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Military Spending: The Other Side of Saudi Security

By Anthony H. Cordesman | Working Draft: March 13, 2018

Core Content

Saudi Arabia's military and security spending has undergone significant changes since King Salman came to power in 2015, driven by a new power structure and the Crown Prince Mohammed bin Salman's (MBS) strategic vision. These changes have included shifts in leadership across key security agencies and increased focus on counterterrorism, regional stability, and countering Iranian influence. However, these efforts have come at a high economic cost, raising concerns about the balance between security and civil development.

Main Security Challenges

• Extremist Threats: Saudi Arabia faces persistent threats from extremist groups like Al Qaida and ISIS, particularly in Yemen. AQAP's leadership was pushed out of Saudi Arabia into Yemen, where it continues to pose a security risk.
• Domestic Instability: Sectarian tensions between Sunnis and Shiites, especially with Iran's influence, create internal security challenges. Saudi Arabia also struggles with managing its own Shiite minority and the broader Sunni-Shiite divide in the region.
• Yemen Conflict: The Saudi-UAE military campaign in Yemen has led to a costly stalemate, with estimated costs exceeding $10 billion and possibly over $25 billion. The conflict has weakened the GCC and increased Iranian influence.
• Iranian Threats: Iran's nuclear ambitions, missile programs, and regional influence pose a significant challenge. It has developed a range of ballistic and cruise missiles, as well as armed drones, and has supported groups like Hezbollah and the Houthi in Yemen.
• Regional Instability: The Arab Spring, Syria, Iraq, and Lebanon have created a volatile environment. Saudi Arabia is affected by the spillover of instability, especially in Syria and Iraq.
• Weak Arab Alliances: The GCC remains divided, with Saudi Arabia isolating Qatar in 2017. Egypt and Jordan are also weakened, limiting Saudi Arabia's ability to form effective alliances.
• Tensions with Turkey: Saudi Arabia perceives Turkey as aligned with Iran and Islamist groups, leading to strained relations.

U.S. and European Relations

• U.S. Uncertainty: The U.S. has had inconsistent support for Saudi security, particularly regarding Iran and the JCPOA. The U.S. also faces challenges in projecting power and coordinating with Saudi Arabia.
• European Contributions: France and the UK still provide some support, but their defense spending is significantly lower than Saudi Arabia's. The U.S. remains the key security partner, though its long-term commitment is unclear.

Saudi Security Spending

• High Levels: Saudi Arabia spends over 10% of its GDP on defense and security, far exceeding the spending of the U.S. and European states.
• 2017–2018 Trends: The 2017 budget allocated $190.9 billion to defense, with expected real spending of $224 billion. The 2018 budget is projected to reach $261 billion, a 10.2% increase over 2017.
• Budget Deficit: The high defense spending contributes to a significant budget deficit, estimated at 7.3% of GDP in 2018, compared to 8.9% in 2017.

Economic and Social Challenges

• Demographic Pressure: Saudi Arabia faces a large youth population, with over 500,000 young Saudis entering the labor force annually. This creates a need for substantial investment in jobs, education, and services.
• Economic Reform: The 2030 Vision aims to reduce reliance on oil and diversify the economy, but current security spending hinders this effort.
• Oil Dependency: The petroleum sector accounts for 87% of budget revenues, 42% of GDP, and 90% of export earnings. Oil price volatility has further strained the economy.
• Corruption and Inefficiency: Saudi security spending has been criticized for lacking cost-effectiveness, with some purchases being politically motivated and overpriced.

Conclusion

Saudi Arabia's security spending is unsustainable and threatens its long-term economic and social development. While the country has made progress in modernizing its military and counterterrorism capabilities, the focus on security at the expense of civil priorities has created a significant imbalance. The 2030 reform plan requires a reduction in defense spending and a better allocation of resources to address domestic challenges, including youth unemployment, economic diversification, and corruption. The country must also improve transparency and efficiency in its security sector to ensure that its investments are both effective and economically viable.