Arms trade fair in the Middle East, forecasters see a 10% drop in Gulf spending

DUBAI, UAE – Expenditure on defense of oil-rich Gulf states among major U.S. arms buyers is expected to fall nearly 10% in 2021 after rising significantly the previous year .

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

“Expenditure on defense in the Gulf Cooperation Council (GCC) countries will decrease 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 it” expects a rapid rise in the coming years, “but will not return to pre-pandemic levels until 2024. This represents a significant change for a region. whose arms imports increased by 61% between 2015 and 2019, according to the Stockholm International Peace Research Institute.

“The significant fall in oil prices during 2020, along with the corresponding decline in demand from the manufacturing and transportation sectors, put more pressure on government budgets,” said Charles Forrester, Jane’s chief analyst. He noted the decline in oil and gas revenues, as well as declining revenues from non-oil sectors, such as tourism, finance and travel, as a result of blockages nationwide.

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

Expenditure on purchases, which is the purchase of defense equipment but does not include salaries, operating and maintenance costs and R&D, will also fall slightly to $ 13.25 million, from $ 13.38 million in 2021, according to predicts Jane, having risen 4.5% in 2020.

The report was brought forward to IDEX, the largest Middle East defense exhibition, taking place 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 Emirates capital throughout the week to showcase their new technologies and brokerage offerings in a region that accounted for 35% of the global arms imports in the last five years, according to SIPRI.

Israel was absent from the arms fair, despite its historic normalization and the rapid warming of ties with the United Arab Emirates following the signing of the Abraham Accords in September. Talks on defense and technology cooperation have abounded since then, but an increase in Israeli cases of Covid-19 caused the country’s leaders to close their main airport, stopping international travel.

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

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

It would become the first Arab country to obtain the highly advanced and secret system, which had the green light after its agreement with Israel. The Israeli military already wants planes; the UAE acquisition “will help link the U.S., Israeli and UAE defense industries,” Jane’s report said.

But the sale is currently on hold when reviewed by Joe Biden’s administration, which has so far shown much more restraint in its relationship with the Gulf states compared to its predecessor, which eluded Congress to push for major arms deals with the United Arab Emirates, Saudi Arabia. And others.

This is seen as one of the many reasons why the UAE and other Gulf states, namely Saudi Arabia, are investing money in the development of their own indigenous defense industries, with the aim of increasing the their self-sufficiency, growing local jobs and competing for themselves as arms exporters. .

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

These technologies include armored vehicles, naval ships, smart missiles, electronic warfare functions and unmanned systems, including air drones, EDGE executive Faisal Al Bannai told CNBC on Monday. EDGE is an advanced technology group made up of 25 companies from the Emirates and is among the top 25 weapons suppliers in the world.

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

The CEO wants to see how UAE companies compete both internationally and regionally.

“I can definitely see, as your skills grow, as needs increase, I think it’s only good for the local industry and local talent grows those skills,” he said.