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
  • Kuwait awards $381m oil project

    23 September 2026

    Register for MEED’s 14-day trial access 

    State-owned upstream operator Kuwait Oil Company (KOC) has awarded an oil project contract worth KD117m ($381m) to India’s Megha Engineering & Infrastructure (Meil).

    The Supreme Purchasing Committee for Kuwait Petroleum Corporation (KPC) approved the contract last month, paving the way for the official award.

    The project focuses on a water separation unit at the Al-Rawdatain facility in Kuwait.

    The water separation facility will be developed at Gathering Centre 25 (GC-25), along with a pumping facility at GC-30.

    The project will deliver a wide-ranging upgrade of processing and utility infrastructure, including new low-pressure separation and gas-handling equipment such as a three-phase wet separator package, a gas knock-out drum and associated low-pressure gas pipelines, as well as a high-integrity pressure protection system and a high-pressure flare.

    Meil will develop the new three-phase low-pressure wet separation facility at GC-25.

    The main process equipment will include two wet separator packages, each with a capacity of 150,000 barrels of liquid a day, and a low-pressure gas knock-out drum with a capacity of 53 million standard cubic feet a day, together with associated gas-handling facilities.

    The facility will also incorporate an effluent water treatment and transfer system, including an effluent water balance tank equipped with microbubble flotation and induced gas flotation systems, as well as transfer pumps.

    Additional GC-25 facilities will include fuel gas treatment, chemical injection, oil recovery and flare connections, along with firewater and deluge systems.

    The scope also covers control and safety systems, substations, and associated civil, structural, mechanical, electrical and instrumentation works.

    At GC-30, the project will focus on treated-water filtration and high-pressure injection infrastructure.

    The scope includes nutshell filters and associated feed pumps with a combined capacity of approximately 500,000 barrels of water a day.

    Booster and injection pumps will transfer treated effluent water to designated injection wells.

    Additional facilities at GC-30 will include fuel gas treatment, sludge collection and disposal systems, oil recovery systems, control and safety systems, substations, laboratory and workshop facilities, and associated civil, structural, piping, mechanical, electrical and instrumentation works.

    The project also includes transfer pipelines connecting GC-25, GC-15 and GC-30.

    Meil will carry out modifications to existing tanks at GC-30, as well as process and utility tie-ins, electrical and instrumentation modifications and other infrastructure required to integrate the new facilities with KOC’s existing assets.

    Meil’s responsibilities cover the project lifecycle from design and engineering through procurement, construction, testing, pre-commissioning, commissioning, start-up and performance testing.

    The contract also includes operation, maintenance, repair and insurance responsibilities for the designated facilities during the applicable operations and maintenance period.

    Seven companies submitted bids for the project last November.

    The full list of bids was:

    • Meil (India) – KD117m ($381m)
    • Mechanical Engineering & Contracting Company (Kuwait) – KD130m
    • Spetco (Kuwait) – KD158m
    • Al-Kharafi (Kuwait) – KD164m
    • China Oil HBP Science & Technology (China) – KD169m
    • Alghanim International (Kuwait) – KD169m
    • Jereh Oil & Gas Engineering (China) – KD191m

    In October last year, KOC awarded Meil a separate contract for a project to develop a gas sweetening and recovery facility in west Kuwait.

    Meil submitted the lowest bid for that tender, at KD69.2m ($225.5m), in February 2025.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19911322/main.jpg
    Wil Crisp
  • Kuwait refinery project on track for year-end completion

    23 September 2026

     

    A $65m project to replace a substation at the Mina Al-Ahmadi (MAA) refinery is on schedule to be mechanically complete before the end of the year, according to industry sources.

    The project is being executed by India’s Larsen & Toubro (L&T), which was awarded the contract in October 2024.

    One source said: “This project is approaching completion and is currently on schedule to be completed before the end of the year, although it could still see delays related to the ongoing regional conflict.”

    The client is state-owned downstream operator Kuwait National Petroleum Company (KNPC).

    Kuwait’s Ministry of Electricity, Water & Renewable Energy (MEW) is also involved in the project and will provide final approvals and sign-off.

    The scope of the project includes:

    • Construction of a substation
    • Installation of transformers
    • Installation of medium-voltage switchgear
    • Installation of low-voltage auxiliary systems
    • Installation of network protection systems
    • Installation of disconnecting switches
    • Installation of surge arrestors
    • Installation of feeder breakers and cubicles
    • Installation of low-voltage A/C and D/C equipment
    • Installation of battery banks and battery chargers
    • Installation of related relay and control panel boards
    • Installation of fire alarm and fire protection equipment
    • Installation of a SCADA system
    • Installation of cables
    • Civil works
    • Associated facilities

    The current project to replace a substation at the MAA refinery closely resembles another project tendered by KNPC more than a decade ago, which L&T also won.

    On 18 May 2015, KNPC signed a contract with L&T to build a new 240MW substation at the MAA refinery, valued at KD21.866m.

    The new substation, known as M20, was designed to replace an existing substation that was considered old and obsolete.

    Mohammed Al-Mutairi, who was KNPC’s chief executive at the time, said the substation building would be explosion-proof and use state-of-the-art control systems.

    He said the station’s capacity would increase from 180MW to 240MW, supplying most of the refinery’s electricity needs.

    Given the similarities between the two projects, L&T has been able to reuse some designs, creating efficiencies, according to industry sources.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19911319/main.jpg
    Wil Crisp
  • Contractor wins $208m Almoosa hospital MEP contract

    23 September 2026

    Register for MEED’s 14-day trial access 

    Riyadh-based construction firm BEC Arabia has won a SR781m ($208m) contract for the mechanical, electrical and plumbing (MEP) works at Almoosa Hospital in Al-Khobar.

    Saudi Arabia’s Almoosa Health Company awarded the contract.

    The hospital complex consists of two towers: a 24-storey in-patient tower with 380 beds, and an 11-storey tower with 224 clinics and 113 additional treatment spaces.

    It will be built on a 45,000-square-metre site.

    A podium spanning the ninth and 10th floors will connect the two towers.

    The hospital will also include parking for 1,700 cars.

    BEC Arabia won the SR656m ($175m) main construction contract for the hospital in November last year.

    In August 2025, MEED reported that Almoosa Health Company had announced it had secured a sharia-compliant credit facility worth SR650m ($173m) from Banque Saudi Fransi.

    In a statement published on the Saudi stock exchange (Tadawul), the company said the seven-year facility would be used to support its expansion and growth strategy.

    Lebanon’s Dar, US-based Perkins&Will and French design firm Pierre-Yves Rochon designed the project.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19910889/main.jpg
    Yasir Iqbal
  • UAE to develop integrated waste-to-resource pilot

    23 September 2026

    Emirates Biotech and United Arab Emirates University (UAEU) have launched a pilot project in Al-Ain that could provide a model for larger waste-to-resource facilities.

    The project involves developing the UAE’s first integrated organic-waste valorisation pilot plant, which will test whether food waste and compostable packaging can be processed together to recover resources and reduce waste sent to landfill.

    Located near the UAEU campus, the 40kg-a-day facility will process organic waste to produce renewable biogas and nutrient-rich compost. The project is intended to generate technical and operating data that could support the development of larger-scale facilities.

    Emirates Biotech and UAEU will design, build and operate the pilot plant as part of a two-year research project running from August 2026 to August 2028. Installation and commissioning are expected to be completed by August 2027.

    The plant will combine anaerobic digestion and composting. Anaerobic digestion will convert the organic waste into renewable biogas, while the resulting digestate will be composted to produce nutrient-rich compost.

    A laboratory-scale assessment will also examine the potential to convert the biogas into renewable hydrogen.

    Food waste accounts for nearly 40% of daily municipal solid waste in the UAE, according to Emirates Biotech, and much of it is currently disposed of in landfills.

    The pilot will therefore assess the technical and operational feasibility of recovering value from two waste streams through a single integrated process.

    If successfully scaled, Emirates Biotech says an integrated organic-waste valorisation plant could reduce CO₂ emissions by 89% compared with landfilling.

    The project is expected to provide a scalable and modular model for converting food waste and compostable packaging into renewable biogas and compost, with the findings intended to inform the development of larger waste-to-resource facilities.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19908972/main.jpg
    Mark Dowdall
  • Contractors prepare Oxagon Highway 55 bids

    23 September 2026

     

    Contractors are preparing to submit bids on 28 September for a design-and-build contract for permanent upgrade works on Highway 55 in the kingdom’s Oxagon region.

    The first phase of the project includes constructing 14 kilometres of road, with two lanes in each direction. It also includes one bridge and three interchanges.

    The project duration is 22 months.

    Highway 55 connects the Red Sea coast with the mainland in northwestern Saudi Arabia. It is currently the only road providing north-south connectivity between Duba and the Neom region.

    MEED reported exclusively in August 2025 that contractors had submitted responses to an expression of interest notice that Neom had issued earlier that month.

    The project is expected to support cargo movement from Duba Port to other parts of the kingdom and the wider region.

    Last year, Neom tested a pilot initiative by handling a shipment that travelled from Cairo via the Port of Safaga, across the Red Sea to the Port of Neom, and then inland to Erbil, Iraq.

    In a statement, Neom said: “The shipment travelled through an intermodal corridor spanning over 900 kilometres, marking a significant milestone in the kingdom’s transformation into a regional and global logistics hub.”

    The Port of Neom is located on the Red Sea near the Arar border, a key entry point into Iraq.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19907876/main.jpg
    Yasir Iqbal