meed-logo

line1 line2 line3
SIGN IN / REGISTER

Instability drives up defence budgets

22 February 2024

At the World Defence Show in Riyadh on 4-8 February, SR26bn ($6.9bn) of contracts were finalised, including SR20bn agreed by the Saudi Defence Ministry. 

Perhaps the most prominent feature was the number of localisation deals that were struck between Saudi government entities and international weapons manufacturers, including US firms Lockheed Martin and Raytheon, France’s Thales and South Korea’s Kia.

The Saudi authorities still have a way to go to meet their ambition – set out in the Vision 2030 economic diversification strategy – to allocate half of all defence equipment spending within the kingdom by the end of the decade, but it is clearly a goal they continue to prioritise. 

“There is definitely that focus on bolstering investment within defence budgets,” said Fenella McGerty, senior fellow for defence economics at the London-based think tank the International Institute for Strategic Studies (IISS).

“We are seeing a focus on R&D [research and development] particularly. It was far too low in this region. It needs to increase to about 4% of the defence budget – as it would be in Europe – and it was about 1%. Countries are moving towards implementing that change within defence spending.”

Increasing investment

McGerty was speaking at the launch of the latest IISS Military Balance report in mid-February. The report showed a further rise in Saudi defence spending in the past year. 

According to IISS data, Saudi Arabia’s defence outlay climbed 5.7% in 2023 to SR259bn ($69bn). This was lower than the 28% growth the year before, but is still among the fastest-growing military budgets in the wider region, and is far larger than the nearest competitors – the UAE, with an outlay of $20.7bn in 2023, and Israel with $19.2bn.

Overall, defence spending in the Middle East and North Africa region was up 9.5% in 2023, with Gulf countries accounting for just over 72% of the $183bn total – a figure that does not include Libya, the Palestinian territories, Sudan, Syria or Yemen, due to a lack of reliable information.

North African countries accounted for a 16.3% share of the total, with the Levant taking up the remaining 11.5%. 

One of the most significant aspects was a doubling of Algeria’s military budget to $18.3bn, from $9.2bn the year before. IISS attributed this to a recent procurement deal with Russia. In 2022, Russian media reported that a deal worth $12bn-$17bn was being negotiated, covering submarines, fighter jets and air defence systems. 

The sharp rise in military spending has pushed Algeria’s defence budget up to 8.2% of the country’s GDP – far higher than any other country in the region. The nearest rivals by that measure are Saudi Arabia at 6.5% and Oman at 6.0%.

Regional disputes

The one-off nature of the Russian deal means Algeria’s military spending is likely to fall back next year, but in other parts of the region, rising tensions are pushing governments to dedicate more funding to their armed forces. In early February, Israel’s parliament gave initial approval to an amended budget to help fund Prime Minister Benjamin Netanyahu’s war in Gaza, providing an additional $15bn.

With tensions rising in nearby Egypt, Jordan, Lebanon, Iraq and Yemen, other governments may feel the need to take similar action. However, they may also have to deal with a trend of weaker economic growth, with projections being downgraded for the region as a result of the negative impact of the Gaza war on trade, tourism and investment. 

Iraq – which has become an arena for fighting between Iran-backed militia and US forces in recent months – already posted a 47% increase in its defence budget for 2023, taking it to $10.3bn. 

As Baghdad attempts to catch up on procurement plans that were delayed by the Covid-19 pandemic, it plans to invest in improved air defence systems and is also in the market for new fighter jets, with France’s Rafale and China’s JF-17 Thunder both understood to be under consideration. At least some of the additional spending will be funded by loans from the US Defence Security Cooperation Agency and the South Korean government.

In some countries, spending is going in the opposite direction. Egypt’s defence outlay fell 34% in 2023 to $3.6bn. However, this was due to inflation and the falling value of the Egyptian pound; in local currency terms, the budget was up by 7% to £E92.4bn.

Iran has also been investing heavily in a manner that is unusual in the region in that it is now home to an extensive domestic weapons development and manufacturing base. This situation is due to international sanctions, which have made it difficult for Tehran to source advanced weaponry from abroad.

The advances Iran has made in missile and drone production have been seen on battlefields in Yemen and Ukraine, with Iran now a key supplier to Russia..

The home-grown strength that Tehran has developed is something that Saudi Arabia and the UAE would like to emulate and surpass. Both countries have faced some difficulty in securing modern armaments and equipment from western suppliers, due to disquiet about their actions in Yemen.

While most of those objections have now been dropped, some advanced weaponry remains out of reach, with the US still refusing to sell F-35 fighter jets to the UAE, for example. Such factors mean they will continue to invest heavily in their domestic defence industries in the coming years, while also procuring more equipment from non-western sources such as China.

