Economy

Saudi defence spending to rise further despite Iran detente

September 4, 2023

Lockheed thaad defence — Saudi military procurements have included Lockheed Thaad – terminal high altitude area defence – systems

Spending to grow 4.5% a year
Set to reach $86.4bn by 2028
Ranked 5th in the world for spending

Saudi Arabia is set to maintain one of the highest defence expenditures relative to the GDP in the world, according to a leading data analysis firm, despite the current trend towards de-escalation with Iran.

Defence spending will grow 4.5 percent a year to $86.4 billion in 2028, from $65.3 billion in 2022 and a defence budget of $69.1 billion for 2023, GlobalData said in a report issued last week.

Saudi Arabia was ranked fifth in the table of world military spenders in 2022, behind the United States, China, Russia and India.

However the kingdom’s spending was 7.9 percent of GDP in the period 2019-2023, GlobalData said, compared with 3.1 percent for the US.

Military fixed-wing aircraft account for more than 50 percent of Saudi purchases. They are made mainly by five companies: Saudi Ground Services Company, Saudi Advanced Industries Co, Saudi Arabian Military Industries (Sami) subsidiary Advanced Electronics Co, Alpha Star Aviation Services and Alsalam Aerospace Industries.

Sami was established by the Public Investment Fund (PIF) in 2017 as part of government plans to channel 50 percent of military spending to Saudi companies by 2030 in a bid to reduce its massive arms bill.

An offset programme established in 1984 to encourage foreign sellers to source some equipment locally and facilitate technology transfer had failed to raise Saudi military manufacturing beyond 2 percent of total purchases.

Sami said last year it would set up one of the world’s biggest munitions factories, including the production of a Saudi-made drone.

Ted Karasik, a defence analyst with Gulf State Analytics, said the Saudi leadership would continue to hedge its bets, despite decreasing regional tension after Saudi Arabia and Iran re-established full ties earlier this year in a deal mediated by China.

“Any threat assessment is likely to have question marks about Iran’s future, especially after the supreme leader passes away, and the nature of the new generation,” he said, pointing to continued Saudi military involvement in Yemen even if the war ends.

Riyadh organised a truce in Yemen last year and began peace talks with the Iran-backed Houthi movement after launching a war in 2015 to oust the group from the Yemeni capital, Sanaa.

The Houthis have carried out drone and missile attacks that could put a damper on Saudi development plans if they continue.

Major Saudi procurements in recent years have included the Eurofighter Typhoon aircraft, Raytheon’s Patriot missile system, and Lockheed’s Thaad – terminal high altitude area defence – system.

Saudi Arabia signed a $6.7 billion deal in June with Airbus to manufacture civilian and military helicopters in the kingdom.

But major arms deals have often run into political obstacles. German Chancellor Olaf Scholz said in July Germany would not deliver Eurofighter jets before the war in Yemen ends.

Saudi Arabia, like its Gulf neighbours Qatar and the UAE, has not been able to finalise a deal with the US administration to buy the US fifth generation F-35 stealth fighter.