If there were a recipe for soaring defence expenditure in the Middle East, it would probably involve a combination of high oil revenues and regional instability. The first brings vast swathes of liquidity and the second a reason to spend it.
If there were a recipe for soaring defence expenditure in the Middle East, it would probably involve a combination of high oil revenues and regional instability. The first brings vast swathes of liquidity and the second a reason to spend it. Oil prices consistently outstripped expectations in 2003 and 2004, reaching $50 a barrel in the second half of this year. Crude has been produced at or near capacity throughout the region, most notably in swing producer Saudi Arabia. At the same time, the region has continued to be plagued by security threats. The US-led coalition forces in Iraq have faced a degree of insurgent resistance notable for both its intensity and its longevity, and terrorist groups across the region have also caused disruption. Add to that the belligerence of Iran on the small matter of nuclear arms development - not to mention the unpredictable reaction of Israel to that potential threat - and one could be forgiven for expecting Middle East arms expenditure to be on the rise. The theory, however, is not borne out by the figures. Statistics released in October by the International Institute of Strategic Studies (IISS) in its annual publication The Military Balance put 2003 military expenditure in the Middle East and North Africa at $54,148 million, up just 4 per cent from 2002. It accounted for 6 per cent of gross domestic product (GDP) in 2003. Significant, but hardly eye-catching. There is, as always, some debate as to how reflective these figures are of actual expenditure. The off-balance-sheet spending of the UAE and Saudi Arabia is well documented. Iran, never the most transparent of countries, has used the current climate of international hostility to its procurement of nuclear technology to become completely opaque: the Stockholm International Peace Research Institute (SIPRI) was unable to obtain any figures for the country's military spending in 2004. Although estimations of current spending vary - SIPRI puts the real increase in Middle East defence expenditure for 2003 at almost 10 per cent - the conclusions drawn are the same. 'There is little evidence that oil revenues are trickling down into defence expenditure,' says IISS defence economist Mark Stoker, while SIPRI describes the growth apparent from its figures as a fluctuation rather than a trend. In its recently published 2004 Yearbook, it cites similar levels of growth in 1997 and 2000, when regional security issues were making fewer headlines. 'The level of growth in regional defence expenditure is not significant,' says SIPRI analyst Wuyi Omitoogun. The evidence of these headline figures is underpinned by recent news of major procurement deals. In short, there haven't been any. Delivery has begun on the UAE's $6,500 million contract to buy 80 Lockheed Martin F16s from the US, due to be fulfilled by the end of 2008; and Saudi Arabia is also looking at fighter procurement, with the Eurofighter Typhoon, understood to be favoured to its rivals the F16 and Dassault's Raphael. But there is no indication that this will happen in the near future. 'There has been a huge drop-off in the size of procurement deals in the last few years, and despite an increase in oil revenues they are not picking up particularly,' says Stoker. The contractors themselves give the same impression. Speaking to MEED in November, The Boeing Group president and chief executive officer Harry Stonecipher, while saying that 'quite a lot' of contracts are under consideration, admitted: 'Recently we haven't had any real orders.' US security blanket Defence cashflows have been stymied for a number of reasons. Although threats to internal security have arguably increased during the US-led invasion and occupation of Iraq, the country no longer presents a major threat to the security of the region. Indeed, the presence of US forces in the area is on the whole regar
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