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Feb 25 2013

Gulf defence spending at $130bn

Spending is part of drive to bolster regional defence capability
Gulf oil producers pumped nearly $130 billion into the military sector in 2012 as they pushed ahead with a drive to bolster their defences, according to Western data.

Some of them have also ordered Patriots and other ballistic missiles for self defence following an escalation in tension between Iran and the US-led Western alliance over Tehran's nuclear programme and its threats to shut the strategic Hormuz Strait, through which nearly a fifth of the world's oil supply passes.

"While defence spending is being cut in Europe and the US, it remains very robust in the Gulf region...our estimates showed that there was a real-term increase of over six per cent in 2012, reaching around $130 billion," said Jeremy Binnie, Middle East and Africa editor at the London-based Jane's Defence Weekly.

"This consequently makes the Gulf region - specifically the GCC states - an increasingly important market for Western defence manufacturers."

In remarks published after IDEX show, he said MENA instability has influenced the continued growth in defence spending, but added that far more money continues to be spent on sophisticated weapons rather than internal security equipment.

According to Jane's, there have been major orders for the latest multirole fighters and more are expected in the near future, with the UAE weighing up the Dassault Rafale and Eurofighter Typhoon. There have also been major orders of naval vessels that will help the Gulf states defend oil tankers if there is a conflict with Iran.

"The most striking development last year was the number of requests for ballistic missile defence, namely the Patriot and Terminal High Altitude Air Defence (THAAD) systems and associated radars," Binnie said.

"Collectively, the requests were worth more than USD13 billion. This is clearly aimed at defending the Gulf states from Iranian ballistic missiles and long-range rockets."

Estimates by defence analysts showed Arab League countries spent more than $300 billion on arms and other military and security purchases during 2011-2013.

The experts said they based their estimates on official figures showed total Arab expenditure stood at $760 billion in 2011 and $840 billion in 2012.

As it accounted for nearly 75 per cent of total expenditure, the current spending totaled around $1,200 billion during those years. With defence allocations standing at about 26 per cent, total military spending was estimated at around $312 billion.

Arab League figures showed overall Arab defence and security expenditure stood at around $680 billion during 2002-2010, an average $75 billion annually, far below the average defence spending over the past two years.

Analysts attributed the surge to a sharp rise in oil export earnings, a drive by Gulf countries to bolster their defences and number of armed forces, the purchase of advanced weapons and large pay rises for the army and security organs.

The figures by the Abu Dhabi-based Arab Monetary Fund showed defence allocations in the GCC and other regional nations accounted for more than eight per cent of GDP, making them the largest defence spenders in the world relative to their GDP.

While such massive defence allocations had smothered the GCC economies and widened their fiscal deficits during the 1990s, they have had little impact over during the years that preceded the crisis due to the surge in their oil revenues.

Independent estimates showed the cumulative crude export revenues of the six GCC countries over the past 15 years were estimated at a staggering $3.76 trillion.

GCC states of the UAE, Saudi Arabia, Kuwait, Bahrain, Qatar and Oman have long been among the world's biggest military spenders, allocating nearly a third of their current expenditure to the purchase of weapons and other military sectors, including maintenance, training and salaries to the armed forces.

Between 2000 and 2012, such allocations stood at an average 32 per cent of the current expenditure, which in turn accounted for nearly 77 per cent of their total spending, according to estimates by their governments.

Saudi Arabia, the world's dominant oil exporter and largest Arab economy, has remained the top military spender in the region, traditionally allocating nearly a third of its total public expenditure to defence.

© Emirates 24|7 2013


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