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
  • Renewables projects in Oman near completion

    9 March 2026

    Three Oman-based renewable energy projects are nearing completion, according to OQ Alternative Energy (OQAE), part of Oman’s state-backed energy group OQ.

    The Riyah 1, Riyah 2 and North Solar projects have a combined capacity of 330MW and are expected to be operational by the end of the year, the renewable energy firm said in a statement.

    The Riyah 1 and Riyah 2 wind power plants are located in the Amin and West Nimr fields in southern Oman, while the North Solar project is located in northern Oman.

    OQAE owns a 51% share in the three projects, which are being developed in partnership with France’s TotalEnergies for state-backed firm Petroleum Development Oman (PDO).

    The schemes have a combined investment of more than $230m.

    Once commissioned, PDO will purchase the electricity from the plants through long-term power-purchase agreements with the developer team, whose 49% shares are owned by TotalEnergies.

    According to OQAE, the North Oman Solar project is approaching mechanical completion. About 95% of tracker and photovoltaic (PV) module installation has been completed, with full PV module installation expected by mid-March.

    Construction is also progressing on the Riyah wind projects. Seven wind turbines with a tip height of 200 metres have been erected and installation works are continuing on the remaining units.

    All 36 wind turbine generators have arrived in Oman and 19 have been transported from the port to the site. All wind turbine foundations have also been completed, allowing installation works to accelerate.

    OQAE said the projects have achieved about 30% in-country value, with several local companies involved in the supply chain.

    These include Voltamp, Oman Cables, Al-Kiyumi Switchgear and Al-Hassan Switchgear, which supplied electrical equipment and infrastructure components.

    Substation engineering design was carried out by Worley Oman. Muscat-based business conglomerate Khimji Ramdas handled logistics and customs management for turbine components.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15910036/main.jpg
    Mark Dowdall
  • Dubai’s real estate faces a hard test

    9 March 2026

    Commentary
    Yasir Iqbal
    Construction writer

    Register for MEED’s 14-day trial access 

    Dubai entered 2026 from a position of historic strength. Dubai Land Department figures show AED917bn ($250bn) in real estate transactions in 2025 across more than 270,000 deals, with residential prices up 60%-75% since 2021.

    In January 2026, the surge extended. Residential transaction values jumped 44% year-on-year to AED55bn. By most measures, it was Dubai’s strongest property cycle on record.

    Then the drones and missiles arrived.

    Iran has reportedly launched more than 1,000 drones and missiles towards UAE targets in recent days. Most of these attacks were neutralised, but debris struck its major assets, such as the Burj Al-Arab hotel and Dubai International airport. Explosions were also reported near the Fairmont the Palm hotel, the US Consulate and in Dubai Marina. These are not shocks that can be quietly absorbed by a market whose value proposition rests on being “safe”.

    Dubai property has been stress-tested before. In 2008, prices fell 50%-60% and took six years to recover. A 2014-19 correction knocked off another 25%-30%. Covid-19 was sharper but shorter, with the market stabilising within 12-18 months. Dubai tends to correct hard, then rebound quickly once confidence returns.

    What’s different now is the nature of the shock, which is the physical damage to the city itself. The core question is whether Dubai’s safe-harbour identity, which is what drew thousands of millionaires and billions in personal wealth last year, can survive missiles landing across the city for long.

    Markets have reacted negatively, as expected. Emaar and Aldar shares fell about 5% in a few days. Developer bond markets are largely shut to new issuance. Off-plan sales, which are about 65% of 2025 transactions, are most exposed because buyers must commit capital years ahead of planned delivery dates amid uncertainty.

    Fitch had already projected a correction of up to 15% in late 2025-26; UBS ranked Dubai fifth out of 21 cities for bubble risk.

    There are offsets, however. Regional capital flight has historically flowed into Dubai, and a large expatriate base provides steady demand. But it is unwise to assume past recovery patterns will repeat amid the unprecedented times, and a 2026 delivery pipeline of over 131,000 units, which is already running ahead of population growth.

    Dubai now faces two risks at once: a structural correction and a reputational shock. The outcome hinges less on the data than on one variable: how long the conflict lasts, and how close it stays.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15910169/main.jpg
    Yasir Iqbal
  • Bahrain’s Bapco Energies declares force majeure

    9 March 2026

    Register for MEED’s 14-day trial access 

    Bahrain’s state energy conglomerate Bapco Energies has declared force majeure on its group-wide operations following attacks on the Sitra oil refinery in the country.

    In a statement on 9 March, Bapco Energies said its decision to issue the force majeure notice follows “the recent attack on its refinery complex”, without providing details.

    Earlier in the day, Bahrain’s National Communication Centre announced that “the facility in Ma’ameer” – an apparent reference to the refining facility in near Sitra – had been targeted in an Iranian attack, causing a fire to break out. The fire was contained, and “the incident resulted in material damage but caused no injuries or fatalities”, said the statement carried by the official Bahrain News Agency.

