Shining Bangladesh Monday | 23 November 2020

Headline

Govt takes hardline for compulsory mask-wearing Abrar murder case: 2 incl doctor testified

UAE turning into arms trade center

Staff Correspondent || shiningbd

Published: 16:25, 22 October 2020   Update: 16:27, 22 October 2020
UAE turning into arms trade center

Photo: Collected

The UAE, the Middle Eastern small Gulf country is turning into the world’s largest arms market due to its multiple dimensions in the world market, compromising international relations and also for geopolitical values.

According to the relevant sources, UAE has not released data on its defense budget since 2014, but back then it already outspent the United States in per capita terms, according to the Stockholm International Peace Research Institute. Most of that money goes to buying the flashiest items on the market. But if a sale is not approved, the UAE is not at much of a loss; a growing portion of its budget is going toward developing its own technologies. News The Business Standard.

The debate over whether the United States will sell the Gulf country the F-35 fighter jet, then, misses the larger picture. If the UAE can't get the jet, it might negotiate to join the F-16 supply chain and gain skills and contacts to help it build other sophisticated systems, according to Shana Marshall, an assistant research professor at George Washington University.

Over the past decade, the small Gulf state has built a reputation for splurging its petrodollars on soccer teams, museums, dairy and produce farms, real estate, tech start-ups, and banks—whether to claim a stake in rising markets, diversify its economy, or buy political clout. The logic is similar to defense production, but more than simply adding a logo and funneling proceeds, it is moving much of the creation process onshore.

In a world where multinational companies already have unclear jurisdiction, that may not seem significant. But in one where rich countries are reprioritizing spending, where regional powers are shifting, and where warfare is prioritizing brain over brawn, Abu Dhabi is "a defense executive's absolute dream," Marshall said. It pays quickly, generously, and without bureaucratic oversight.

Boosted by its recent agreement with Israel to normalize diplomatic relations, the monarchy could become the pumping heart of an unbridled defense industry sooner rather than later. Those working to ban arms and technology transfers to unfriendly countries will find their efforts lost. Those looking to cash in on the military-industrial complex will get to know a new pole beyond the United States and China—one that literally considers itself at the center of the world.

The way here was neither long nor conventional. Most countries that produce arms today—or at least parts for foreign ones—kick-started their industries during the Cold War, with the help of U.S. firms looking to buy consumer and political loyalty. The UAE only broke free from British protection in 1971; it took the Emirati government until the Iraqi invasion of Kuwait in 1990, and then the U.S. invasion of Iraq in 2003, to take interest. Those wars signaled to the Gulf monarchies that they had to be strong and self-reliant. They subsequently signed deals with foreign defense firms to start investing in their own industries and promised to boost one another's. Saudi Arabia stepped up, but the clear leader was the UAE.

The Emirates' approach to these deals was different. The standard agreement since the Cold War, known as an "offset," holds that the defense contractor does not just sell a weapon but also pays for infrastructure around it. The buying country can demand investment either directly related to the sale, like a factory for small parts or training in maintenance, or in something not related at all, like factories for civilian goods, real estate, universities, industrial parks, or shrimp farms.

Both profit: One side provides cheap labor, another subsidizes development. In 1997, as price tags got bigger, the U.S. Department of Commerce advised governments to manage the offsets through investment funds. The UAE was the only country that listened. Its offset bureau helped establish two sovereign wealth funds—Tawazun and Mubadala—where offset money would be dumped before it was invested. Run by well-connected merchant families and their financial consultants, these funds favor high-return portfolios like financial services, oil-related infrastructure, and a shipyard for yachts and warships.

But the commerce department's own Bureau of Industry and Security turned against the previous advice in the late 1990s to use investment funds because it found the practice to be corruption-prone. The U.S. Government Accountability Office also criticized offsets as an opaque form of offshoring and warned of the risks of technological transfer. But their words had little effect. As the U.S.-Soviet arms race petered out, the United States consolidated its military bureaucracy, shaving the budget of those who monitored these kinds of deals. Mohammed bin Zayed, the UAE's de facto ruler and deputy commander of its armed forces, also has friends in think tanks and lobbying circles to push deals through.\

Still, offsets had their limits. They are known to be slow, to be rarely completed, and to keep the buying country dependent. The Emirates set tight rules to wring the most out of them but was too impatient to build indigenous military infrastructure from the ground up. Instead, by streamlining and scaling up its investment funds, it has been pooling money to bring foreign projects—and with them, their engineers and patents—to Abu Dhabi.

