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THE GULF RISING Defense Industrialization in Saudi Arabia and the UAE

The SC

Feb 13, 2012
Shrinking budgets and downsized militaries. Those
are some of the characteristics of the challenging
defense environment in which the United States
and its transatlantic friends and allies have to
live for the foreseeable future.

The long-term viability of many national defense industries in the
transatlantic community and around the world
is currently in doubt due to increasing political,
financial, and fiscal pressures as well as dramatic
changes in the world of defense. Even the most
advanced US industrial allies are having difficulty
pursuing their defense and security goals, and, as a
result, they have been forced to make tough choices
that have left them even more dependent on the
United States or with capability shortages.

In this harsh defense environment, it is hard to see
how Saudi Arabia and the United Arab Emirates
(UAE)—two modernizing states that have much
weaker industrial capacities and scientifictechnological
bases—can succeed where other,

more developed states failed in the past or are
currently scaling back or dropping out. Yet with
carefully articulated goals, modest expectations,
smart strategies, effective financial management,
and cooperation with Washington, Riyadh and
Abu Dhabi can navigate some of the complexities
of military industrialization and overcome some
of its key challenges. New technologies, such
as unmanned and communications systems
and commercially derived technologies, have
challenged the existing defense hierarchy.

The emerging new defense-industrial base may afford
more opportunities for relatively new entrants
such as Saudi Arabia and the UAE and make their
learning curves a little less steep.

The United States has a strong interest in seeing
its Gulf partners succeed in achieving their defense
and security objectives. If approached with a
healthy dose of rationality, honesty, precision, and
foresight, military industrialization can contribute
to Saudi Arabia and the UAE’s efforts to diversify
their economies and promote economic growth.
Equally important, it can upgrade their indigenous
defense and security capabilities and allow the
United States to increasingly rely on them to be
security providers in the Gulf.

This report by Bilal Y. Saab, senior fellow for
Middle East security at the Atlantic Council’s
Brent Scowcroft Center on International Security,
provides new analysis of and key policy insights
on military industrialization in Saudi Arabia and
the UAE and adds an important, though often
overlooked, dimension to the US policy debate on
the US-Gulf partnership.

This effort is part of the Scowcroft Center’s Middle
East Peace and Security Initiative, launched in
2013 by the Atlantic Council. It directly contributes
to the Scowcroft Center’s Transatlantic Security
Initiative by exploring opportunities for closer
defense-industrial cooperation and collaboration
between the transatlantic community and partners
in the Arab Gulf.

Executive Summary

Because of their sizeable financial resources,
close relations with Washington, and privileged
access to the top transatlantic defense companies,
Saudi Arabia and the UAE are in a unique position
to explore opportunities and make important
strides in the military-industrial domain that other
countries can simply ill-afford to make. Moreover,
over the past decade, globalization and the
information technology (IT) revolution in military
affairs (RMA) have opened up the international
defense market and made it less exclusive, allowing
Saudi Arabia and the UAE to overcome some of
the key scientific and technological challenges
that accompany the building and sustaining of
indigenous defense industries.

For Saudi Arabia and the UAE, the creation of
modern military industries that could compete
in the international defense market promotes a
set of domestic and foreign policy interests. Both
countries seek to develop their arms manufacturing
capabilities to address a range of perceived internal
and external national security threats, reduce
their political dependence on the United States
and other influential powers that dominate the
global defense market, diversify their economies,
affirm their regional status and prestige, enhance
their military credibility, and finally augment their
diplomatic leverage.

Self-sufficiency is not a realistic goal for Saudi
Arabia and the UAE. But in some limited security
and defense areas, including spare parts,
ammunition, and potentially shipbuilding (for the
UAE), both countries have made steps forward.
In addition, they now design, manufacture, and
modernize military vehicles, communication
and electronic systems, and unmanned systems
including drones. They have also significantly
upgraded their maintenance, repair and overhaul
(MRO) capabilities in the aerospace industry.
Because of Saudi and Emirati improvement in
such capabilities, the old adage of “Arabs don’t
do maintenance” no longer reflects reality.