    “The company clarified that all local market needs are fully secured according to the proactive plans in place, ensuring the continuity of supplies and meeting local demand without impact,” Bapco Energies said in its statement.

    “Bapco Energies values its relationships with all of its stakeholders and will continue to communicate the latest available information,” it said.

    The Monday morning attack on the Sitra refinery was the second strike on the complex in days. Iranian missiles hit the facility on 5 March, resulting in parts of the refinery being engulfed in flames, although that fire was also put out quickly.

    ALSO READ: Oil prices soar above $100 a barrel as conflict intensifies

    QatarEnergy has also issued force majeure to customers that have been affected by its decision to stop production and shipments of liquefied natural gas (LNG) and associated products.

    “QatarEnergy values its relationships with all of its stakeholders and will continue to communicate the latest available information,” the state enterprise said in a statement on 4 March.

    QatarEnergy announced its decision to halt production of LNG and associated products on 2 March due to military attacks on the company’s operating facilities in Ras Laffan Industrial City and Mesaieed Industrial City in Qatar.

    The following day, the company said it was stopping output of products in the downstream energy value chain, including urea, polymers, methanol, aluminium and other products.

    The state enterprise did not blame Iran for the attacks in either of its statements, but it is understood that its facilities have been hit by drones or missiles launched by Tehran, as it retaliates against Israel, the US and their military bases in the GCC states, further escalating the ongoing conflict.

    ALSO READ:
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15910429/main.jpeg
    Indrajit Sen
  • Wade Adams wins more work in Dubai

    9 March 2026

    Dubai-based Wade Adams Contracting has been awarded two contracts covering infrastructure works in the Nad Al-Sheba and Villanova communities in Dubai.

    The first contract, which was awarded by local real estate developer Dubai Holding, covers roads and infrastructure works for the spine road at its Nad Al-Sheba residential development.

    The scope of work includes the development of the road network, service reservation, storm water drainage, street lighting, traffic control, potable water system and sewage collection system.

    The work also covers the main irrigation system, fire-fighting system, electrical power ducts, telecommunications, spare ducts, irrigation pump station, storm pump station and all utility tie-in connections to adjacent packages.

    The project area covers 2,800 square metres (sq m).

    The other contract covers the infrastructure works for the La Tilia cluster at the Villanova development.

    The scope of work includes ground investigation, demolition and site clearance, earthworks, road network, Dubai Electricity & Water Authority-related works, street lighting, telecommunications, irrigation, drainage, sewerage and spare ducts.

    In August last year, Wade Adams Contracting was awarded a contract to carry out infrastructure works within the Nad Al-Sheba Gardens development in Dubai, as MEED reported.

    The contract includes enabling works, roads and utility services in Zones C, D and H of the development.

    The project spans an area of over 550,000 sq m within Nad Al-Sheba Gardens.

    This latest contract adds to the work awarded to Wade Adams in January, which included two contracts for grading and enabling works in clusters D and H of Nad Al-Sheba Gardens, as well as infrastructure works in Zone E.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15909803/main.jpg
    Yasir Iqbal
  • Roshn signs $177m investment deal with local developer

    9 March 2026

    Saudi gigaproject developer Roshn Group has signed an investment agreement worth over SR650m ($177) with Riyadh-based developer Miskan Real Estate Development Company.

    The agreement will allow the firm to develop a project spanning more than 68,000 square metres (sq m) of land within the Warefa community in Riyadh.

    The latest agreement follows Roshn Group's signing of several land sale and development deals with local developers, worth over SR2bn ($570m).

    The agreements were signed on the sidelines of the recently concluded Restatex Real Estate Exhibition in Riyadh.

    The signed agreements cover residential and commercial projects at Roshn’s Sedra and Warefa communities in Riyadh.

    The client signed three agreements worth over SR1.3bn ($363m) related to its Sedra residential community. These include a SR1bn ($293m) agreement with Jeddah-based developer Arabian Dyar for a 55,000 sq m plot.

    Another agreement was signed with Riyadh-based firm Tiraz Al-Arabia to build integrated commercial facilities within the Sedra development. The value of this deal has yet to be disclosed.

    In a separate announcement, Alramz Real Estate Company said it has signed a SR262m ($70m) agreement to acquire and develop a plot spanning over 14,000 sq m for a 240-unit residential project in Sedra.

    In Warefa, Roshn signed two agreements totalling SR781m ($208m).

    It signed a SR548m ($146m) deal with Sateaa Altameer for Real Estate to develop a site spanning an area of over 108,000 sq m.

    Another SR233m ($62m) agreement was signed with Fayziyya for Real Estate Development for a plot covering 46,000 sq m.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15909425/main.png
    Yasir Iqbal