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Gulf states seek to cash in on arms buys
RIYADH, Saudi Arabia, (UPI) -- Saudi Arabia and the United Arab Emirates, two of the world's leading arms buyers, are out to bolster their defense industries by upgrading offset programs under which foreign defense manufacturers would transfer technology and set up joint ventures.
Over the next 3-5 years, these two states, militarily the most powerful Arab nations in the Persian Gulf, are expected to spend some $100 billion between them on arms procurement.
Of this, they will request $24 billion and $21 billion respectively in offset obligations, said Grant Rogan, chief executive of Blenheim Capital Services Ltd., an offset advisory service based in the United Kingdom.
He told Jane's Defense Weekly that the two countries' offset programs "have been largely the same for the past 20 years" and now need to be overhauled to maximize their opportunities to expand their emerging defense industries.
The administration of President George W. Bush announced in 2007 that it had drawn up a $20 billion package of arms sales to its allies in the six-member Gulf Cooperation Council -- Saudi Arabia, the Emirates, Kuwait, Oman, Qatar and Bahrain -- as well as Egypt and Jordan over the following 20 years.
This was primarily to bolster their defenses against an expansionist Iran that was allegedly driving to acquire nuclear weapons, thus threatening U.S. and Arab interests in the region, particularly energy supplies.
But it also opened up a whole range of deals for advanced systems through which Saudi Arabia and the Emirates, both key oil producers, could extract considerable advantages for their nascent defense industries.
Washington traditionally has been leery of providing U.S. technology to Arab states, in large part because Israel claims that would erode the qualitative edge over its regional adversaries that the United States has sworn to uphold.
But as the U.S. defense industry has come to rely increasingly on foreign military sales to keep production lines running to equip U.S. forces, such restrictions have been steadily easing in recent years.
These sales, many of them in the Middle East, have sustained key U.S. weapons systems when U.S. defense budgets were being cut back.
"Such sales reduce the price of the platforms that the U.S. military acquires, allows for modernization of existing systems and provides for greater interoperability with U.S. forces," U.S. analyst Daniel Goure wrote earlier this month on the Early Warning Blog.
For instance, the sales of hundreds of M1A1 Abrams tanks to Saudi Arabia and Egypt "provided sufficient additional funds to allow the Army to proceed with development of the M1A2," Goure noted.
In recent years the Emirates in particular has insisted that all contracts with foreign arms manufacturers include high-tech transfers, and Abu Dhabi, the federation capital, has sometimes invested in the development of weapons systems it seeks, giving it unprecedented influence in shaping these systems.
These days the focus is primarily on missile defenses and air power to counter the perceived Iranian threat.
This is in Washington's strategic interest, suggesting that it may be more amenable than ever to participate in big-ticket offset deals that will enhance the Saudi and Emirati defense industries.
But Steven Cahall, vice president of BCSL, told Jane's that the aspirations of Saudi Arabia and the Emirates in the "air defense element … may exceed what U.S. suppliers can provide through technology transfer projects."
Saudi Arabia introduced its offset program in 1984, when Boeing won the lead contractor role in the $3.8 billion Peace Shield contract -- a massive deal at the time -- with the Defense Ministry in Riyadh to build an air-defense system.
Boeing assumed responsibility for managing a 35 percent offset obligation.
The Emirates launched its offset program in the early 1990s, in the surge of military procurement in the Gulf that followed the 1990-91 Gulf War with Saddam Hussein's Iraq.
Jane's says the reviews of offset legislation that is currently under way are aimed at capitalizing "on the defense industrial opportunities that will be presented by a bow wave of procurement expenditure" in the Arab states.
The magazine quoted BCSL as noting that offset programs will be recalibrated to embrace a "wider focus on the employment of skilled indigenous workers, the transfer of technology and the facilitation of defense export activity."
RIYADH, Saudi Arabia, (UPI) -- Saudi Arabia and the United Arab Emirates, two of the world's leading arms buyers, are out to bolster their defense industries by upgrading offset programs under which foreign defense manufacturers would transfer technology and set up joint ventures.
Over the next 3-5 years, these two states, militarily the most powerful Arab nations in the Persian Gulf, are expected to spend some $100 billion between them on arms procurement.
Of this, they will request $24 billion and $21 billion respectively in offset obligations, said Grant Rogan, chief executive of Blenheim Capital Services Ltd., an offset advisory service based in the United Kingdom.
He told Jane's Defense Weekly that the two countries' offset programs "have been largely the same for the past 20 years" and now need to be overhauled to maximize their opportunities to expand their emerging defense industries.
The administration of President George W. Bush announced in 2007 that it had drawn up a $20 billion package of arms sales to its allies in the six-member Gulf Cooperation Council -- Saudi Arabia, the Emirates, Kuwait, Oman, Qatar and Bahrain -- as well as Egypt and Jordan over the following 20 years.
This was primarily to bolster their defenses against an expansionist Iran that was allegedly driving to acquire nuclear weapons, thus threatening U.S. and Arab interests in the region, particularly energy supplies.
But it also opened up a whole range of deals for advanced systems through which Saudi Arabia and the Emirates, both key oil producers, could extract considerable advantages for their nascent defense industries.
Washington traditionally has been leery of providing U.S. technology to Arab states, in large part because Israel claims that would erode the qualitative edge over its regional adversaries that the United States has sworn to uphold.
But as the U.S. defense industry has come to rely increasingly on foreign military sales to keep production lines running to equip U.S. forces, such restrictions have been steadily easing in recent years.
These sales, many of them in the Middle East, have sustained key U.S. weapons systems when U.S. defense budgets were being cut back.
"Such sales reduce the price of the platforms that the U.S. military acquires, allows for modernization of existing systems and provides for greater interoperability with U.S. forces," U.S. analyst Daniel Goure wrote earlier this month on the Early Warning Blog.
For instance, the sales of hundreds of M1A1 Abrams tanks to Saudi Arabia and Egypt "provided sufficient additional funds to allow the Army to proceed with development of the M1A2," Goure noted.
In recent years the Emirates in particular has insisted that all contracts with foreign arms manufacturers include high-tech transfers, and Abu Dhabi, the federation capital, has sometimes invested in the development of weapons systems it seeks, giving it unprecedented influence in shaping these systems.
These days the focus is primarily on missile defenses and air power to counter the perceived Iranian threat.
This is in Washington's strategic interest, suggesting that it may be more amenable than ever to participate in big-ticket offset deals that will enhance the Saudi and Emirati defense industries.
But Steven Cahall, vice president of BCSL, told Jane's that the aspirations of Saudi Arabia and the Emirates in the "air defense element … may exceed what U.S. suppliers can provide through technology transfer projects."
Saudi Arabia introduced its offset program in 1984, when Boeing won the lead contractor role in the $3.8 billion Peace Shield contract -- a massive deal at the time -- with the Defense Ministry in Riyadh to build an air-defense system.
Boeing assumed responsibility for managing a 35 percent offset obligation.
The Emirates launched its offset program in the early 1990s, in the surge of military procurement in the Gulf that followed the 1990-91 Gulf War with Saddam Hussein's Iraq.
Jane's says the reviews of offset legislation that is currently under way are aimed at capitalizing "on the defense industrial opportunities that will be presented by a bow wave of procurement expenditure" in the Arab states.
The magazine quoted BCSL as noting that offset programs will be recalibrated to embrace a "wider focus on the employment of skilled indigenous workers, the transfer of technology and the facilitation of defense export activity."
