared to the previous year to $ 100 billion, but they are expected to drop to $ 90.6 billion this year and $ 89.4 billion in 2022.

Procurement spending, which is the purchase of defense equipment, but does not include items such as salaries, operating and maintenance costs, and R&D, will also drop slightly to $ 13.25 billion, from $ 13.38 billion in 2021, predicts Jane’s, after rising 4.5% in 2020.

The report came before IDEX, the largest defense exhibition in the Middle East, which takes place in Abu Dhabi this week. Despite the pandemic, IDEX was still busy with participants. Before the event, organizers expected more than 70,000 attendees and 900 exhibitors to gather in the capital of the Emirates over the week to showcase their newest technologies and brokerage businesses in a region that accounted for 35% of total global arms imports over the past five years, according to SIPRI.

Absent from the arms fair was Israel, despite its historical normalization and the rapid heating of ties with the United Arab Emirates following the signing of the Abraham Accords in September. Talks about defense and technology cooperation have abounded since then, but an increase in Israel’s Covid-19 cases has prompted the country’s leadership to close its main airport, disrupting international travel.

The advent of diplomatic relations with Israel means new technologies and more competition for the Gulf market, offering more equipment options still compatible with those already acquired from the West.

One big question remains the Lockheed Martin F-35 Joint Strike Fighter jet, for which the UAE signed a $ 23 billion purchase in the final days of Trump’s presidency.

He would become the first Arab country to obtain the highly advanced and secretive system, with a green light after its agreement with Israel. The Israeli military is already flying in jets; the acquisition of the United Arab Emirates “will help to unite the defense industries of the United States, Israel and the Emirates,” said Jane’s report.

But the sale is currently suspended and awaiting review by the Joe Biden government, which has shown much more restraint in its relationship with the Gulf States compared to its predecessor, which bypassed Congress to force big arms deals with the United Arab Emirates and Saudi Arabia and others.

This is seen as one of the many reasons why the United Arab Emirates and other Gulf states, notably Saudi Arabia, are pouring money into developing their own native defense industries – in order to increase their self-sufficiency, create local jobs and compete for their own rights as arms exporters.

Both Saudi Arabia and the United Arab Emirates, with the help of state entities such as Saudi Arabian Military Industries and Emiratis’ EDGE, “are also working to leverage new technologies in the defense sector – in order to develop their own conventional defense capabilities. deterrence and to reduce dependence on foreign suppliers, “said Forrester.

These technologies include armored vehicles, naval vessels, smart missiles, electronic warfare capabilities and unmanned systems, including aerial drones, EDGE CEO Faisal Al Bannai told CNBC at the exhibition on Monday. EDGE is an advanced technology group consisting of 25 companies from the Emirates and is ranked among the 25 largest arms suppliers in the world.

“As these solutions begin to evolve and mature, surely the local customer at least prefers to buy local sovereign products, because it has more flexibility and can meet their needs in a much shorter time,” said Hadley Gamble of CNBC.

The CEO intends to see companies in the United Arab Emirates competing at the international and regional level.

“I can definitely see, as you increase your capabilities, as needs continue to increase, I think it is only good for the local industry and for local talent to develop those capabilities,” he said.