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
  • Dubai extends bids for Hassyan SWRO pipeline packages

    7 May 2026

    Dubai Electricity & Water Authority (Dewa) has extended the bid submission deadlines for two water transmission pipeline packages linked to phase two of the Hassyan seawater reverse osmosis (SWRO) desalination plant in Dubai.

    The tenders cover the supply, installation, testing and commissioning works for glass reinforced epoxy (GRE) water transmission pipelines. The project will enable potable water to be transmitted from the phase two plant into Dubai’s transmission network.

    The tender bond for the first package is AED9.6m ($2.6mn). The tender bond for the second project is AED17.9m. The deadlines for the two projects have been pushed back to 2 June and 4 June, respectively.

    Local firms Al-Nasr Contracting, Tristar E&C and Wade Adams, along with UAE firm Binladin Contracting Group, are among the companies expected to submit bids for the main contracts for these projects.

    In April, Dewa issued two separate tenders for transmission projects in the emirate.

    The first tender covers the supply, installation, testing and commissioning of GRE water transmission pipelines and associated works at several locations in Dubai. The closing date for submissions is 4 June. Bidders are required to provide a tender bond of AED9m ($2.45m).

    The second tender relates to 132kV cable works and associated modifications at several substations, including the Autosouq, Crystal and Danaro Road substations. The package also includes a new 132kV cable circuit and cable shifting works linked to the DXB INTRL 400/132kV substation.

    The bid submission deadline is 11 June, with a required tender bond of AED17.5m.

    In January, Dewa announced that construction of the 180 million imperial gallons a day phase one of the Hassyan SWRO independent water project was 90% complete.

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

    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

    Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16716599/main.jpg
    Mark Dowdall
  • Teams form for Qiddiya high-speed rail PPP

    7 May 2026

     

    Firms are forming joint ventures as part of a public-private partnership (PPP) package to bid for the upcoming works on the Qiddiya high-speed rail project in Riyadh.

    The latest development follows Saudi Arabia’s Royal Commission for Riyadh City, Qiddiya Investment Company and the National Centre for Privatisation & PPP receiving prequalification statements from firms by 30 April for the PPP package of the rail project.

    The consortiums that are planning to bid for the PPP package are:

    • McQuarie / Hitachi / Keolis / Albawani / WeBuild / Hyundai / HyundaiRotem
    • ⁠Plenary / Siemens / MTR / FCC / Nesma & Partners / Freyssinet
    • ⁠Vision Invest / CRRC / Mapa 
    • Mada International / ⁠Renfe / Alstom / Hassan Allam Construction / El-Seif Engineering Contracting / China State Construction Engineering Corporation / Limak Holding
    • Lamar Holding / Talgo / Mermec / China Harbour Engineering Company / Al-Ayuni Investment & Contracting

    The prequalification notice was issued on 19 January, and a project briefing session was held on 23 February at Qiddiya Entertainment City.

    The Qiddiya high-speed rail project, also known as Q-Express, will cover 84 kilometres, connecting King Salman International airport and King Abdullah Financial District with Qiddiya City.

    The line will operate at speeds of up to 250 kilometres an hour, reaching Qiddiya in 30 minutes.

    There are five stations planned: Qiddiya Grand Central Station, Qiddiya Uptown Station, King Abdullah Financial District, Terminal 6 King Salman International Airport (KSIA) and Iconic Terminal at KSIA.

    Last month, MEED exclusively reported that contractors had submitted their prequalification statements for the engineering, procurement, construction and financing package by 16 April.

    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, and Ashurst is the legal adviser.

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

    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

    Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16716585/main.jpg
    Yasir Iqbal
  • Contractor wins $218m Aramco-backed logistics hub deal

    7 May 2026

     

    Saudi Amana, the local affiliate of UAE-based construction firm Group Amana, has won an estimated SR820m ($218m) contract to build a logistics complex at King Salman Energy Park (Spark) in Saudi Arabia's Eastern Province.

    Asmo, the logistics joint venture of Saudi Aramco and DHL Supply Chain, awarded the contract.

    Asmo received the main contract bids on 18 March, as MEED reported.

    Al-Khobar-based engineering firm House of Consulting Office is the project consultant.

    In February, Asmo signed an agreement with Bahrain‑headquartered Arcapita Group Holdings to deliver the project at Spark.

    The project will feature a 43,000-square-metre (sq m), temperature-controlled Grade A warehouse; more than 3,000 sq m of offices and staff amenities; 5,300 sq m dedicated to chemicals storage; and an open yard covering about 1.2 million sq m.

    Planned for large-scale industrial use, the site is expected to incorporate advanced warehouse and building management systems, end-to-end digital connectivity, automation and robotics.

    It will also be developed in line with internationally recognised sustainability standards, featuring solar photovoltaic readiness, electric-vehicle charging infrastructure and a target of Leed Gold certification.

    The development aims to support the next stage of Saudi Arabia’s logistics and supply chain expansion.

    Under the deal structure, Arcapita will provide funding and retain ownership of the asset, while Asmo will develop the facility and then lease and operate it under a 22-year occupational lease.

