Arab states keep U.S. atop arms market

Sept. 30, 2011 at 2:51 PM
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BEIRUT, Lebanon, Sept. 30 (UPI) -- Saudi Arabia was the leading buyer of U.S. weapons in 2003-10, receiving arms worth $29 billion, the U.S. Congressional Research Service's latest report on arms transfers stated.

That's not counting the $60 billion Riyadh is expected to spend on U.S. military purchases -- including combat jets, warships and missiles -- over the next decade.

Lockheed Martin, Boeing, Sikorsky Aircraft Corp. and Raytheon will be major beneficiaries of the biggest U.S. arms deal on record.

The 75-page CRS report said that over the entire period Saudi Arabia, a U.S. ally since World War II, was far and away the leading recipient with deliveries totaling $29 billion. It was followed by India at $17 billion, China $13.2 billion, Egypt $12.1 billion and Israel $10.3 billion.

The United States has topped the global arms deliveries listing for the last eight years.

With defense cuts in the United States, Europe and Russia, the export of weapons systems and other equipment, including training, spares, maintenance and other support services has taken on greater importance.

Exports produce orders that keep assembly lines producing equipment for national military forces and the revenue for research and development to turn out more advanced systems.

"As a result," says Washington analyst Jim Lobe, "major U.S. and European defense contractors are looking to boost sales in foreign markets, particularly in the wealthy markets of Near Eastern oil producers, such as Saudi Arabia and the United Arab Emirates, India, South Korea and Southeast Asia."

The report noted that, as in previous years, developing countries were the biggest buyers on the global market.

The report's author, CRS's senior arms expert Richard Grimmett, observed that as "new arms sales have become more difficult to conclude since the global recession began, competition among sellers has become increasingly intense."

He noted that arms suppliers have resorted to offering potential customers new incentives that include more flexible financing options and co-production agreements.

Saudi Arabia and the other Arab monarchies in the Gulf Cooperation Council -- the United Arab Emirates, Kuwait, Oman, Qatar and Bahrain -- all insist that major arms contracts include offset deals whereby Western defense contractors agree to establish joint ventures with local enterprises, often focused on setting up indigenous defense sectors.

These have been particularly successful in the United Arab Emirates, which has become a major military power in the Persian Gulf that rivals, and in some cases surpasses, Saudi Arabia.

In some instances, particularly in the Emirates, Arab governments have helped fund the development of weapons systems.

Grimmett also observed that with things the way they are these days, the main motivation for U.S. and European defense companies to sell arms to foreign states "may be based as much, if not more, on economic considerations as those of foreign or national security policy."

With the Pentagon's appetite for new weapons diminishing, U.S. defense contractors are increasingly focusing on foreign sales. U.S. President Barack Obama has been encouraging greater defense exports to sustain production lines.

Despite intense international competition, particularly from emerging economies like China and Ukraine which have arms industries, American arms manufacturers are expected to sell a record $46.1 billion in military hardware abroad in 2011.

That's an increase of nearly 50 percent over the 2010 total of $31.6 billion.

With the need to boost exports becoming paramount, arms-control advocates fear that weapons could end up in the wrong hands. But the Pentagon insists that regulation remains tight and that U.S. national security won't be threatened.

The six GCC states, plus Jordan, are set to spend an estimated $68 billion on defense in 2011, research firm Frost and Sullivan said. That's expected to rise to nearly $80 billion by 2015.

With the emergence of a buyer's market, some Arab states are demanding particular refinements or alternative weapons suites from defense companies, a frequent demand by Israel.

France's Dassault Aviation, for instance, has been struggling to sell 60 of its Rafale multi-role combat jets to the United Arab Emirates since 2008. But Abu Dhabi wants a version with a more powerful engine and an improved radar.

Dassault desperately needs to sign its first foreign client for the Rafale, in part to keep production going for French forces. So Abu Dhabi may get its way.

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