The last weeks the Saudi defense industry has been boosted, with specific interest for the implementation of the Vision 2030 pre-requisites such as localization of production, technology transfer and investments. Without any doubt the immense value of the deals announced during the visit of Saudi Crown Prince Mohammed bin Salman, and his entourage, to the UK, USA and now France, still will need to materialize and be implemented, but the Saudi red-line that instigates “no more one-way high value transfer of money outside of the Kingdom, but full reciprocity and investments In-Kingdom” has been followed through.
All Saudi defense deals signed and/or announced the last weeks entail a clear message, “If you want our money and deals, you need to invest and part-operate in Kingdom”.
On April 10, Ahmad Al-Khatib, who is the new chairman of Saudi Arabian Military Industries (SAMI), stated during the “Defense and Security Technology Conference” in Paris, which was organized by SAMI as part of the visit of MBS to France, that the bilateral cooperation will increase, with a focus on various military and defense fields. The conference’s main objective was to introduce SAMI’s strategy, capabilities and plans. The main message shown to the French participants was that there is a NEW Saudi approach. The Kingdom’s defense investments will be focusing on the development and support of local military industries, with a target to become self-sufficient. SAMI also reiterated that it will do all possible to implement a strategy to support a 50% localization of the Kingdom’s military spending, boosting the growth rate of non-oil export revenues, and creating thousands of jobs for the Saudi youth, in line with the objectives of Saudi Vision 2030.
On April 9, French officials stated to the press that France and Saudi Arabia have agreed a new intergovernmental accord to conclude weapons deals. The accord now removes, under pressure of MBS, who indicated that Saudi Arabia is unhappy with the current defense sales approach, the existing framework of ODAS, the defense organization dealing with French interests in Saudi Arabia. Officials said that “it will now be covered by an intergovernmental agreement between the two countries. The ODAS company will only provide for the termination of existing contracts.” The French flexibility is largely based on the immense defense and security contracts on offer the coming years. Riyadh already acquired the last years French tanks, armored vehicles and naval vessels. In 2016, licenses potentially worth 18 billion euros ($22.11 billion) to Saudi were approved, with deliveries worth about 2 billion euros. Even that French opposition in parliament and press is very vocal, defense deals are expected to go through. French media sources expect even new deals soon, such as a deal for navy patrol boats from CMN, or a deal for Caesar artillery canons from Nexter. Paris however knows that new deals will entail an In-Kingdom part, not only investments or so-called consultancy/schooling projects, but manufacturing and development or out-right technology transfer to SAMI.
Several major military deals have been announced during and after MBS’s visit to the US. On March 28 the US State Department stated that it had approved the sale of an estimated $670 million in anti-tank missiles to Saudi Arabia. The latter includes up to 6,700 missiles made by Raytheon, as well as spare parts for American-made tanks and helicopters that Saudi Arabia already owns. The deal still needs to be approved by Congress.
On April 5 news emerged that the Trump administration signed off on another billion-dollar arms deal with Saudi Arabia. As stated by the US Defense Security Cooperation Agency, which is the Pentagon directorate responsible for international sales of U.S. military weaponry, the deal entails the shipment of 100 155 mm M109 Howitzers, 180 .50-caliber M2 heavy machine guns, eight Advanced Field Artillery Tactical Data Systems and three Fire Support Combined Arms Tactical Trainers, for a grand total of $1.3. billion. As stated by the US agency, “this sale will increase the Royal Saudi Land Force’s (RSLF) interoperability with U.S. forces and conveys U.S. commitment to Saudi Arabia’s security and armed forces modernization….The proposed sale will improve Saudi Arabia’s capability to meet current and future threats and provide greater security for its border regions and critical infrastructure”. Officials have also indicated that the Howitzer systems included in the deal will be converted by the Saudi military into the M109A6 Paladin Medium Self-Propelled Howitzer heavy artillery weapon.
A sign of the increased muscles of Riyadh is the fact that several large deals also were announced fully to be implemented and set up in Saudi Arabia. On April 2, US aerospace giant Boeing reported that it has committed to a partnership with Saudi Arabian Military Industries (SAMI), the goal of which will be a joint-venture business to localize over 55% of the MRO services for fixed and rotary-wing military aircraft in Saudi Arabia. The latter MOU also includes technology transfer allowing the installation of weapons on those aircraft, and to localize the spare-parts supply chain in the Gulf kingdom. The respective investments and ownership positions, as well as other details about the new venture were not revealed.
The increased pressure put on defense contractors, manufacturers and suppliers, by Riyadh is clear and at present effective. The mission of setting up a top class domestic defense and security industry, in a country formely known as one of the world’s largest arms buyers, is feasible but will need to take a long-term approach. Even that MBS has stated in public that this is needed to diversify the economy, the challenges will be immense. With the new strategy, Saudi Arabia will try to change the fact that until now 99% of the Saudi defense spending is outside of the country, which is annually between $50-70 billion. The drivers are clear, the outcome not yet. For Riyadh not only economics are playing a role. MBS’s entourage clearly understands that the Kingdom is currently facing severe regional threats while its military engagement in Yemen, Syria and other places, are potentially threatening arms deals with Western countries. In addition to US Congress, European governments, such as UK, Germany or France, are being pressured by NGOs and politicians to block arms deals with Saudi Arabia or other regional players. With a highly developed local defense industry, part of these dangers could have been mitigated.
Even that Riyadh could be hitting the arms bazars of China, India, South Africa or Russia (or FSU members), there still is a preference for US-European weapons-systems or technology. The combination of setting up a new high-profile defense organization SAMI, in combination with access to UAE defense contractors, decreases the need to go Full Monty to Moscow. In addition to SAMI, which is led by Andreas Schwer, former head of combat systems at Germany’s Rheinmetall AG, Riyadh also has set up the General Authority for Military Industries. GAMI is a government body with broad powers in military procurement as well as research and development. SAMI and GAMI are both fully able to clear the mind of international defense contractors in way that on all minds will be the fact “that if they want to continue selling to one of the world’s top military spenders, they will have to locate more manufacturing in Saudi Arabia.” At the same time, the Saudi defense industry is already working to develop its own technology. King Abdulaziz City for Science and Technology (KACST), the government’s R&D arm, has 40 engineers working on short-range ballistic missiles and laser-guided bombs. More is likely to follow.
