Middle East arms fair forecasters see 10% drop in Gulf spending

DUBAI, UAE – Defense spending in oil-rich Gulf states – among the world’s largest buyers of US weapons – is expected to fall by almost 10% in 2021, after rising significantly the previous year.

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

“Defense spending in Gulf Cooperation Council (GCC) countries will fall by 9.4% in 2021 as countries in the region face pressure due to the impact of Covid-19 and low oil prices,” Jane’s wrote in a statement. report added on Friday, adding that “expects a rapid recovery in the coming years” – but will not return to pre-pandemic levels until 2024. This is a significant change for a region whose arms imports have risen by 61% between 2015 and 2019, according to the Stockholm International Peace Research Institute.

“The significant drop in oil prices in 2020, coupled with a corresponding drop in demand in the manufacturing and transportation sectors, has put increased pressure on government budgets,” said Charles Forrester, senior analyst at Jane’s. He noted declining revenues from oil and gas, as well as declining revenues from non-oil sectors such as tourism, finance and travel, as a result of national bottlenecks.

In 2018, the company expected Gulf defense spending to grow steadily in the coming years and to exceed $ 110 billion by 2023. Defense spending increased by 5.4% in 2020 from the previous year to $ 100 billion. dollars, but is estimated to drop to $ 90.6 billion this year and $ 89.4 billion in 2022.

Public procurement spending, which includes the purchase of defense equipment but does not include things like wages, operating and maintenance costs and research and development, will fall slightly to $ 13.25 billion from $ 13.38 billion. dollars in 2021, Jane predicts, after rising 4.5% in 2020.

The report came ahead of IDEX, the largest defense exhibition in the Middle East, to be held in Abu Dhabi this week. Despite the pandemic, IDEX was still busy with participants. Prior to the event, organizers expected more than 70,000 attendees and 900 exhibitors to gather in the Emirate capital during the week to showcase their latest technologies and brokerage offerings in a region that accounted for 35% of total global imports. weapons in the last five years, according to SIPRI.

Absent from the arms fair was Israel, despite its historic normalization and rapid warming of ties with the UAE after the signing of the Abraham Accords in September. Talks on defense and technological cooperation have abounded since then, but an increase in Israeli Covid-19 cases has led the country’s leadership to close the main airport, stopping international travel.

The emergence of diplomatic relations with Israel means new technologies and more competition for the Gulf market, offering greater options for equipment that is still compatible with those already purchased in the West.

A big question mark remains the Lockheed Martin F-35 Joint Strike Fighter jet, for which the United Arab Emirates acquired a $ 23 billion acquisition in the last days of Trump’s presidency.

It would become the first Arab country to obtain an extremely advanced and secret system, enlightened by its agreement with Israel. The Israeli army is already flying planes; the acquisition in the UAE “will help link the defense industries of the US, Israel and the UAE,” the Jane report said.

But the sale is pending a review by the Joe Biden administration, which has shown much more restraint in its relationship with the Gulf states so far than its predecessor, which bypassed Congress to promote large arms deals with the UAE, Saudi Arabia and others.

This is seen as one of the many reasons why the United Arab Emirates and other Gulf states, namely Saudi Arabia, are investing money in developing their own indigenous defense industries – with the aim of increasing their self-sufficiency, increasing local jobs and competition in themselves as arms exporters. .

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

These technologies include armored vehicles, naval ships, smart missiles, electronic warfare capabilities and unmanned systems, including aerial drones, EDGE CEO Faisal Al Bannai told CNBC on Monday. EDGE is a high-tech group of 25 companies in the United Arab Emirates and is among the top 25 arms suppliers in the world.

“As these solutions begin to evolve and mature, the local customer certainly prefers to at least buy local sovereign products because they have more flexibility and can meet their needs in the much shorter term,” he told Hadley Gamble. from CNBC.

The CEO aims to see companies in the United Arab Emirates competing internationally and regionally.

“I certainly see, as you develop your capabilities, as your needs continue to grow, I think it’s only good for local industry and local talent to develop such capabilities,” he said.