Meed | Middle East defence spending accelerates

Middle East defence spending accelerates

7 May 2023

Global military spending reached a record high of $2.24tn in 2022, up 3.7 per cent year-on-year, according to newly compiled data from the Stockholm International Peace Research Institute (SIPRI), as the Ukraine war and tensions in East Asia prompted governments to ramp up their investment in equipment.

It marks the eighth consecutive year of growth in global defence expenditure. The sharpest rise was in Europe, where there was a 13 per cent increase in spending, but the Middle East and North Africa (Mena) region was not far behind, with an 11.2 per cent rise on the previous year.

“The continuous rise in global military expenditure in recent years is a sign that we are living in an increasingly insecure world,” said Nan Tian, a senior researcher with SIPRI’s military expenditure and arms production programme.

“States are bolstering military strength in response to a deteriorating security environment, which they do not foresee improving in the near future.”

Rising regional outlay

The rise in the Mena region’s total to $168bn was mostly due to an increase in spending by Saudi Arabia and Qatar and, to a lesser extent, Lebanon and Iran.

As has long been the case, Saudi Arabia dominated the picture, with a defence outlay of $75bn in 2022 – up 16 per cent on the year before and its first increase since 2018.

Military spending data for the Middle East is often opaque. Other large spenders, according to SIPRI’s database, include Israel ($23.4bn), Qatar ($15.4bn), Algeria ($9.1bn), Kuwait ($8.2bn), Iran ($6.8bn) and Oman ($5.8bn).

However, the institute has no estimates for a number of other countries, most notably the UAE. Its most recent figure for the UAE is for 2014, at which point the defence budget was an estimated $22.8bn, the region’s second-biggest after Saudi Arabia that year.

There are also no current estimates for defence spending by the countries suffering the greatest instability, including Libya, Sudan, Syria and Yemen.

Others have drawn up figures for the UAE, though. The London-based International Institute for Strategic Studies (IISS) estimated the UAE’s defence spend was $20.4bn last year in its recently published Military Balance 2023 report. That marked a 6 per cent rise on the previous year’s estimate.

While the UAE may not have the largest budget in the region, IISS says its armed forces are “arguably the best trained and most capable of all GCC states”.

Unclear Iranian picture

The outlay by Iran is also a matter of some debate, given the questions over the value of the rial and the country’s high inflation rate of around 40 per cent.

SIPRI says that, in local currency terms, Iran’s defence spending grew by 38 per cent to IR1,988tn in 2022. That is equivalent to some $46.9bn at the government’s official exchange rate, but far less at the open market rate used by SIPRI.

Inflationary pressures have become a common concern for countries around the world, even if few are having to cope with price rises as rapid as in Iran. Many Western countries are also dealing with an energy supply crisis due to the war in Ukraine, which has led to prices spiking upwards and sanctions being imposed on Moscow.

The Middle East’s oil exporters have benefitted from elevated oil prices, making it easier to afford the rise in defence spending.

However, the most notable direct consequence of the conflict in Ukraine for the Middle East has been the surge in military cooperation that has followed between Russia and Iran. Moscow’s failure to quickly take control of Ukraine has led to a drawn-out conflict and, as its weapons inventory has become depleted, it has imported drones from Iran to fill in some of the gaps.

That cooperation may yet extend in the other direction, with Iranian media reporting in March a potential deal for Tehran to receive Russian Sukhoi Su-35 fighter jets. Iran will also have gained useful information about the performance of its Shahed 131, Shahed 136 and Mohajer-6 drones in the war.

Lingering Gulf concerns

Such developments will likely concern other Gulf governments, even if regional tensions have eased somewhat due to the rapprochement between Saudi Arabia and Iran, announced via a China-brokered agreement in March.

That fits into a broader regional trend for de-escalation and diplomatic advances. Recent talks between Saudi officials and Yemen’s Houthi rebels in Sanaa could yet pave the way to resolving that conflict – further discussions between the two sides are due to take place in May, possibly in Muscat.

The levels of violence in Libya and Syria have also been on a downward trajectory over the past year, but both remain susceptible to further outbreaks of fighting, as does Iraq.

Elsewhere, though, relations between Algeria and Morocco remain problematic, and the prospects of any peace deal between the Israelis and Palestinians look as distant as ever with the hardline government of Israel’s Prime Minister Benjamin Netanyahu in office.

Any reduction in regional tensions will be a welcome development given the high burden of defence spending on local economies. As IISS points out, many Mena countries’ defence budgets are very large relative to the size of their economies.

As has long been the case, Oman spends more as a proportion of its GDP than any other country in the region, with its 2022 outlay equivalent to 5.9 per cent of GDP, according to IISS calculations.

It is followed by Kuwait at 5 per cent and Saudi Arabia at 4.5 per cent.

The average for the region is 3.8 per cent of GDP, more than double the global average of 1.7 per cent. The overall trend for rising budgets means that the economic burden is unlikely to fall away any time soon.

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Dominic Dudley

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The revised tariff schedule, published on the company’s official website, covers residential, commercial, industrial, agricultural, charitable and government customers.

The largest percentage increase in consumption rates is 16.7%, for residential customers using up to 6,000 kilowatt-hours (kWh) a month. Residential customers will pay 21 halalas/kWh for monthly consumption of up to 6,000kWh, up from 18 halalas. For consumption above 6,000kWh, the rate will rise from 30 to 33 halalas/kWh, a 10% increase.

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Tariffs for charities and government customers will also increase. In addition to consumption-based charges, customers will pay a fixed monthly fee based on the capacity of their electricity meter. This replaces the previous separate charge for meter reading, maintenance and billing, with VAT applied to the revised tariffs.

Electricity investment

The new tariffs coincide with changes to water consumption tariffs announced by the National Water Company, also effective from 1 January 2027.

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Dubai Municipality confirms AED3bn Tasreef drainage awards
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The projects will cover Jumeirah, Umm Suqeim, Al-Quoz, Al-Barsha, Al-Wasl and Al-Marmoom. The works include constructing and extending main stormwater drainage lines with diameters of up to three metres.

The four packages are part of Dubai’s AED30bn Tasreef programme, which aims to increase the emirate’s stormwater drainage capacity by 700% and reduce costs associated with pumping stations, network operations and maintenance by 20%.

The contracts have been awarded to China State Construction Engineering Corporation (CSCEC) and three local firms: Arifco Group, Nael Construction & Contracting (NCC) and Detech Contracting. Dubai Municipality did not state which projects the awards relate to.

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Saudi Arabia’s Sports Ministry has tendered a contract covering early works at King Salman International Stadium in Riyadh.

The scope includes enabling works, site preparation and initial construction activities.

The tender was issued on 11 October, with a submission deadline of 19 November.

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Construction of the stadium is expected to be completed by 2029.

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Firms submitted prequalification statements for the main design-and-build contract in February.

Saudi stadium plans

In August 2024, MEED reported that Saudi Arabia planned to build 11 new stadiums and refurbish four facilities for the 2034 Fifa World Cup.

Eight stadiums will be located in Riyadh, four in Jeddah and one each in Al-Khobar, Abha and Neom.

A further 10 cities will host training bases: Al-Baha, Jazan, Taif, Medina, Alula, Umluj, Tabuk, Hail, Al-Ahsa and Buraidah.

There are expected to be 134 training sites in the kingdom, including 61 existing facilities and 73 new venues.

Saudi Arabia was officially selected to host the 2034 Fifa World Cup during an online convention of Fifa member associations at the Fifa Congress on 11 December 2024.

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