Furthermore, both countries’ military personnel
have drastically enhanced their military training
and competency and can now operate some of the
most sophisticated weapons systems. They have
also steadily increased their defense spending as
part of their gross domestic product (GDP) and
successfully absorbed some technology transfers.
The development of strategic partnerships with
Washington, London, and Paris and some of the
leading global defense firms over the years has
offered Saudi Arabia and the UAE the opportunity
to aggressively pursue defense industrialization.
But out of all enabling factors, it is unquestionably
both countries’ large and sophisticated offset
programs, which have emphasized technology
transfer, that have contributed the most to
their effort to develop their indigenous defense
capabilities. Saudi Arabia and the UAE are projected
to be among the top twenty global military offset
markets for the next decade. Through these offset
programs, Saudi Arabia and the UAE have been
able to connect their domestic defense sectors
with global defense producers and enable them
to acquire basic industrial knowledge and knowhow.

The results are mixed but in some areas
encouraging, as a number of indigenous industries
have been established in Riyadh, Abu Dhabi,
and other locations in joint ventures with global
defense industry giants.

Yet these accomplishments notwithstanding,
embarking on a successful path to domestic
military industrialization could, depending on
the desired objectives, require nothing short of a
total state effort and a societal transformation.
Political stability, national leadership, and relative
abundance of financial capital in Saudi Arabia
and the UAE have been crucial to getting military
industrialization off the ground, but to develop,
rationalize, and sustain the process for the long
term both countries stand a better chance of
succeeding if they implement the following set
of recommendations:

●● Clarity of Purpose and Strategy: Saudi and
Emirati military industrialization must have
a more precise strategic and tactical purpose.
High-tech and small-scale is the best way
forward for both countries, but Saudi Arabia
and the UAE ought to think more seriously about
ways to effectively integrate the process of local
arms production into the broader context of
national defense policy and arms acquisition.

●● Defense Production Policy: Riyadh and Abu
Dhabi must formulate clear defense production
policies and create overarching bodies for longterm
defense planning. This is important for
consistency between short-term decisions and
long-term plans.

●● Organization of Defense: Riyadh and Abu
Dhabi must organize their national defense
establishments by creating credible and
authoritative institutions as well as solid legal
and administrative frameworks. If defense
ministries in Riyadh and Abu Dhabi assume
key defense-related powers and refrain
from relegating them to kings or military
commanders, military industrialization
would profit.

●● Technology Transfer: A diverse approach to
technology transfer that addresses actual needs
and realities would be most beneficial to Saudi
Arabia and the UAE. Riyadh and Abu Dhabi
should continue to adopt a deliberate policy of
training their nationals and encouraging them
to learn skills on the job.

●● Research & Development and Science &
Technology: Saudi Arabia and the UAE should
develop a more robust local R&D capability that
would have more direct interaction with the
users—the armed forces and foreign clients.
But advances in R&D have to correspond to
S&T levels in user organizations. Both countries
should also create more dynamic linkages
between science institutions (universities,
parks, institutes, etc.,) and the defense industry.

●● Private Sector Participation: Saudi Arabia
and the UAE need to ensure a greater role for
the private sector in funding the enterprise of
military industrialization. Otherwise defense
production would remain wholly state-owned,
which works against the streamlining of defense
industrial activity.

●● Offset Programs: Saudi Arabia and the
UAE should further integrate their offset
programs into national strategies for industrial
development. In order to reduce their
dependency on external technology suppliers,
both countries must maximize the effect of
job creation.

●● Maintenance, Repair, and Overhaul: Because
Saudi and Emirati technicians and engineers,
as few as they are, are still unable to maintain
modern US and other Western weapons systems
without the help of foreign workers, further
focus on and investment in MRO capabilities is
needed in Saudi Arabia and the UAE.

●● Bilateral or GCC-wide Military Industrial
Cooperation: Saudi Arabia and the UAE would
benefit from developing a joint MRO base and
an integrated or complementary services and
production infrastructure. This would be hugely
profitable economically, as it would allow for
maximal exchange of experience and skills, as
well as fuller, more prolonged use of facilities
and qualified manpower.

Implications for US Policy

Efforts by Saudi Arabia and the UAE over the
past decade to upgrade their national defense
capabilities by purchasing arms and pursuing
domestic military industrialization contribute to
US strategic plans and interests in the Middle East
and are generally consistent with the broader US
commitment to expanding its global partnerships
and strengthening its friends and allies’ defense
capabilities. However, should current political
uncertainties in US-Gulf relations persist and,
more dramatically, a strategic rift between
Washington and Riyadh develop in the future due
to major policy differences, intensified defense
industrialization in the Gulf could carry risks to US
strategic interests in the Middle East.

