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February 25, 2011

UAE in Multi-Billion Dollar Shopping Spree at IDEX Trade Show

(Defpro) : United Arab Emirates announce more than $3 billion in defence deals at IDEX 2011
10:33 GMT, February 24, 2011 defpro.com | Amid uprisings and turmoil throughout the entire Middle East and North African region, defence companies and military officials gather since Sunday in one of the last stable bastions of the Arab world, the United Arab Emirates, at the 10th IDEX edition. Being a key element of one of the fastest growing defence markets, the UAE has once more proven its role in what can be considered “one of the largest arms races” [1] that the Persian Gulf has ever known. According to news agencies, Major General Obaid al-Ketbi of the UAE announced on Wednesday that more than 11.68 billion dirhams ($3.09 billion, €2.25 billion) in defence procurement contracts have been concluded during the first three days of the trade show.

According to AFP, al-Ketbi in particular emphasised a contract for the Abu Dhabi Ship Building Company for the purchase of Rolling Airframe Missile (RAM) missiles, valued at $218.1 million, as well as largest defence deal of the show. The latter, worth $550 million, will provide the implementation of a C4I system for the UAE Armed Forces by Emiraje Systems.

Further, AFP reported of a possible contract for Lockheed Martin for establishing a comprehensive anti-ballistic missile (ABM) system, including the Patriot PAC-3 and the Terminal High Altitude Area Defence (THAAD) system, at an estimated cost of $7 billion. According to a Lockheed Martin official, the UAE has shown interest in an ABM solution in 2007 and has since negotiated the purchase of related systems with the US government. “I think [...] sometime this spring, we’ll get some positive news that the two governments have reached an agreement” on the THAAD system, said Dennis Cavin, Lockheed Martin vice president for international air and missile defence.

Shortly before the Tunisian revolution unhinged the illusion of political stability of many countries in the region, Forecast International projected defence investment to grow by 14 per cent over the next five years in the Middle East [2]. Further, according to a Frost & Sullivan report, “the six Gulf Cooperation Council countries – Saudi Arabia, Bahrain, UAE, Oman, Qatar, Kuwait – along with Jordan are set to spend $68 billion on defence in 2011” and may reach nearly $80 billion in 2015.

It is difficult to judge the impact of the latest events, and those probable to come, on this outlook at a promising defence market. The wildfire of uprisings and protests spreading throughout the region and their present unexpected results has shown how unpredictable the political and strategic development has become within a matter of weeks.

Forecast International stated in January that, in addition to the core Gulf Cooperation Council (GCC) members, Iraq will play an important role in the market, predicting an average investment of $12.5 million annually through 2015 to improve the Iraqi Security Forces (ISF) capabilities while the US continues its military drawdown. However, the report’s conclusion that “bolstering the Iraqi Air Force” will be the “principle area of Iraqi investment” has been put into a new perspective last week.

On 16 February, the Iraqi government announced that it diverted money, previously allocated for the purchase of US-built F-16 fighter aircraft, toward improving food ration subsidies amid the inflation in global food prices as well as Iraq’s projected budget deficit of $13.3 billion. Among different motivations, food prices have been a significant reason for people taking to the streets in many Middle East and North African countries.

This is a quite new perspective for Western governments and defence contractors and they may have to deal with an entirely new environment for their traditional and choreographed leverages. In particular the US may have to significantly rearrange its picture of the region.[3] A strong indicator for this development is the cautious (almost timid) and reserved reaction by the Obama administration to the crisis in Bahrain.

Still relatively unaffected by the wave of uprisings in the region, Saudi Arabia and the UAE, at present, appear to be the last considerable strongholds for US influence in the Arab world, with strong effects on the further development of the local defence market.

The 10th IDEX edition will certainly be the last Middle East defence trade show that can be dominated by Western defence companies in the traditional ‘pre-revolutionary’ way. Future shows are likely to see a more complex and difficult environment for companies and governments when it comes to negotiating and concluding contracts – probably a certain alignment with the more sluggish Western market conditions.

By Nicolas von Kospoth,

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