BMI View: Within an extremely complex region, Saudi Arabia's security and defence situation faces a number of challenges both on the internal and external front. BMI thinks that Saudi Arabia's defence and security policy-making is been affected by internal political rivalry within the Kingdom. Our view is that it is unlikely to become involved in an interstate conflict, and that its traditional leverage in Yemen, where it has previously intervened has been weakened . We think that its decision to join the coalition against the Islamic State is illustrative of a continuing counter-terrorism policy in view of its fears of attacks inside the Kingdom.
On the interstate front, Saudi Arabia seems to be continuing attempts to improve its relations with Iran to iron out some of the regional instability. On Saudi Arabia's northern border in Q414, we saw Iran shift its position in favour of Maliki to whom King Abdullah was strongly opposed. On Saudi Arabia's southern border, we saw the two states seemingly cooperate in bringing about the Houthi advance in Yemen and both sides seem willing to strengthen the Lebanese army.
BMI thinks the conventional military balance between Iran and Saudi Arabia continues to be an issue and the situation requires close observation. While Iran remains cut off from the world's arms market due to sanctions, Saudi Arabia is the world's fourth largest military expenditure, which has most probably not gone unseen in Tehran. For us, it seems that Saudi Arabia is responding to Iran's nuclear programme by investing in its own long-standing Strategic Missile Force. However, Saudi Arabia's defence sector undoubtedly needs to overcome its own internal challenges where Q414 saw the sacking of the fourth defence minister in 15 months, which raises concerns about an internal power struggle.
On the security front, the threat of terrorism both from the Islamic State (IS) and the Al Qaeda on the Arabia Peninsula (AQAP) is a key issue. We think that Saudi Arabia's decision to join an international coalition to carry out airstrikes on IS is not only motivated by fears of terrorism at home, but it is also a move in a strategy to oust Bashar Al Assad. Saudi Arabia also now faces the challenge that AQAP will renew its activities in Yemen following the Houthi's takeover of the capital, Sanaa, in September.
Defence expenditure in 2015 is forecast to increase by 5.5% y-o-y from 2014, to reach 62.4USDbn.
We forecast Saudi Arabia's defence expenditure to reach USD62.1bn for the year 2015, which equates to a 4.4% year-on-year increase.
We expect the value of arms and ammunitions imports to reach USD887.4mn and the value of Saudi Arabia's bomb, grenade, mine, missile, and ammunition imports to reach USD826.4mn.
We have given Saudi Arabia an overall security risk rating of 76 for Q115, with respective scores of 77.5, 67, and 78 out of 100 for the risk of interstate conflict, terrorism, and criminality.
Saudi Arabia has received its first 3 AH-64E Apache Guardian attack helicopters.
In a deal estimated at USD1.75bn, the United States has approved Saudi Arabia's purchase of the Raytheon Patriot PAC-3 air defence missiles.
A USD3bn arms deal between Saudi Arabia and France to equip the Lebanese army is still being negotiated, although it is close to being completed with Saudi Crown Prince Salman Bin Abdulaziz having visited France in September.
In September, Saudi Arabia inaugurated the northern border security project which includes sensors and software. The project is not set for completion for another 5 years.
On Saudi Arabia's southern border, al Qaeda on the Arabian Peninsula called to Yeman's Sunnis' to fight against the Houthi's after they took control of the capital Sanaa in September.
The Saudi Arabia Defence & Security Report features BMI Research's independent forecasts for national and international security, the defence industry, military expenditure, employment in arms production, and arms imports and exports, as well as examining industry trends and prospects, national and multinational arms producers and the regulatory environment.
BMI's Saudi Arabia Defence & Security Report provides professionals, consultancies, government departments, regulatory bodies and researchers with independent forecasts and regional competitive intelligence on the Saudi defence and security industry.
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Global and Regional Political Outlooks
A strategic overview of the world’s major political risks, identifying countries facing leadership successions and nations at risk of upheaval, inter-state conflict, or separatism and insurgencies, plus a summary of the world’s ‘wild card’ low-probability high-impact risks.
Snapshot evaluation of the major issues affecting the defence and security sectors, economy and politics, with issues subdivided into strengths, weaknesses, opportunities and threats.
BMI Industry Forecast Scenario
Historic data series and forecasts to end-2019 for key industry indicators supported by explicit assumptions, plus analysis of key downside risks to the main forecast.
- Defence Expenditure: Defence expenditure (local currency and USDbn); defence expenditure (% of total budget); defence expenditure per capita (USD); defence budget (local currency and USDbn).
- Armed Forces (to 2012): Manpower available for military service, manpower fit for militaryservice, army personnel, navy personnel,air force personnel, total armed forces, (‘000) (% population).
- Arms Trade: Arms and ammunition exports and imports (USDmn); bombs, grenades and missiles exports and imports (USDmn); revolver and pistol exports and imports (USDmn); weapons excluding guns and swords exports and imports (USDmn).
Political Risk Assessment
Drawing on BMI’s heritage of more than 25 years of Country Risk analysis, this comprehensively evaluates the key risks to domestic politics and foreign relations, focusing on issues most likely to affect either domestic security or the defence sector.
Security Risk Analysis
BMI’s proprietary Security Risk Indices provide investors with a reliable and country-comparable guide to conflict, terrorism and criminal risk, backed up by our analyst’s latest assessment of each component. Furthermore, drawing on our Country Risk expertise, we assess the state’s vulnerability to a serious, or prolonged, terrorist campaign.
Armed Forces Spending/ Expenditure
The reports contain a detailed breakdown of areas of expenditure by the armed forces, these include spending on international deployments, WMDs and missile defence systems as well as individual breakdowns of the cost-per-soldier.
The domestic security overview lists the various potential internal security threats facing a country, ranging from internal security issues such as terrorism, cyber terrorism, crime and drugs, to external security issues including general defence procedures and potential threats from specific countries. The reports also provide a regional overview which details specific issues and flashpoints affecting the Americas, along with potential risks in the coming year.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
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