At Defense and Security Equipment International, the world's largest arms fair, which took place in London last year, the organizers reported a record need for space. Much of that demand came from the United Arab Emirates, which reserved the corner with the most pedestrian traffic. But his pavilion looked empty next to the life-size prototypes that surrounded him, and his delegate was too busy to speak to the press.
Even so, the makers of the nearby surveillance equipment wanted to chat. They came from the UK, Sweden and Australia and said they were happy with the amount of space their new guests gave them to explore. One of them had developed a speech recognition system that indexed international databases with police interrogations across the board. Another showed an Internet of Things radar system on a police car taking orders from intelligence officials.
The UAE has not released data on its defense budget since 2014, but it has already outperformed the United States per capita, according to the Stockholm International Peace Research Institute. Most of the money goes into buying the most eye-catching items on the market. However, if a sale is not approved, the UAE is not very at a loss. A growing part of his budget goes into developing his own technologies.
The debate over whether the United States will sell the F-35 fighter aircraft to the Gulf Country misses the big picture. If the UAE can't get the jet, they may negotiate to join the F-16 supply chain and acquire skills and contacts to build other sophisticated systemsAccording to Shana Marshall, an assistant professor at George Washington University.
Over the past decade, the tiny Gulf state has built a reputation for using its petrodollars for soccer teams, museums, dairy and manufacturing farms, real estate, tech startups and banks – whether it wants to get involved in emerging markets or diversify its economy or buy political clout. The logic is similar to defense production, but more than just adding a logo and the proceeds of the funnel, it moves much of the creation process ashore.
In a world where multinational corporations already have unclear jurisdiction, this doesn't seem to matter. But in a country where rich countries are re-prioritizing spending, where regional powers are shifting, and where warfare is putting the brain before the muscle, Abu Dhabi is "a defense manager's dream," Marshall said. It pays off quickly, generously and without bureaucratic control.
Empowered by the recent deal with Israel to normalize diplomatic relations, sooner rather than later the monarchy could become the beating heart of an unbridled defense industry. Those working to ban arms and technology transfers to unfriendly countries will find their efforts lost. Anyone who wants to benefit from the military industrial complex gets to know a new pole beyond the USA and China – one that literally sees itself as the center of the world.
The road to get here was neither long nor conventional. Most of the countries that manufacture arms today – or at least parts for foreign ones – got their industries going during the Cold War with the help of US firms looking to buy consumer and political loyalty. The UAE did not break away from British protection until 1971; It took the Emirati government until the Iraqi invasion of Kuwait in 1990 and then the US invasion of Iraq in 2003 to generate interest. These wars signaled to the Gulf monarchies that they had to be strong and independent. They then signed contracts with foreign defense companies to invest in their own industries and promised to strengthen each other. Saudi Arabia has risen, but the clear leader has been the UAE.
The Emirates approach to these deals was different. The standard arrangement since the Cold War, known as the "offset," states that the defense contractor not only sells a weapon but also pays for the infrastructure in the area. The buying land may require investments that are either directly related to the sale, such as a small parts factory or maintenance training, or in something unrelated at all, such as civil goods factories, real estate, universities, industrial parks or shrimp farms.
Both benefit: one side offers cheap labor, another subsidizes development. In 1997, as the price tags got bigger, the US Department of Commerce advised governments to manage settlement payments through mutual funds. The UAE was the only country that listened. The Compensation Office helped set up two sovereign wealth funds – Tawazun and Mubadala – into which compensation funds were dumped before they were invested. These funds are run by well-connected families of traders and their financial advisors, and prefer high-yield portfolios such as financial services, oil-related infrastructure and a shipyard for yachts and warships.
However, the Commerce Department's Bureau of Industry and Security opposed the earlier advice in the late 1990s to use mutual funds as the practice was deemed susceptible to corruption. The US Government Accountability Office also criticized offsets as an opaque form of offshoring and warned of the risks of technology transfer. But her words had little effect. As the US-Soviet arms race subsided, the United States consolidated its military bureaucracy and saved the budget of those overseeing this type of business. Mohammed bin Zayed, the de facto ruler of the United Arab Emirates and deputy commander in chief of his armed forces, also has friends in think tanks and lobbying circles for getting business done.
Even so, offsets had their limits. They are known to be slow, rarely completed, and addictive to Kaufland. The Emirates set strict rules to get the best out of them, but were too impatient to build the indigenous military infrastructure from scratch. Instead, the company has pooled money by streamlining and increasing its mutual funds to bring overseas projects – and with them their engineers and patents – to Abu Dhabi.