    According to a statement, “the scheme will be executed via a forward-funding model, underscoring a long-term commitment to national infrastructure”.

    Asmo added that this will be its first purpose-built logistics centre and one of four strategic locations planned to anchor its nationwide logistics network, aligned with the National Transport and Logistics Strategy under Saudi Vision 2030.

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

    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

    Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16715420/main.jpg
    Yasir Iqbal
  • Kuwait postpones bid deadlines for four downstream oil tenders

    7 May 2026

     

    Kuwait has extended bid deadlines for four tendered contracts that are all focused on the country’s Mina Al-Ahmadi (MAA) refinery.

    The contracts include a project that has been tendered by state-owned downstream operator Kuwait National Petroleum Company (KNPC) to upgrade water transmission and storage infrastructure at the refinery.

    The contract will use the engineering, procurement and construction model and the tender was originally issued in October 2025 with an initial bid deadline of 4 January 2026.

    The tender has already seen several extensions and the latest rescheduling has set the bid deadline back from 19 April 2026 until 10 May 2026.

    The project is expected to take two years to complete and its scope is focused on expanding water storage capacity at the facility, either through extending existing tanks or building new tanks.

    The winning bidder will also be responsible for developing associated infrastructure and upgrading related systems that transport desalinated water to the refinery, such as pipelines and other infrastructure.

    In its 2024-25 annual report, KNPC said the project will help to meet demand for water at the facility’s refining and gas production units.

    The other three contracts are all maintenance contracts, which were also tendered by KNPC and have had their bid deadlines extended until 30 June 2026.

    The first of these is focused on mechanical maintenance of the Clean Fuel Project (CFP) units at the facility, as well as gas liquid production facilities.

    The CFP units were added to the refinery as part of the $16bn CFP, and were brought online in 2021.

    The project aimed to increase Kuwait’s capacity to produce low-sulfur fuels and, as part of the project, the MAA refinery was integrated with Kuwait’s Mina Abdulla (MAB) refinery.

    The project increased the capacity of MAB to 454,000 barrels a day (b/d) and the MAA refinery to 346,000 b/d.

    The second maintenance contract is focused on the mechanical maintenance of refining and production units at the MAA facility. The third contract is focused on workshop maintenance at the facility.

    The MAA refinery has been hit in several attacks during the US and Israel's war with Iran, which started on 28 February 2026.

    The full extent of the damage to the facility is currently unclear.

    Last month, MEED revealed that state-owned oil companies in Kuwait have fast-tracked the award of contracts to repair damage to infrastructure in the oil and gas sector.

    To expedite the award of contracts, deals were directly negotiated with trusted contractors without public tenders.

    The contracts were negotiated by senior officials at Kuwait Petroleum Corporation subsidiaries including Kuwait Oil Company and KNPC, sources said.

    It is not known whether any of these contracts related to repairs at the MAA refinery.

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

    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

    Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16715383/main.jpg
    Wil Crisp
  • Oman signs exploration agreement for methane hydrates

    7 May 2026

    Oman’s Ministry of Energy & Minerals (MEMR) has signed an agreement with Victarens Global Energy for the exploration of methane hydrates in Block 83 in the sultanate.

    Under the agreement, Victarens Global Energy will perform a study of Block 83, which spans approximately 11,000 square kilometers onshore Oman, over an initial period of two years, extendable for an additional two years based on the outcomes of the studies.

    “This step marks the first initiative of its kind in the sultanate to assess the potential of gas production through non-conventional methods, contributing to the diversification and sustainability of energy sources,” the MEMR said in a statement.

    The agreement was signed in Muscat by Salim Bin Nasser Al-Aufi, Oman’s Energy & Minerals Minister, and Kenan Issa, CEO of Victarens Global Energy.

    The project will be implemented in two main phases. The initial investment for the first phase is estimated at approximately $20m, while the second phase is expected to require around $200m, “reflecting the strategic importance of this project in exploring non-conventional energy resources”, the MEMR said in a statement.

    ALSO READ: Oman awards manganese exploration concession deal

    The scope of work on the first phase includes geological studies, analysis and reprocessing of existing geophysical data, and carrying out new seismic surveys to determine the volume and thickness of methane hydrate layers within the study area.

    Based on the results of this phase, the project will proceed to the second phase, which involves installing extraction equipment and testing the feasibility of commercial production.

    Should the project demonstrate economic viability for methane hydrate production, negotiations will be conducted between the MEMR and the company to establish a long-term agreement, including the commercial terms and profit-sharing mechanisms that ensure mutual benefits for both parties.

    “This agreement aims to explore and assess methane hydrate resources, supporting the adoption of advanced technologies in the energy sector and reinforcing the transition toward future energy sources, while promoting innovation and sustainability in the utilisation of natural resources. The agreement aligns with the objectives of Oman Vision 2040, which focuses on economic diversification, the development of the energy sector and strengthening the sultanate’s position as a regional hub for energy and advanced technologies,” the MEMR statement added.

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

    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

    Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16703851/main1050.jpg
    Indrajit Sen