Crown Prince Mohammed bin Zayed bin Sultan Al Nahyan (C) of the Emirate of Abu Dhabi, Deputy Commander in Chief of the UAE Armed Forces, takes a look at a scale model of an Armata T-14 tank made by UralVagonZavod Research and Development Corporation at the IDEX 2021 International Defense Conference and Exhibition.
Photo of TASS | TASS via Getty Images
DUBAI, United Arab Emirates – Defense spending in the oil-rich Gulf states, among the world’s top US arms buyers, is expected to drop nearly 10% in 2021 after rising significantly the previous year.
That’s thanks to tighter budgets due to falling oil prices over the course of the coronavirus pandemic, defense intelligence firm Jane’s said in a new report.
“Defense spending in the Gulf Cooperation Council (GCC) countries will decline 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 report released Friday. , adding that he “expects a rapid rebound in the next few years,” but it will not return to pre-pandemic levels until 2024. That is a significant change for a region whose arms imports increased by 61% between 2015 and 2019, according to Stockholm International Peace Research Institute.
“The significant drop in oil prices during 2020, along with a corresponding decline in demand from the manufacturing and transportation sectors, resulted in increased pressure on government budgets,” said Charles Forrester, principal analyst at Jane’s, at the report. He pointed to declining oil and gas revenues, as well as falling revenues from non-oil sectors such as tourism, finance and travel as a result of lockdowns across the country.
In 2018, the company expected Gulf defense spending to rise steadily over the next few years and exceed $ 110 billion by 2023. Defense spending increased 5.4% in 2020 from the previous year to $ 100,000 million, but is forecast to drop to $ 90.6 billion this year and $ 89.4 billion in 2022.
The Gulf Cooperation Council states: Defense spending and GDP growth, 2010-2025. Source: IHS Markit / Janes Defense Budgets
IHS Markits / Janes
Procurement spending, which is the purchase of defense equipment but does not include things like salaries, O&M costs, and research and development, will also drop slightly to $ 13.25 billion from $ 13.38 billion in 2021 predicts Jane, after a 4.5% increase in 2020.
The report came ahead of IDEX, the Middle East’s largest defense expo, taking place in Abu Dhabi this week. Despite the pandemic, IDEX was still busy with the participants. Before the event, organizers expected more than 70,000 attendees and 900 exhibitors to gather in the Emirates capital throughout the week to showcase their newest technologies and brokerage deals in a region that accounted for 35% of total world arms imports in the last five years. according to SIPRI.
Israel absent from the arms fair
Israel was absent from the arms fair, despite its historic normalization and rapid warming of ties with the United Arab Emirates after the signing of the Abraham Accords in September. Much has been made of defense and technology cooperation since then, but an increase in Israel’s Covid-19 cases led the country’s leaders to close its main airport, halting international travel.
The advent 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 what has already been purchased in the West.
Lockheed Martin F-35 Joint Strike Fighter Lightning II
Robert Sullivan | FlickrCC
A big question mark remains the Lockheed Martin F-35 Joint Strike Fighter jet, for which the United Arab Emirates signed a $ 23 billion purchase in the final days of the Trump presidency.
It would become the first Arab country to obtain the highly advanced and secret system, given that it was given the green light as a result of its agreement with Israel. The Israeli army already flies the planes; The acquisition of the United Arab Emirates “will help unite the American, Israeli and Emirati defense industries,” Jane’s report said.
Development of local defense industries
But the sale is currently on hold pending review by the Joe Biden administration, who has shown much more restraint in his dealings with the Gulf states so far compared to his predecessor, who bypassed Congress to push for big deal deals. arms with the United Arab Emirates, Saudi Arabia. and others.
This is considered 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-reliance, generating local jobs and compete in their own right as arms exporters. .
Both Saudi Arabia and the United Arab Emirates, with the help of state entities such as the Military Industries of Saudi Arabia and EDGE of the Emirates, “are also working to take advantage of new technologies in the defense sector, in order to develop their own conventional deterrence capabilities and to reduce dependence on foreign suppliers, “Forrester said.
Those technologies include armored vehicles, naval vessels, smart missiles, electronic warfare capabilities and unmanned systems, including aerial drones, EDGE executive director Faisal Al Bannai told CNBC at the expo on Monday. EDGE is an advanced technology group consisting of 25 Emirati companies and is among the top 25 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 they have more flexibility and can meet their needs in a much shorter time frame,” he told CNBC’s Hadley Gamble.
The CEO aims to see UAE companies competing both internationally and regionally.
“I can definitely see, as their capabilities increase, as needs continue to increase, I think it’s only good for the local industry and local talent to increase those capabilities,” he said.