One of the motivations of Saudi Arabia and the UAE
to pursue military industrialization is to reduce
their political dependence on the United States.
Unilateralism on the part of US friends and allies
can sometimes undermine security interests, as
evidenced by Israel’s unilateral military actions
in Lebanon, Syria, and the Palestinian Territories.
The United States has often favored and called for
regional solutions to many of the Middle East’s
security problems, and Washington would be
relieved if Saudi Arabia and/or the UAE could
step up and use their own defense and diplomatic
resources to defuse a potential crisis in the future.
However, if another major crisis, a la 1990-91 Gulf
War, occurs and the Saudis and/or the Emiratis
decide to act on their own to protect their interests
outside the confines of the US-Gulf partnership, US
strategic interests might be at risk.

While Saudi Arabia’s current capacity to act
more independently from the United States is
lower, its willingness will only increase should
relations with Washington fail to improve and
its defense industrialization effort develop at a
more rapid pace. This equation is almost reversed
with the UAE. Abu Dhabi’s capacity to act more
independently from the United States is higher (its
armed forces are more technically proficient and
combat-ready than the Saudi military) and will
only strengthen with time, but its willingness to do
so is decreased because it has a stable relationship
with Washington and much prefers to work with
US-led, international coalitions. This explains
why Abu Dhabi is interested in strengthening
its partnership with NATO and vice versa. Like
Saudi Arabia, the UAE has regional leadership
ambitions, but it seeks to lead by example, and its
foreign policy outlook tends to be more global and
cosmopolitan than Saudi Arabia’s.

The sustainability of the US-Gulf partnership
is a joint responsibility, despite Washington’s
senior status. The Arab Gulf countries, and Saudi
Arabia and the UAE in particular, have obligations
too. Building closer security relationships and
integrating national defense capabilities (most
importantly in air and missile defense, and
intelligence, surveillance and reconnaissance)
should be more pressing priorities for Arab Gulf
leaders. Interoperability is also not a one-way
street. Washington has been adamant about
its Gulf partners maintaining compatibility
with US defense systems.

However, often times,when these partners request
the purchase of US items that would uphold US-GCC
and inter-GCC interoperability, their requests are denied by

The two major reasons for this are
strict export controls and a US Israel policy of
Qualitative Military Edge (QME), which is designed
to maintain Israel’s regional military supremacy
and uphold its deterrence posture. In the Gulf
partners’ view, the problem is not limited to US
rejection but also to Washington’s slow or lacking
response. Sometimes it takes years to get an
answer from Washington for a specific military
purchase, and by the time a response is provided
the price as well as the needs and circumstances of
the Gulf partners would have changed.

But Saudi Arabia and the UAE shouldn’t rely
solely on US cooperation. There is ample room for
defense-industrial cooperation and collaboration
between Riyadh and Abu Dhabi and other GCC
capitals, be it in manpower, skilled expertise,
manufacturing and/or MRO, that can address
some deficiencies. The problem is that politics,
rivalry, and prestige have stood in the way of such
a goal. The United States has been pushing the
GCC to think more collectively for some time, but
disagreements among its members, be it on Syria,
Egypt, or Iran, are real. So long as political discord
reigns in the GCC, the US-Gulf partnership, with
its defense-industrial component, will never meet
its true potential and remain limited to bilateral
affairs between the United States and individual
GCC members.


Military industrialization in Saudi Arabia and the
UAE is a natural consequence of both countries’
ambitions to affirm their rising regional status as
well as their efforts over the years to modernize
their societies and diversify their economies.
The pace, scope, and effectiveness of Saudi
and Emirati military industrialization efforts
will continue to depend, in many respects, on
broader societal change in both countries. But
it would be misleading to say that the Saudi
and Emirati political systems, because of their
restrictive attributes—including secrecy, excessive
centralization, exclusionism, corruption, and
lack of accountability—totally obstruct military
industrialization. What matters most when it
comes to successful military industrialization
is intent, vision, resources, and a set of sound
political, economic, and military industrial
strategies. Saudi Arabia and the UAE still struggle
with the formulation of such strategies, but they
are gradually improving and learning from the
top defense companies in the world, by way of
collaboration and partnership.

It bears repeating that military industrialization
in Saudi Arabia and the UAE is a long-term process.
Indeed, it is likely to take anywhere between
five to fifteen years before either country can
effectively export military items en masse and
increasingly rely on its own local manpower and
arms production capabilities to address national
security needs. But Riyadh and Abu Dhabi are
careful not to rush the process, and they have
every reason to be confident about the future.

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