Main image: Middle East and North Africa military expenditure. Souce: IISS Military Balance 2024

 

https://image.digitalinsightresearch.in/uploads/NewsArticle/11539659/main.gif
Dominic Dudley

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Oil tankers attacked in Iraqi waters

    12 March 2026

    Register for MEED’s 14-day trial access 

    Two tankers carrying Iraqi oil products were set on fire after being attacked in Iraq’s territorial waters near the country’s southern export terminals, increasing concerns about global energy supplies.

    After the attack, the country’s Oil Ministry said that it saw the attacks as “a worrying indicator of escalating tensions in a vital area of the global economy and energy supply”.

    It added that “the safety and safety of navigation in international sea corridors and energy supply routes should be kept away from regional conflicts”.

    The Oil Ministry said the attacks had a direct impact on the stability of the global economy and energy markets, as well as putting the lives of civilians and workers in the maritime transport sector at risk.

    Farhan Al-Fartousi, from Iraq’s General Company for Ports, told state television that one crew member had been killed in the attack and that 38 crew members had been rescued.

    Iraq’s state-owned oil marketing company Somo said that the Maltese-flagged oil tanker Zefyros was attacked as it was preparing to enter the port of Khor Al-Zoubair, where it would have taken on board an additional 30,000 tonnes of liquid naphtha.

    The second targeted vessel, Safesea Vishnu, was sailing under the Marshall Islands flag and was chartered by an Iraqi company, according to Somo.

    Iraq’s oil production has fallen steeply since the conflict began, from 3.3 million barrels a day (b/d) to less than 1 million b/d.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15951323/main.png
    Wil Crisp
  • Chevron yet to agree terms for Iraq oil field takeover

    12 March 2026

     

    US-based oil company Chevron is yet to agree terms with Iraqi state-owned Basra Oil Company (BOC) for its potential takeover of Iraq’s West Qurna-2 oil field, according to industry sources.

    Last month, Chevron signed a preliminary agreement with BOC to explore taking control of the West Qurna-2 oil field.

    Until recently, West Qurna-2 was operated by Russia’s Lukoil, which faces a 28 February deadline to divest its assets in Iraq under sanctions.

    One industry source said: “Chevron is yet to agree terms, and it has made it clear that it wants different terms to the contract that Lukoil had.”

    In January, Iraq’s cabinet approved temporarily nationalising petroleum operations at the West Qurna-2 oil field until a new operator was found.

    Lukoil declared force majeure at the West Qurna-2 oil field in November, after sanctions by the UK, EU and US were announced in October.

    The Russian company had a 75% stake in the asset.      

    Prior to Russia’s Lukoil declaring force majeure, Iraq’s state oil authorities froze all cash and crude payments to Lukoil in compliance with the sanctions.

    In a statement released on 1 December 2025, Iraq’s Oil Ministry said that it had extended “direct and exclusive invitations to a number of major American oil companies”.

    Awarded to Lukoil in 2009, West Qurna-2 lies about 65 kilometres northwest of Basra in southern Iraq and produces about 480,000 barrels a day (b/d) of oil, accounting for roughly 10% of the country’s total oil output.

    At the same meeting on 23 February, Chevron also signed a deal relating to the development of the Nasiriyah field, four exploration sites in the province of Dhi Qar and a field in the province of Salahaddin.

    Chevron signed an agreement in principle with Iraq in August 2025 to develop the Nasiriyah oil project in the province of Dhi Qar.

    At the time, Iraq said it expected the Nasiriyah project to reach a production capacity of 600,000 b/d within seven years.

    READ THE MARCH 2026 MEED BUSINESS REVIEW – click here to view PDF

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15944830/main.png
    Wil Crisp
  • Egyptian/Saudi firms to invest $1.4bn in Cairo project

    12 March 2026

    Saudi Arabia’s Sumou Investment, through its subsidiary Adeer International, and Egyptian developer Paragon Developments have signed an agreement to jointly develop a mixed-use project in Mostakbal City, East Cairo.

    According to local media reports, the project will cover about 500,000 square metres and will be developed with a total investment of about $1.4bn.

    The project will be developed by Paragon-Adeer, a joint venture of Paragon Developments and Adeer International.

    The announcement follows a $1.4bn deal signed in July last year between Adeer International and another Egyptian developer, Midar, to jointly develop a mixed-use project in Mostakbal City.

    Midar, Sumou Investment and Hassan Allam Properties are partnering to develop $2bn in hospitality and leisure projects across several locations in Cairo within Midar-owned land parcels. 

    According to GlobalData, Egypt’s residential construction sector is expected to grow by 8.3% from 2026 to 2029, supported by investments in the housing sector and the government’s focus on addressing the country’s growing housing deficit amid a rising population.

    The commercial construction sector is expected to register real-term growth of 6.6% during 2026-29, supported by a rebound in tourism and hospitality markets and an improvement in investment in office buildings and wholesale and retail trade activities.

