GCC States to maintain defence spending despite oil price slump

Gulf Arab states are poised to continue to spend billions of dollars on defence despite low oil prices causing severe budget deficits forcing Gulf States to introduce austerity measures and cut spending.

Saudi Arabia’s total defence budget is forecast at $82bn in 2016, steadily rising to $87bn in 2020 while that of UAE is put at $15.1bn in 2016 reaching $17bn in 2020, according to Teal Group, a US-based defence analysis firm which has also forecast increased spending by Kuwait, Qatar, Oman and Bahrain.

“Defence spending is linked to national security and threat perception, not resource prices,” said Richard Aboulafia, vice president of Teal Group. Oil prices more than halved in 2016 from their peaks in 2014.

“Even if low oil prices might complicate the timing of defence deals, it really has little to do with the total medium- and long-term volume of sales,” he added.

Saudi Arabia and the UAE’s defence spend as a share of their GDP is the highest in the world, according to the Stockholm International Peace Research Institute.

That means big business for arms manufacturers at the biennial International Defence Exhibition (IDEX), starting on Sunday in Abu Dhabi, capital of the United Arab Emirates.

Big contracts at stake include the UAE’s requirements for up to 60 fighter jets. Talks have been ongoing with France’s Dassault Aviation and Britain’s BAE Systems.

Saudi Arabia is in the middle of its Eurofighter and F-15 acquisition programmes, but they are due to be completed by 2019, after which the country will need more fighters to meet its ambitious force structure goals.

Kuwait has requested 28 Boeing F/A-18 E/F Super Hornets, with an option for a total of 40 aircraft while Bahrain has expressed interest in the Lockheed Martin F-16.

Aside from fighter jets, countries in the region are looking to upgrade missile systems and to buy helicopters, tanks, drones, and other hardware to strengthen internal and external security.

The UAE will announce deals at IDEX 2017, the only time such contracts are awarded officially. At the 2015 IDEX, it announced deals worth $5bn, up 30 per cent over 2013.

“High or low oil prices, defence and security are irreplaceable, we cannot compromise,” a senior UAE military official told Reuters.

Around 1,235 companies from 57 countries are exhibiting at the expo, the region’s largest such show.