December 17, 2015 / 11:26 AM / 4 years ago

Gulf Arab defense spending drops for first time in decade: report

DUBAI (Reuters) - Low oil prices are eating into defense spending in the Gulf region, one of the world’s largest arms markets, with budgets trimmed for the first time in a decade this year and deeper cuts expected in 2016, according to a report published on Thursday.

Overall spending fell to $81.6 billion in 2015 from $86.7 billion last year, London-based global intelligence firm IHS said, despite Gulf Arab military interventions in Yemen and Libya, arms supplies sent to Syrian rebels and air strikes against Islamic State in Syria.

Military spending dropped in Saudi Arabia, Kuwait, Bahrain, Qatar and the United Arab Emirates, while Oman spent only slightly more, IHS said in the report.

Despite this year’s fall, spending on arms remains substantially higher than four years ago when it was ramped up in the wake of uprisings across the Arab world which alarmed the region’s conservative rulers. Gulf Arab states have also built up missile defenses against regional rival Iran.

Those security concerns, along with record oil revenues, had propelled the Middle East to become the fastest growing regional weapons market. Gulf spending surged in 2012, up to $71.9 billion from $59.1 billion in 2010, according to the IHS data.

This year’s cuts come as part of a broad effort to rein in state spending as lower oil prices strain finances in the major oil-exporting countries. Oil prices trade now around $37 a barrel, down from a peak of $115 last year.

The resulting budget constraints mean Gulf states are scaling back ambitions on big-ticket items like warplanes and missile defense, instead focusing on more immediate needs like ammunition.

Led by the Gulf trend, spending in the broader Middle East also dropped in 2015, but is likely to remain largely flat at $170 billion over the next two years, the report projected.

Saudi Arabia still spends the most on defense in the region, some $46.3 billion, accounting for more than half of the Gulf’s military budgets and making it the eighth-largest defense spender in the world, according to IHS.

Reporting by Katie Paul, editing by Sami Aboudi and Dominic Evans

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