Saudi Arabia Becomes World’s Biggest Arms Exporter
This year Saudi Arabia surpassed India as the world’s largest arms exporter. They’ve always been good customers of the US defense industry and willing to purchase the high-dollar stuff like state of the art fighter jets and tanks. Saudi Arabia’s military is pretty big considering the population (something like 30 million) and it’s very well equipped due to all the excess wealth they have from oil revenue.
Saudi Arabia has the money to spend on arms, but they also have surplus population to field a relatively large military. About the only thing they do there is produce oil. They make so much money off oil that they’re able to import low-skilled labor to do all the dirty work in that country and free up a lot of people to do other things.
Even though Saudi Arabia takes defense seriously, part of the plan is that the United States keeps Saudi Arabia free from outside interference via the petrodollar agreement (in short, they price oil in US dollars, we provide military/diplomatic assurances that their neighbors won’t attack them, they put excess profits into US government securities and buy weapons from us). Is this a sign of that petrodollar agreement weakening? Earlier this year the Saudis were pissed that we even entertained the idea of cooperating with Iran over ISIS and that we were considering loosening sanctions and talking with them over the nuclear program. Some people say that the low oil prices are partly due to Saudi Arabia flooding the market to make US oil production (aka “fracking”) less viable. Some experts have said that Saudi Arabian oil production has peaked. Other powers are rising in the world (China, EU, Russia and a cast of second-tier players like Iran, Turkey, India, Brazil, etc) and their money is just as green as ours.
I’m not sure whether to take this rise in Saudi Arabia’s military spending as an acknowledgement of the fact that they live in a rough neighborhood and would be responsible to do some of the heavy lifting alongside the US if war broke out in the region or if this is a sign of a decline in confidence in the United States or a sign that they’re decoupling from the petrodollar arrangement and trying to be as self-sufficient as possible in the realm of national defense. In the book Twilight’s Last Gleaming I recently reviewed, the author has a scenario where the Saudis are forced to turn to Turkey in order to gain protection against the Iranians, who in the book want to retake some holy cities in Saudi Arabia and acknowledges ominously that they might find some other interesting things (oil fields) along the way. The idea that they have to make “deals with the devil” in order to keep the neighbors from taking over is probably pretty unpalatable to the Saudis, even though their government is about as close to the proverbial devil as it gets on this planet.
When you combine the military spending of Saudi Arabia with the United Arab Emirates it accounts for 1 in 7 of the dollars the world spends on military stuff – pretty impressive for a couple of small countries. They spend more than all the countries of the EU on this sort of thing. I think this is also interesting considering that oil prices and thus government revenues are down in Saudi Arabia. You would think they would hold on to their wallet a little tighter in this climate.
Anyways, it’s hard to make heads or tails out of this development, but it sure seems like the Saudis have something on their minds. Are they going to move away from the petrodollar system? Maybe trying to dump dollars into something tangible? Do they think it’s not viable to depend on us? Are they anticipating war with Iran? Are they anticipating an uprising within Saudi Arabia or something from ISIS or some other group? Is it a little bit of all of the above? We’ll see.