Self-sufficiency is less about the nationality of the developers or the origin of every part; what matters more is that the UAE owns, assembles, maintains, and services a growing share of the technologies it uses.

In 2014, it brought together the Tawazun and Mubadala funds under the Emirates Defence Industries Company, which then merged with two dozen other subsidiaries last year to form the defense conglomerate Edge. Its CEO manages a $5 billion budget to develop what he calls "sovereign capability." In practice, that means partnering with big foreign defense firms, buying out small ones, and hiring midsize ones to open shop in Abu Dhabi, registered under a local name. Since the intellectual property belongs to the Emiratis, export controls to limit the exchange of technological know-how do not apply.

The UAE will likely never build an entirely sovereign defense industry—nor, with global supply chains, does it need to. Emiratis will likely never run the whole show, given that the country has few native workers and many foreign ones. But, the way global supply chains work, self-sufficiency is less about the nationality of the developers or the origin of every part; what matters more is that the UAE owns, assembles, maintains, and services a growing share of the technologies it uses.

Its full arsenal is kept confidential, but the war in Yemen offered a preview. The offensive said to have triggered the world's worst humanitarian disaster, the 2015 blockade of the Hodeida port, was enforced by the Baynunah corvette, a small warship manufactured at Abu Dhabi Ship Building. Observers of the war also spotted UAE-branded missiles, drones, machine guns, and armored vehicles. These arms may not be the highest grade, but they do the job in battle. They are now tested, advertised, and on the market for export.

Gulf states that haven't been able to emulate the Emirates' defense drive, like Kuwait and Bahrain, are reliable customers, both in weapons and services. Saudi Arabia has tried to follow suit but is nowhere near the Emirates in exports or innovation. Its target to localize up to half of its military industry by 2030 is more talk than walk; it still puts most of its money in joint projects rather than research and training, which the Emiratis count on for bigger and longer-term returns.

With a pandemic raging and economic priorities shifting, it may not be the best time to secure an arms deal. Global military spending relative to GDP—notably in research and development—has already been falling for a decade, and the Gulf states in particular have been losing their shine in Western capitals. Due to its intervention in Yemen, the UAE has also had sales blocked or suspended, pushing it to decrease its arms dependency on the West. But all of this works in the UAE's favor.

As conventional defense giants are struggling with problems at home, smaller countries are looking to buy elsewhere; among the UAE's biggest customers are the Democratic Republic of the Congo, Mali, Nigeria, Jordan, Algeria, South Sudan, and Egypt, which may have a tough time accessing certain weapons from the United States or European countries.

The UAE's products cater to their needs, with cheaper prices and features such as adaptability to desert weather and minefields. It already sells to nearly two dozen countries, according to the Stockholm International Peace Research Institute; it has joint projects with such powers as Russia and Saudi Arabia; and it sends equipment for free to U.N.-embargoed countries including Somalia and Libya. Edge's CEO recently said that despite the global economic slowdown, the conglomerate is preparing an order of armored vehicles for Algeria and is discussing new projects with several other countries.

One of those countries, he said, is Israel. Even before they normalized relations, the two had reportedly collaborated in defense, especially in drone surveillance, and announced in July that their defense and intelligence firms would partner to combat the COVID-19 pandemic, likely involving technologies led by artificial intelligence. The UAE-Israel match is ideal for the pair: Both countries are small, urbanized, and specialize in artificial intelligence and cybersecurity. Now that they have a direct channel, they can sell and share technologies that the United States had blocked.

The Israeli defense ministry is not likely to object to a close partnership since the two countries' strategies—to counter Iran, curb the Muslim Brotherhood, and refine domestic surveillance—align. The respective defense firms are also eager for big-ticket deals, which will fund Israeli experimentation in advanced technologies and boost Emirati status in the market.

The way it's headed, the UAE is hoping to become the center of gravity of an industry in need of deep pockets. It does not need to copy the United States to prove it has succeeded. "The Emiratis find a niche because they know that they are small, and that if they want to matter, they have to not play the game according to others' rules," said Florence Gaub of the European Union Institute for Security Studies.

The defense industry the UAE is subsidizing is planning less for wars on land or sea, and more in cyberspace and urban airspace. That's a market projected to grow and an area that particularly concerns a monarchy intent on holding onto power. And that means the world's elite engineers, retired officers and mercenaries, private equity managers, defense contractors, and brand consultants are likely to continue packing for Abu Dhabi.

Shiningbd/Rz