1. Changing Course?
In light of the dramatic drop in oil prices, which has lumbered the Kingdom of Saudi Arabia with
By Matthew Hedges
T
he Kingdom of Saudi Arabia
(KSA) is one of the world’s
leading spenders on arms
and defence hardware. Historically,
defence expenditure has accounted
for approximately 35% of total
government spending, and according
to RBC Capital Markets analysis,
has been rising rapidly since 2011.
Saudi Arabia spends more than
10% of its GDP on military equipment,
representing total expenditure of around
$60 billion per annum. Its traditional
adversary, Iran, spends around
$10 billion annually on defence. The
smaller Gulf states spend dramatically
less, mostly because their populations
are only a fraction of Saudi Arabia’s 31
million. According to the International
Institute for Strategic Studies’ The
Military Balance 2016, Saudi Arabia
accounted for approximately 42%
of Middle East North Africa defence
expenditure in 2015. To put Saudi
Arabia’s defence spending into context,
the NATO military alliance requires
member countries to spend a much
lower percentage of GDP—at least
2%—on defence.
However, in December 2015, the
Saudi government announced a
budget de cit of $3 .6 billion due to
eroding oil prices. The question is, what
effect is this likely to have on defence
expenditure in the near term? The
expectation is that the KSA will continue
to spend money on defence given that
it is surrounded by an array of perceived
threats and overrun with religious
extremism. Marque contracts and the
desire to acquire the latest, state-of-
the art technology may explain the
high value of Saudi Arabia’s defence
spending, but its lack of experience
means the defence budget is more of
A member of the 1st Battalion 325th Airborne
Infantry Regiment explains the M252 1 mm
mortar to Saudi Arabian National Guardsmen
(Photo by US Army)
Defence Procurement International - Winter 2015/16
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a ballast for the regime’s security than
anything else.
THE KING IS DEAD, LONG LIVE
THE KING
King Salman bin Abdulaziz Al Saud
ascended the KSA throne following the
death of King Abdullah in January 2015.
The former crown prince is part of the
notoriously powerful ‘Sudairi Seven,’
seven brothers from within the House
of Saud ruling family. The clan has a
stranglehold on the Saudi Ministry of
Defence (MoD). However, under the
rule of King Abdullah, the department
was often interfered with in an attempt
to blunt any power it had. Successive
managerial changes were forced upon
the MoD in a continuous struggle to
weaken potential adversaries to King
Abdullah’s successors. In parallel,
Abdullah gave his son Prince Mutaib
bin Abdullah the symbolically powerful
Saudi Arabian National Guard (SANG),
later upgrading his position to that of
minister. The intention here was to
guide Prince Mutaib into a position
where he would have succeeded King
Abdullah. This was not, however, to be
the case and the Sudairi’s took hold of
power instead.
Upon King Salman’s ascension he
made immediate reforms placing long-
term US ally Mohammed bin Nayef
(MBN) as Crown Prince and Minister of
Interior whilst also promoting his son,
Prince Mohammed bin Salman (a rather
unknown gure within Saudi Arabia
before this) to the position of Defence
Minister and later the Deputy Crown
Prince (second in line to the throne).
The increasingly prominent position of
Prince Salman has caused considerable
upset within the extended royal family.
A TURN OF EVENTS
Soon after the regime change, Saudi
Arabia and its new Defence Minister,
Prince Salman, initiated a military
campaign in Yemen codenamed
Operation Decisive Storm, which later
transitioned into Restoring Hope.
f cially, the aim of the con ict is to
remove the Houthis from power, whom
the Saudis, and a number of other Arab
states, believe took power illegitimately.
With the con ict not turning out the way
the Saudi’s would have liked, many are
questioning exactly why Saudi Arabia is
ghting in Yemen.
The Saudi regime on the other hand
views the Yemen con ict as an attempt
to disrupt Iranian efforts to destabilise
the Arabian Peninsula, whilst also
displaying a show of force for the new
regime; a postulation that could turn
out very badly. The Saudi’s and their
allies are clearly struggling in Yemen,
proving that they have failed to dent
Houthi capabilities. When coupled with
increasing troop deaths and relentless
border and counter attacks, the
Coalition is starting to evaluate potential
exit options, without losing face.
As a result of the incursion into
Yemen, a power vacuum has been
created, with Al Qaeda in the Arabian
Peninsula (AQAP) and some Daesh
(otherwise referred to as Islamic
State) af liates utilising this to gain
a stronghold within the failed state.
Islamist forces have held positions in
Aden and the Hadhramaut governorate.
In addition to the threat from Yemen,
Saudi Arabia continues to feel the
effects of violent extremism, which has
US Defence Secretary Ash Carter and Saudi Defence Minister Mohammed bin Salman
during a visit to the Pentagon (Photos by US DoD)
A meeting at the White House between US president Barack Obama, Crown Prince Mohammed bin Nayef (centre) and Defence Minister Prince
Mohammed bin Salman (left)

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Defence Procurement International - Winter 2015/16
plagued the kingdom for decades. Lone-
wolf terrorist attacks, suicide bombings
and an extensive network of fundraising
for global terrorist organisations
threaten the integrity of the state. When
combined with the instability in the Shia-
dominated eastern region, the future of
the Saudi state looks turbulent. Prince
Mohammed bin Nayef, however, has
extensive experience of dealing with
counter-terrorism and enjoys a close
relationship with the United States. The
result of which will continue to see the
US take an apolitical stance towards
Saudi Arabia, at least until the end of
president Obama’s tenure. Europeans,
on the other hand, are starting to voice
concerns regarding their relationship
with Saudi Arabia.
PROCUREMENT ISSUES
The identities of the strategic
departments within the Saudi defence
organisation are heavily linked to their
patron and leader. This has a polarising
effect due to the tribal af liations and
political in ghting within the regime and
has been the cause of a number of
procurement issues within the kingdom.
It is also the rationale behind numerous
appointments and dismissals within the
MoD during the reign of King Abdullah.
The Saudi MoD has traditionally
attracted personnel from the Najd
region in the centre of the country
and has utilised its clan af liation to
encourage conscription to one of its
key political branches. SANG on the
other hand was under the tight control
of the former King Abdullah who used
it to exercise and rally tribal support for
himself and his lineage.
But it is not just the inner
machinations of the ruling royal family
that has impacted defence procurement.
As one of the largest producers of crude
oil, Saudi Arabia has been dramatically
affected by the decline in oil prices. With
an undiversi ed economy, Saudi Arabia
reportedly requires oil to be trading at
around $106 per barrel to keep an even
keel on its budget.
With oil trading at less than $30 per
barrel, the Salman regime is reportedly
resorting to austere measures to elevate
its coffers. Selling foreign assets (some
sources claim that if they continue
selling them at their current rate they will
run out by 2020) is just one option being
initiated. Saudi Arabia’s pragmatic and
dynamic foreign policy indicates a future
that could open up future procurement
programmes to non-traditional partners.
The US, UK and European states
will continue to wield considerable
in uence in the KSA market however
due to long-term budgetary concerns,
the Saudi government will require
more technology transfers, offset
contributions and closer industrial
cooperation.
The institutionalisation of the Saudi
defence industry has accelerated with
the former head of Saudi Arabia Basic
Industries Corporation, Mohamed Al-
Mady, appointed as president of the
General Organisation for the Military
Industries Corporation (MIC). MIC is
closely aligned to the Saudi MoD and is
perceived to be the central vehicle for
industrial participation in Saudi Arabia.
The MIC is chaired by Prince
Mohammed bin Salman and attended
to by Ibrahim bin Abdulaziz Al-Assaf,
Minister of Finance, Taw q Al-Rabiah,
Minister of Commerce and Trade,
Turki bin Faisal Al Saud, chairman of
the King Abdulaziz City for Science
and Technology, Lt. Gen. Huseen ibn
Abdullah Al-Gubayel, chief of staff, and
three members nominated from the
private sector. In theory, the MIC has
the credentials and backers to propel
it forward, but its priorities are not
known, and it is unclear whether the
Saudi Economic Offset Programme,
which governs foreign investment and
technology transfer, will be incorporated
into this initiative.
Saudi Arabia is currently in
advanced talks to procure four of
Lockheed Martin’s littoral combat ship
(LCS) variant at a combined cost of
approximately $11.3 billion. In addition,
the kingdom is also in advanced
negotiations to procure 10 MH-60R
US Marines training members of the Saudi Armed Forces (Photo by USMC)
Saudi Arabia is looking to procure
Lockheed Martin’s Littoral Combat Ship
(Copyright Lockheed Martin)

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Defence Procurement International - Winter 2015/16
multi-mission helicopters that can be
used on board the ships. There are
also suggestions that the Saudi’s are
attempting to upgrade the ghter aircraft
currently in their inventory by looking
to replace either the Tornado or the
- -D with 4 - Strike Eagles the
latter is looking more likely even though
relations between the UK and Saudi
Arabia have been slightly tarnished by
public outrage over the kingdom’s poor
human rights record.
The Apache AH-64 and UH-60
Blackhawk helicopters may also be
upgraded, with both seeing increased
use. There are also indications that the
Saudi’s are prioritising the transition to
C4ISR-enabled forces. This observation
is gleaned from the importance
placed on the modernisation of the
kingdom’s surveillance aircraft and
communications networks. Saudi
Arabia’s border security programme
remains a mess with the EADS
Northern Border deal in tatters, which
suggests that procurement policy
and incorporation remain chaotic at
best. Back in 2009, the defence and
aerospace group EADS won a
$2.3 billion contract to improve the
kingdom’s border (land and sea)
security. The deal included new
radar and camera systems and
reconnaissance aircraft, all provided
by EADS. Athough Saudi Arabia
has clearly demonstrated intent to
strengthen its defence position, its
inability to train and provide a uali ed
workforce minimised the usability and
effectiveness of the EADS border
security programme.
WHAT LIES AHEAD?
On the one hand, increasingly
scrutinised domestic policies and lower
oil prices may suggest a requirement
to reduce the kingdom’s defence
spending. However, the regime is
likely to continue to demonstrate
‘schizophrenic’ behaviour towards the
drivers of defence spending with internal
factors often prompting the regime
to purchase marque items and raise
salaries for its conscripts. In this vein,
the position of Prince Mutaib in SANG is
highly vulnerable to adjustment to allow
the Sudairi clan maximum application
of power and authority across the Saudi
Armed Forces. There will have to be
a consolidation of power within the
security forces apparatus.
The regime is likely to continue to
prioritise defence spending, regardless
of oil prices, due to the structural
vulnerabilities it faces from internal
forces, as well as the in uence this
has on outside powers. Equipment
specialised for urban warfare and
special operations will continue to be
procured, as well as C4ISR equipment,
which lies well behind where the
kingdom’s capabilities should be. The
con ict in emen and Syria, as well as
the relaxing of economic sanctions on
Iran, will continue to give weight to the
Saudi’s reasons for continuing to spend
money on armaments, regardless of
their usefulness or the kingdom’s ability
to effectively utilise them.
ABOUT THE AUTHOR
Matthew Hedges holds a Masters
Degree in International Relations of
the Middle East from the University
of Exeter and is a PhD candidate
at Durham University where he is
researching defence and security policy
in the GCC countries.
Top defence importers worldwide in 2014
Saudi Arabia
India
China
United Arab Emirates
Taiwan
Austrailia
South Korea
Indonesia
Turkey
Pakistan
$5.57bn
$2.60bn
$2.21bn
$2.16bn
$2.03bn
$1.91bn
$1. 7bn
$1.54bn
$1.43bn
$6.46bn