Saudi Arabia Defence and Security Report Q3 2012

The Saudi Arabia Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Saudi Arabia's defence and security industry.

BMI’s latest Saudi Arabia Defence and Security Report for Q312 examines the country’s strategic position in the Middle East and the wider world. It provides an overview of the contemporary geopolitical challenges facing the country, and the challenges it may face in the future, especially in the context of the ongoing Arab Spring.

In addition, the report examines the trends witnessed in the country’s current and future defence procurement, and order of battle across its armed forces. The report’s general conclusion is that Saudi Arabia will continue to invest heavily in defence procurement, giving it military superiority over most of its neighbours in what will remain a volatile region; but that the long-term security outlook is less certain,
given domestic political pressures that the essentially authoritarian government is unlikely to address through democratic reforms.

The report discusses the dangers posed to Saudi Arabia by regional unrest, and in particular by sectarian strife in neighbouring Bahrain. Riyadh’s support for Bahrain’s Sunni royal family has led to protests in Saudi Arabia’s Shi’a-dominated Eastern Province. Saudi Arabia has also begun playing a leading role in providing regional backing to the Syrian opposition in a move that could have serious implications for regional geopolitics for years to come.

Robust economic growth will continue to bankroll Saudi Arabia’s military establishment, with a huge US arms package first announced in 2010 and auctioned at the end of 2011 now starting to progress. Followon orders relating to the procurement of 84 Boeing F-15 Strike Eagles at the end of 2011 are outlined later in this report.

Over the last quarter BMI has revised the following forecasts/views:

- BMI has reviewed the latest details relating to the key weapons package announced by the US in December 2011, with major contracts for companies including BAE Systems, Boeing,
Lockheed Martin and Raytheon being announced.

- The decision to manufacture all of Saudi Arabia’s Eurofighter Typhoons in the UK, rather than to assemble most of the aircraft in-country, means that Riyadh’s own facilities will now be dedicated to providing through-life support for the Typhoon fleet.

- A controversy surrounding a possible defence deal with Saudi Arabia led to the resignation of Sweden’s defence minister. The former minister accepted that he had known about an agreement to help Saudi Arabia set up an anti-tank weapon facility, although the Saudi Defence Ministry has denied the deal’s existence.

- Saudi Arabia’s Shi’a-dominated Eastern Province remains tense. It is BMI’s view that the biggest single global political risk at the present time is an Israeli or US air strike against Iran to prevent it from developing nuclear weapons. This in turn is a major threat to Saudi stability, with the Shi’s-dominated Iran potentially in a position to destabilise Saudi Arabia’s Shi’a east in the event of a conflict. SHOW LESS READ MORE >

Executive Summary 5

SWOT Analysis 7

Saudi Arabia Security SWOT 7

Saudi Arabia Defence Industry SWOT 8

Saudi Arabia Political SWOT 9

Saudi Arabia Economic SWOT 10

Saudi Arabia Business Environment SWOT 10

Global Political Outlook 11

Major Risks Looming In 2012-2013 11

Global Flashpoints: Eurozone, Iran, Syria, Afghanistan, Korean Peninsula 11
Table: Election Timetable, Q212-Q113 15

Wild Cards To Watch 19

Middle East Security Overview 22

The Strategic Outlook For The 2010s 22

The Middle East In A Global Context 22

Challenges And Threats To Stability And Security 22

Regional Power Dynamics 33

Nuclear Proliferation 35

External Powers 36

Scenarios For The Middle East 37

Security Risk Ratings 39
Table: Middle East And Africa Defence And Security Ratings 39
Table: Middle East And North Africa State Vulnerability To Terrorism Index 40

Political Overview 41

Domestic Politics 41

Inching Towards Reform 41
Table: Saudi Arabia’s Political Overview 43

Long-Term Political Outlook 44

Scenarios For The Coming Decade 44

Foreign Relations I 48

US/Israeli Airstrikes Still Unlikely In 2012 48

Foreign Relations II 50

Can A Nuclear Iran Be Contained? 50

Security Overview 54

Internal Security Situation 54
Table: Insurgent Groups 54

External Security Situation 56

Latest Developments 59

Armed Forces And Government Spending 60

Armed Forces 60

International Deployments 60

Weapons Of Mass Destruction 61

Market Structure 62

Arms Trade Overview 63

Industry Trends And Developments 64

Industry Forecast Scenario 67

Armed Forces 67
Table: Saudi Arabia’s Armed Forces, 2000-2008 (’000 personnel, unless otherwise stated) 67
Table: Saudi Arabia’s Available Manpower For Military Services, 2008-2016 (aged 16-49, unless otherwise stated) 67

Defence Expenditure 68
Table: Saudi Arabia’s Government Defence Expenditure, 2009-2016 68
Table: Saudi Arabia’s Defence Expenditure Scenario – Changing % Of GDP, 2009-2016 (US$mn) 69

Defence Trade 69
Table: Saudi Arabia’s Arms & Ammunition Exports, 2009-2016 (US$mn) 69
Table: Saudi Arabia’s Defence Imports, 2009-2016 (US$mn) 70
Table: Saudi Arabia’s Defence Trade Balance, 2009-2016 (US$mn) 70

Key Risks To our Forecast Scenario 71

Macroeconomic Outlook 71

Economy Firing On All Cylinders 71
Table: Saudi Arabia’s GDP By Expenditure, 2008-2016 (%) 76

Company Profiles 77

BAE Systems 77

Thales International 78

Country Snapshot: Saudi Arabia Demographic Data 79

Section 1: Population 79
Table: Demographic Indicators, 2005-2030 79
Table: Rural/Urban Breakdown, 2005-2030 80

Section 2: Education And Healthcare 80
Table: Education, 2003-2005 80
Table: Vital Statistics, 2005-2030 80

Section 3: Labour Market And Spending Power 81
Table: Employment Indicators, 1999-2006 81
Table: Consumer Expenditure, 2000-2012 (US$) 81

BMI Methodology 82

How We Generate Our Industry Forecasts 82

Defence Industry 82

Sources 83