    MEED’s March 2026 report on Egypt includes:

    > COMMENT: Egypt’s crisis mode gives way to cautious revival
    > GOVERNMENT: Egypt adapts its foreign policy approach
    > ECONOMY & BANKING: Egypt nears return to economic stability
    > OIL & GAS: Egypt’s oil and gas sector shows bright spots
    > POWER & WATER: Egypt utility contracts hit $5bn decade peak
    > CONSTRUCTION: Coastal destinations are a boon to Egyptian construction

    To see previous issues of MEED Business Review, please click here

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15939746/main.jpg
    Yasir Iqbal
  • Qiddiya gives high-speed rail prequalifying firms more time

    12 March 2026

     

    Saudi Arabia’s Royal Commission for Riyadh City, in collaboration with Qiddiya Investment Company (QIC) and the National Centre for Privatisation & PPP, has set a new deadline of 16 April for firms to submit prequalification statements for the development of the Qiddiya high-speed rail project in Riyadh

    The prequalification notice was issued on 19 January, with an initial submission deadline of 17 March.

    The clients are considering delivering the project using either a public-private partnership (PPP) model or an engineering, procurement, construction and financing (EPCF) basis.

    Firms have been asked to prequalify for one of the two models.

    Last month, the clients invited interested firms to a project briefing session on 23 February at Qiddiya Entertainment City.

    The Qiddiya high-speed rail project will connect King Salman International airport and the King Abdullah Financial District (KAFD) in Riyadh with Qiddiya City.

    Also known as Q-Express, the railway line will operate at speeds of up to 250 kilometres an hour, reaching Qiddiya in 30 minutes.

    The line is expected to be developed in two phases. The first phase will connect Qiddiya with KAFD and King Khalid International airport.

    The second phase will start from a development known as the North Pole and travel to the New Murabba development, King Salman Park, central Riyadh and Industrial City in the south of Riyadh. 

    In November last year, MEED reported that more than 145 local and international companies had expressed interest in developing the project.

    These included 68 contracting companies, 23 design and project management consultants, 16 investment firms, 12 rail operators, 10 rolling stock providers and 16 other services firms.

    In November 2023, MEED reported that French consultant Egis had been appointed as the technical adviser for the project.

    UK-based consultancy Ernst & Young is acting as the transaction adviser on the project. Ashurst is the legal adviser.

    Qiddiya is one of Saudi Arabia’s five official gigaprojects and covers a total area of 376 square kilometres (sq km), with 223 sq km of developed land. 

    READ THE MARCH 2026 MEED BUSINESS REVIEW – click here to view PDF

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15939059/main.gif
    Yasir Iqbal
  • Wynn resumes construction on Ras Al-Khaimah project

    12 March 2026

    Register for MEED’s 14-day trial access 

    US-based Wynn Resorts said on 11 March that site activity on its resort project on Ras Al-Khaimah’s Al-Marjan Island has restarted after work was temporarily halted. New measures are in place to ensure the safety and security of the workforce. 

    “Wynn employees have been offered the opportunity to work from abroad, if their home embassy recommends they do so,” the company added.

    The $5.1bn project involves the construction of an integrated resort with 1,500 rooms, high-end shopping, MICE venues and the UAE’s first confirmed gaming area. It is scheduled to open in spring 2027.

    The 70-floor 283-metre-tall main structure was topped out in December 2025.

    Financially, Wynn Resorts holds a 40% equity stake in the joint-venture development company alongside local partners Marjan and RAK Hospitality Holding. Wynn reported in late 2025 that about two-thirds of the project’s budget had already been spent or contractually committed, which provides a degree of protection against fluctuating material costs.

    In 2025, Wynn Resorts said it had secured a $2.4bn construction facility to finance the development of the project. In a statement at the time, Wynn said the financing is the largest hospitality financing transaction in UAE history. The loan, available to Wynn Al-Marjan Island FZ-LLC – a subsidiary of the 40%-owned joint venture – is denominated in both AED and US dollars.

    Structured as a delayed draw facility, the seven-year term loan offers competitive market interest rates and substantial financial flexibility for the joint-venture partners.

    The syndicate includes prominent regional and international banks, with Abu Dhabi Commercial Bank and Deutsche Bank serving as joint coordinators. The joint coordinators, along with First Abu Dhabi Bank, Emirates NBD Capital and the National Bank of Ras Al-Khaimah, acted as mandated lead arrangers, bookrunners and underwriters, and Sumitomo Mitsui Banking Corporation acted as lead arranger. First Abu Dhabi Bank is also the agent and security agent for the lenders.

    Dubai-based Alec was appointed as the project’s main contractor in 2023. Earlier in March, Alec said it had resumed on-site and in-office operations across its UAE projects from 4 March.

    In a statement, the company said that it is working closely with clients to ensure a prompt and safe return to full-scale activity.

    The move follows a temporary work-from-home policy introduced across the company’s UAE operations in response to ongoing events, as Alec Holdings reaffirmed its commitment to protecting its workforce while continuing to deliver in clients’ best interests.

    During the same period, the company said its operations in Saudi Arabia remained fully operational.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15952339/main.jpg
    Colin Foreman