In 2014, the Tawazun and Mubadala funds were merged under the Emirates Defense Industries Company, which merged with two dozen other subsidiaries to form the defense conglomerate Edge last year. Its CEO manages a budget of $ 5 billion to develop what he calls "sovereign ability". In practice, this means working with large overseas defense companies, buying small ones, and hiring medium-sized businesses to open a business in Abu Dhabi that is registered under a local name. Since the intellectual property belongs to the Emiratis, there are no export controls to limit the exchange of technological know-how.
The UAE is unlikely to ever develop a fully sovereign defense industry – and neither is it with global supply chains. Emiratis will likely never run the whole show as the country has few local workers and many foreign workers. However, in the way global supply chains work, self-sufficiency is less about the nationality of the developers or the origin of each part. More importantly, the UAE own, assemble, maintain, and service a growing proportion of the technology they use.
The entire arsenal is kept confidential, but the war in Yemen offered a preview. The offensive believed to have sparked the world's worst humanitarian disaster, the blockade of the port of Hodeida in 2015, was carried out by the Baynunah Corvette, a small warship manufactured at the Abu Dhabi Ship Building. War observers also discovered UAE-branded missiles, drones, machine guns and armored vehicles. These weapons might not be of the highest class, but they do the job in combat. They are now being tested, promoted and put on the market for export.
Gulf states like Kuwait and Bahrain, which failed to mimic the defensive drive of the Emirates, are reliable customers, both for weapons and services. Saudi Arabia has tried to follow suit but is nowhere near the Emirates in terms of exports or innovation. The goal of locating up to half the military industry by 2030 is more talk than walking; Most of the money is still in joint projects rather than research and training that the Emiratis count on for greater, longer-term returns.
With a pandemic and shift in economic priorities, it may not be the best time to get a guns deal. Global military spending as a percentage of GDP – especially in research and development – has been falling for a decade, and the Gulf States in particular have lost their luster in the western capitals. Due to its intervention in Yemen, sales have also been blocked or suspended in the UAE, which has resulted in a decrease in gun dependence on the West. However, all of this benefits the UAE.
With conventional defense giants struggling at home, smaller countries are looking to shop elsewhere. The UAE's largest customers include the Democratic Republic of the Congo, Mali, Nigeria, Jordan, Algeria, South Sudan and Egyptwho may have a hard time accessing certain weapons from US or European countries.
UAE's products meet their needs with lower prices and features such as adaptability to desert weather and minefields. It already sells in nearly two dozen countries, according to the Stockholm International Peace Research Institute. it has joint projects with powers like Russia and Saudi Arabia; and it sends equipment to U.N. embargoed countries, including Somalia and Libya, for free. Edge CEO recently said that despite the global economic slowdown, the conglomerate is preparing an armored vehicle order for Algeria and is discussing new projects with several other countries.
One of these countries is Israel. Even before normalizing their relationships, the two had reportedly collaborated on defense, particularly drone surveillance, and announced in July that their defense and intelligence companies would be partners in fighting the COVID-19 pandemic, likely using Technologies led by artificial intelligence. The game between the United Arab Emirates and Israel is ideal for both: both countries are small, urbanized and specialize in artificial intelligence and cybersecurity. Now that they have a direct channel, they can sell and share technology that the United States had blocked.
The Israeli Defense Ministry is unlikely to object to a close partnership, as the two countries' strategies – counteracting Iran, containing the Muslim Brotherhood, and refining domestic surveillance – are coordinated. The respective defense companies are also keen to do large-ticket deals designed to fund Israeli experiments with advanced technologies and to strengthen the Emirates' status in the marketplace.
In doing so, the UAE hope to become the focus of an industry in need of deep pockets. It doesn't have to copy the United States to prove it was successful. "The Emiratis find a niche because they know they are small and that if they want to play a role they don't have to play the game by other people's rules," said Florence Gaub of the European Union's Institute for Security Studies.
The defense industries that the UAE subsidizes are planning wars less on land or at sea than in cyberspace and urban airspace. This is a market that is expected to grow, and an area that particularly affects a monarchy that wants to keep power. And that means the world's elite engineers, retired officers and mercenaries, private equity managers, defense firms and branding advisors are likely to continue packing for Abu Dhabi.