Saudi Arabia’s Weapons Buying Spree May Be Curtailed By Kingdom’s Financial Crisis

The unprecedented financial crisis currently engulfing Saudi Arabia – due to the double-whammy of low crude oil prices and the coronavirus pandemic – may severely dent the kingdom’s weapons-buying program and, in turn, reduce its political influence in the Mideast.

The Saudis have been purchasing arms – primarily from the U.S. and U.K. -- in a frenzy to feed Crown Prince Mohammed bin Salman’s war in neighboring Yemen, which has now lasted more than five years.

Saudi Arabia was the world’s fifth biggest arms procurer last year, spending some $62 billion on military hardware – or about 8% of Saudi gross domestic product. That figure compares with: U.S. (3.4% of GDP), China (1.9%), Russia (3.9%) and India (2.4%).

But now as oil prices have collapsed, Saudi Arabia faces a potentially devastating budget deficit that may make it impossible to keep purchasing more pricey weapons.

“I have no doubt, this is the end of an era. The era of the Persian Gulf having all this money is over,” said Bruce Riedel, a senior fellow at Brookings Institution in Washington and a former official of the Central Intelligence Agency.

By purchasing less weapons from western suppliers, the Saudis may also see its support in Europe and U.S. capitals dwindle.

Andrew Feinstein, an expert on corruption and the global arms trade, stated: “If Saudi Arabia wasn’t by far one of the largest buyers of weapons you probably couldn’t count on the uncritical support of powerful western powers. One of the outcomes of purchasing weapons is that you’re buying relationships.”

Indeed, U.S. President Donald Trump has championed arms sales to the Saudis as a job- and wealth-creator for American industry.

U.S. defense giant Raytheon (RTN) has generated billions of dollars in revenue from supplying arms to the Saudis.

In February, a Raytheon executive defended the company’s business activities with the Saudis.
“We are an element of U.S. policy -- our role is not to make policy, our role is to comply with it,” said John Harris, CEO of Raytheon International.

“What we’re trying to do is make sure we remain relevant, we have the right capabilities, to the extent there are questions that we provide the responses, and that we continue to comply with U.S. laws and regulations.”

Rep. Tom Malinowski, a New Jersey Democrat, criticized Trump’s campaign to sell arms to the Saudis.

“President Trump has proudly said that we should continue to sell weapons to Saudi Arabia because they pay us a lot of money,” he said. “He seems to see foreign policy in the way he viewed the real estate business -- every country is like a company and our job is to make money.”

In a related development, the State Department Inspector General Steve Linick who was recently fired by Trump was investigating Secretary of State Mike Pompeo’s approval of a multibillion-dollar arms deal with Saudi Arabia.

The U.K. has also sold billion in arms to the Saudis since 2015, triggering sharp accusations of the British government exacerbating a humanitarian crisis in Yemen.

However, now in an unexpected new covid-19 world, the Saudis may not be able to afford billion-dollar weapons.

“I expect that [Saudi Arabia] may in the short term put off committing to some larger purchases, like a new set of fighter jets, for example, which Britain has been negotiating for quite some time,” said Andrew Smith, at the London-based Campaign Against Arms Trade, or CATT.

“Saudi Arabia is the U.K.'s biggest arms customer and most shameful relationship,” CATT said. “One of the world's most authoritarian regimes, its repression at home and aggression abroad is propped up and supported by U.K. arms sales. Not only does it brutally repress its own population, it has also used U.K. weapons to help crush democracy protests in Bahrain; now U.K.-made warplanes are playing a central role in Saudi Arabia's attacks in Yemen. The Saudi-led attacks on Yemen have killed thousands and created a humanitarian disaster.”

Riedel noted that Britain’s BAE Systems has a large exposure to Saudi Arabia and would be hurt by falling arms sales to the kingdom.

“BAE will be hit enormously,” he said. “There are thousands of BAE employees whose jobs revolve around supporting the Saudi air force in one way or another. Sooner or later they are going to be told ‘we can’t pay your salary anymore.’”

BAE Systems reportedly sold £2.5 billion ($3 billion) in arms to the Saudi military during 2019 alone. Since 2015 (when Riyadh launched its war in Yemen), BAE has made at least £15 billion ($18.3 billion) on Saudi contracts.

Gerald Feierstein, a former U.S. ambassador to Yemen, noted that while Saudi Arabia can easily postpone or cancel new weapons contracts, the kingdom will nonetheless have to continue maintenance contracts in order to keep its existing forces operable. The Saudis have also been known to renegotiate and extend payment terms on arms contracts,

“Remember when Mohammed bin Salman came to the White House and Trump held up that cardboard graphic with $100 billion in sales, that was all aspirational anyway,” Feierstein said. “Most of that stuff has never happened and it’s never been signed, it was just kind of pulled out of the air.”

Moreover, the Democratic nominee for President in the U.S., Joe Biden has vowed to reduce arms sales to the Saudi’s and also condemned its government.

"I would make it very clear we were not going to… sell more weapons to [Saudi Arabia], we were going to… make them pay the price and make them… the pariah that they are,” Biden said last November in a Democratic debate. “There's very little social redeeming value… in the present government in Saudi Arabia. And I would also… end subsidies that we have, end the sale of material to the Saudis where they're going in and murdering children, and they're murdering innocent people. And so they have to be held accountable."

Even a former official in the Trump administration thinks the Saudis will buy fewer arms.

“I do think that the [financial crisis] is going to affect all their spending,” said Kirsten Fontenrose, director for regional security in the Atlantic Council’s Middle East division and a former senior director for the Gulf at the National Security Council under Trump.