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