Mideast Defense Spending Seen Flat Due to Oil by IHS Jane's

  • Spending slowdown comes despite growing regional tensions
  • Iran defense budget rises at second-fastest pace last year

The oil price slump means that growth in defense spending in the Middle East will slow, even though Gulf Arab states have been drawn into wars in Yemen, Syria and Iraq, IHS Jane’s said in a report.

After growing swiftly between 2012 and 2014, defense spending in the region is expected to be little changed at $170 billion over the next two years as budgetary pressures come up against security concerns, Craig Caffrey, principal analyst at IHS Jane’s, said in a report Sunday.

“2015 saw the first defense budget cuts for a decade as oil prices crashed,” Caffrey said. “We saw the first marginal cuts in 2015, but, those cuts are now expected to deepen in 2016 as states are forced into pursuing fiscal consolidation with more vigor.”

Saudi Arabia’s 2015 defense budget was the largest in region at $46.3 billion, compared with $49.6 billion in 2014, according to the report. That’s a decline of 6.8 percent even as Saudi Arabia leads a coalition of Gulf states fighting Shiite Houthi rebels in Yemen. Saudi Arabia won’t let the plunge in oil prices derail its regional agenda, Foreign Minister Adel al-Jubeir said in an interview this month.

For 2016, the government allocated 213 billion riyals ($57 billion) for military and security spending combined, the largest component of the kingdom’s budget.

"Heightened regional security concerns are expected to ensure that defense budgets are protected in relative terms," Caffrey said. "As the Gulf States take a more active role in regional security, we will likely see upward pressure on defense budgets in the medium to long term."

The fastest-growing defense budgets in the region were Iran’s, Tunisia’s and Israel’s, according to the report. Iran’s defense budget grew 29 percent in 2015, the second-fastest in the world after Ukraine, which saw a 70 percent increase.

Before it's here, it's on the Bloomberg Terminal.