Random posts on all sorts of things designed to inform and provoke.
Every defense contractor worth their salt knows that if they want to hit their sales targets, they should immediately move to the Arabian Gulf. With their enormous resources and real or perceived internal and external threats, nations in this region are an oasis in the desert of the global defense market. That is why the entire world was present at the 2013 International Defense Exhibition and Conference (IDEX) conference – held this year in the United Arab Emirates (UAE).
Forecast International has forecast that countries in the Arabian Gulf will spend around $83 billion on military procurements in 2015, and highlighted that it’s likely this figure may increase substantially. While this provides a significant opportunity for US firms, it comes with some risk since the biggest sale packages cannot be finalized without approval from government agencies and the US Congress who may delay approval beyond a reasonable timeframe.
While Saudi Arabia is generally recognized as the biggest single market in the region, according to the Stockholm International Peace Research Institute (SIPRI), the UAE bought 33 percent of the territory’s military procurements. The United States and France filled most of the UAE’s defense requests which were largely for aircraft, missiles and air defense systems.
Indeed, suppliers and consumers highlighted the growing demand for unmanned aerial vehicles (UAVs) and associated equipment at the 2013 IDEX, the need for which is being largely driven by current and prospective internal concerns.
The biggest UAV-specific news coming out of IDEX was the UAE’s announcement that it had agreed to purchase an undisclosed number of Predator XP UAVs for $197 million. If approved, this will make the UAE the first non-NATO country to get this technology.
General Atomics, the UAVs manufacturer, says the sale will go through because the version being sold has been modified for export. Regardless, the sale will still need to be approved from the US Congress including the Senate Foreign Relations Committee.
It’s obvious the UAVs will be used to support domestic security agencies since they are designed to be used only for intelligence, surveillance and reconnaissance. This should be neither surprising nor illegal because multiple US states plan to do the same and discriminating against the UAE would just put US businesses at a disadvantage.
Incidentally, if the approval does come through, it will open up the rest of the Persian Gulf market providing new opportunities for US companies. However, time is of the essence, as the Congressional Research Service recently reported that US manufacturers were at risk of being left behind by non-US defense companies in this lucrative market.
By the way, why has no one questioned the standard excuse of Arabian Gulf nations buying military equipment to counter Iran? How much state-of-the-art equipment do these nations need to combat a country that has been under sanctions for over a decade?
Regardless of the threat level, this market will continue to grow for a significant period of time. Once sales have been exhausted – which likely won’t happen for a few years – companies can continue to generate revenue from training, infrastructure development and support services.
This places US companies at a distinct advantage because of the emphasis they place on customer service. However, each such agreement will continue to be threatened under an every-changing regulatory environment. The risk here is that any unnecessary delays will hurt not just the corporate bottom-line but also our influence in the region – and that may be the most damaging and lasting consequence of them all.