BMI's Executive Summary

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Tension in the Gulf continued to rise in Q407 as a result of the face-off between the US and Iran over the latter's nuclear programme. The United Arab Emirates (UAE) faced the task of navigating a path between its strategic ally, the US, and its close neighbour and trading partner, Iran. The Emirates also had to take account of security scenarios in the immediate neighbourhood. According to the US Defence Security Cooperation Agency (DSCA), in December 2007, weapons manufacturers Lockheed Martin and Raytheon were working on an order worth up to US$9bn to supply the Patriot Advanced Capability-3 missile systems and associated equipment and services to the UAE. The Patriot system has been promoted among US allies in the Gulf as a defensive shield in the context of a potential military confrontation with nearby Tehran, which has been building up its arsenal of offensive missiles. DSCA also named Raytheon as the main supplier of an additional US$1.36bn order for PAC-3 missiles, PAC-2 missile upgrades, and Patriot ground support equipment upgrades. Another manufacturer, Northrop Grumman, was reported to be working on a US$437mn order to deliver upgrades and refurbishments of E-2C aircraft for the UAE.

The UAE is arguably the most politically stable country in the Arab world. It is currently edging towards reforms, largely at the behest of the US' limited agenda to introduce popular participation in the Gulf States, but these will be symbolic and will not cause any fundamental shifts in the power dynamics. The UAE has few explicit security threats. However, its inauspicious geo-strategic location dictates a permanent state of insecurity. Minor territorial disputes with Iran continue to put a low-level security pressure on the Emirates, while instability in nearby Iraq and political uncertainties in the wider region provide reason for caution. The security threats to the UAE in terms of insurgency and terrorism are thus far not significant.

The UAE's 10-year modernisation programme has created a military with the potential to challenge Iran and Saudi Arabia for regional dominance. The confluence of strategic imperative and immediate wealth contributed to the UAE's establishment as a procurer, not a producer, of arms. The UAE lacks an established local defence industry and its forces are almost entirely reliant upon foreign procurement, training and expertise. The Offsets Group Programme mandates that foreign contractors establish joint ventures with local firms, providing the opportunities for technology transfers and the establishment of local maintenance and manufacturing facilities. A number of indigenous firms are however making limited progress in strengthening their position within the industry. Strong support for advanced military procurements and upgrades drive the industry for the medium term. Coming to the end of a 10-year US$15bn defence modernisation programme, the UAE is the most rapidly developing military power in the Gulf region, and engages in a brisk arms trade with a variety of international suppliers. Regional security imperatives mean that the UAE is consistently looking to maintain its credible deterrent force by importing the latest technologies. To dilute the potential political effect of heavy reliance of foreign arms producers, the UAE consciously aims to diversify its suppliers among the four main global suppliers of arms: the US, France, the UK and Russia. The UAE does not export arms to any significant degree.

It seems the Emirates have little to worry about for the time being – a stable political system, a strong economy, limited security threats and a military with technology that can, in some aspects, rival the best in the world.

Chapter 1 - Executive Summary

SWOT Analysis

United Arab Emirates Political SWOT

United Arab Emirates Security SWOT

United Arab Emirates Defence Industry SWOT

United Arab Emirates Economic SWOT

United Arab Emirates Business Environment SWOT

Chapter 2 - Political Overview

BMI Core Scenario

Domestic Political Overview

Elections, Labour Reforms…But No Real Change

Times Are Good

Labour Pains

First Elections Ahead, But Little To Change

Security Risks

Regional Issues To Dominate

Palestine

Chapter 3 - Security Risk Analysis

BMI’s Security Ratings

Risk Ratings

Table: UAE Regional Risk Ratings

Table: State Terrorism Vulnerability Index

Regional Security: The Middle East and North Africa

Inter-State Conflicts

Internal Conflicts

Security Risk Ratings

UAE Conflict Risk

UAE Terrorism Risk

UAE Physical Safety Risk

Chapter 4 - Security Risk Overview

Internal Security Situation

Historical Background

Emirate Rivalry

External Security Situation

Regional Security

Iran

Global Engagement

Insurgency and Terrorism

Chapter 5 - Military Structure & Defence Industry

Armed Forces

Table: Regional Armed Forces (including conscripted) 2006

Current Strength

Army

Navy

Air Force

International Deployments

Weapons Of Mass Destruction

Market Structure

Arms Trade Overview

Imports

Exports

Industry Trends & Developments

Procurement Trends & Developments

Chapter 6 - Industry Forecast Scenario

Table: UAE Defence Sector – Army Enlargements

Immediate Opportunities

Key Risks To BMI’s Forecast Scenario

Chapter 7 - Macroeconomic Forecast

Table: Economic Indicators

Chapter 8 - Company Profiles

Abu Dhabi Ship Building (ADSB)

Chapter 9 - BMI Forecast Modelling

How we generate our industry forecasts

Defence Industry

Sources

Chapter 10 - Appendix A: Risk Ratings Methodology

Conflict Risk Methodology

Terrorism Risk Methodology

Physical Safety Risk Methodology

Overall Risk Rating

State Vulnerability Index

Competitive Landscape for MEA Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's Middle East & Africa Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: