VIII SAUDI ARABIA'S SEARCH FOR SECURITY-THE ECONOMIC BURDEN

The "search for security" has been a central theme of Saudi government policy from the inception of the state to the present. From the outset, it is important to underscore the secrecy that surrounds Saudi military spending. Saudi budgets specify total allocations to the armed forces without providing a breakdown in terms of arms imports, expenditures on military infrastructure, operations and maintenance (largely implemented by foreign contractors), domestic military expenditures, and other components of defense expenditures. Nor do official Saudi sources provide information on the size of the armed forces.

Government budgets show that military outlays (in current dollars) rose from less than $1 billion in 1972 (i.e., before the FY1973 oil shock) to over $9 billion in 1978 (before the FY1979 oil shock). During the second half of the 1970s, military expenditures totaled over $52 billion, more than double the amount specified in the 1975-80 Development Plan. As was the case with civilian spending, the growth in military outlays initially lagged behind the sharp rise in GDP which followed the first oil shock, and the ratio of military expenditures to GDP dropped from 9 percent in 1972 to about 6 percent in FY1973. Subsequently, the continued escalation in military spending exceeded the growth of GDP and the ratio rose to 14-15 percent in 1975-79.

Following the FY1979 oil shock and the huge increase in oil revenues, there was another major rise in military outlays, from less than $11 billion in 1978 to $16-17 billion in FY1979, and then to over $19 billion in 1981-84 (about double the outlays in 1976-78). And like the immediate aftermath of the first oil shock, the rise in military budgets lagged behind the very rapid growth in oil revenues in 1980-81, and the ratio of military expenditures to GDP fell from 14-15 percent in 1975-79 to 10-12 percent in 1980-81. But while oil revenues and GDP fell after 1981, Saudi authorities did not curb military spending, which remained at its peak $19-20 billion annual level until 1984. Subsequently, according to official accounts, military outlays were reduced to $13-14 billion per annum in 1986-89. As a ratio of GDP, military expenditures fell from 25 percent in 1983 to 14 percent in 1988-89. Even after correcting for inflation, there was a very sharp escalation in the military budget in the 1970s and in the first half of the 1980s, according to the budgetary accounts.

Estimates published by the U.S. Arms Control and Disarmament Agency (ACDA) indicate that Saudi reports of military outlays since 1982 are seriously understated. According to the Saudi government's budgetary reports, average annual military expenditures were $15.9 billion in 1982-89; but according to ACDA, they averaged $18.8 billion, about 18 percent higher. Estimates published by the Stockholm International Peace Research Institute (SIPRI) are even higher. According to SIPRI, the ratio of military expenditures to GDP rose from an average 13.9 percent in 1972-79 to 19.8 percent in 1980-88. By all accounts, Saudi military outlays were unusually high by international standards, especially for a country not engaged in active hostilities.

According to ACDA estimates, Saudi military expenditures of $14.7 billion in 1989 were exceeded only by Iraq in the Middle East. By way of comparison, Israel's outlays were 61 percent lower at $5.7 billion. Saudi arms imports rose from less than $5 billion in 1975-79 to $14.2 billion in 1980-84 and $23.2 billion in 1985-89. In the second half of the 1980s, Saudi arms purchases even exceeded Iraq's $22.7 billion. Others were far behind: Iran, $10.3 billion; Syria, $7.2 billion; Israel, $6.1 billion; Egypt, $5.8 billion; and Libya, $5.1 billion. Even after discounting for inflation, the Saudi escalation in arms purchases was exceptional, especially for a country not at war.

As large as they were, the purchases of arms abroad were but a fraction of total military outlays. In the first half of the 1980s, arms imports accounted for 14-15 percent of total military spending; in the second half, this ratio rose to 33 percent according to Saudi budgetary accounts, or 28 percent according to ACDA estimates. A number of other factors help to explain the disproportionate role of military spending in the Saudi budget.

In terms of area, Saudi Arabia is a large country-about one third the size of the continental United States-but it is sparsely populated and widely dispersed. This adds significantly to the costs of infrastructure-roads, ports, airports, electricity, communications, water supplies, etc. Saudi military budgets include the construction of "military cities," often in distant desert areas where no infrastructure previously existed. These are inherently very expensive undertakings. The U.S. Army Corps of Engineers has long been engaged in military construction and the provision of various services. In 1985-89, the United States provided $9.2 billion of construction and other services to the Saudi military forces. It was the largest single supplier of military services to Saudi Arabia, but there were also many others.

The Saudi proclivity to acquire the most sophisticated and expensive military equipment requires high outlays on operations and maintenance, as well as high costs of training military personnel. According to ACDA, the size of the Saudi armed forces increased from 75,000 during most of the 1970s to 84,000 in 1988-89. In addition to the regular armed forces under the command of Defense Minister Prince Sultan bin Abdul Aziz, there is also the powerful, well-equipped National Guard headed by Crown Prince Abdullah bin Abdul Aziz. Maintaining a second army equipped with the latest technology is a rather expensive proposition. In addition to these two forces, the Saudi military also includes a Frontier Force and Coast Guard under the direction of the Ministry of Interior, and other paramilitary units under the jurisdiction of the General Civil Defense Administration.

Adding to the security burden is the cost of maintaining a large number of foreign military advisers (American, British, and others) to train the armed forces in the use of modern military equipment and tactics. According to press reports, there were also 10,000 Pakistani troops attached to the National Guard in the mid-1980s, charged with providing additional insurance for the survival of the royal regime in the aftermath of the attempted revolt in Mecca in 1979. In recent years, most Pakistani troops have been withdrawn, reportedly because of difficulties in screening the troops and for other political differences between the two countries.

The country's small population inhibits a large expansion of the army. Therefore, military planners place a strong emphasis on the air force and the acquisition of sophisticated military equipment for the army, in the hope that it will partially offset the numerical advantage of neighboring countries that pose a threat, mainly Iran and Iraq. A second reason for a small army, as Yahya Sadowski has noted, is a reluctance "to, create large standing armies for fear that they-like armies in other Arab states-might edge into the business of making coups. But operating and maintaining sophisticated equipment requires highly-skilled manpower that is in short supply within the Saudi populations The military forces are not only a severe drain on Saudi finances, they also exacerbate the shortage of skilled Saudi manpower in the various economic sectors, thereby increasing the country's dependence on foreign labor to operate and maintain the civilian economy.

Saudi foreign aid is, for the most part, tied to defense considerations; it is a form of "preventive security." According to the budgetary accounts, annual average allocations for foreign aid rose from $1 billion in 1974-75 to over $7 billion in 1980-81 (when oil revenues were high), and then, as deficits emerged, declined steadily to less than $2 billion in 1988-89. The balance of payments figures show a similar trend, rising from $2 billion dollars in 197475 to nearly $6 billion dollars in FY1979, and then declining almost steadily to less than $2 billion in 1988-89.

While Muslim and Arab sympathies play a role in the determination of Saudi aid, the fact remains that the bulk (aside from aid to Iraq during the war with Iran) has been earmarked for Egypt (although less since it signed the Camp David agreements with Israel in 1979), Syria, Jordan, Yemen, and Oman. The latter three have common borders with Saudi Arabia, while Syria and Egypt have strong military forces and carry great weight in inter Arab affairs. Saudi foreign aid is often motivated by the hope that it might avoid problems. As The Economist phrased it: "For years [the Saudis] have been buying off . . . the Syrians, Palestinians of many a hue, and almost every sort of Lebanese [faction], in the hope of keeping out of trouble. . . . Danegeld ["protection money" in the American vernacular] is an accepted factor of Gulf politics. Only a small share of Saudi aid goes to poor Arab countries like Sudan or Mauritania. These countries neither threaten nor enhance Saudi security.

The relationship of foreign aid to security was most pronounced in Saudi Arabia's very substantial support for Iraq in its war with Iran from 1980-88. The Saudis evidently feared that if revolutionary Iran prevailed over Iraq, their own security would be imperiled. They viewed Iraq as fighting the battle for the Gulf monarchies. This led to substantial (though off-budget) aid to Baghdad. After the 1990 Iraqi invasion of Kuwait, King Fahd revealed that aid to Iraq during the 1980s amounted to $25.7 billion, of which $5.8 billion were in grants, $9.2 billion in concessionary (i.e., non-interest bearing, long-term) loans, $6.8 billion from the sale of oil from the Saudi Kuwaiti neutral zone, and $3.7 billion in military equipment and other items. The understanding was that the loans were to be repaid after the war by the shipment of Iraqi oil on behalf of the lenders. Of course, none of them was repaid. If these figures are reasonably accurate, it means that (off-budget) aid to Iraq in 1981-88 was about equal to announced allocations for foreign aid in those years. Clearly, aid to Iraq significantly aggravated Saudi Arabia's financial problems.

Other expenditures motivated by Saudi Arabia's search for security are also not included in the military budgets. The Saudi pipeline (known as the Petroline) from the oil fields in the east to Yanbu in the west was built primarily for security reasons. Its purpose is to provide an alternative route for oil exports in the event of the closure of the Strait of Hormuz. The pipeline was opened initially in 1984 with a capacity of 1.8 mbd and then expanded to 3.2 mbd, and has recently been expanded again to a capacity of about 5 mbd. Much of the capacity has remained unused simply because transport by tanker is cheaper. The pipeline is, for the most part, an insurance policy with a rather high premium. Work is also proceeding on the construction of an extensive network of strategic underground storage caverns for oil products at an estimated cost of $5-6 billion dollars.3 The kingdom's dependence on oil accounts for its extreme sensitivity to any disruption, and the government is willing to spend large sums on oil security, even if these sums are not labeled as security expenditures.

Saudi Arabia's custodianship of the Islamic holy sites of Mecca and Medina may add to its prestige in the Muslim world, but it also adds to the country's security problems. The attempted revolt in Mecca in 1979 and the riots of Iranian pilgrims in 1987 stimulated large-scale expenditures on additional security measures. The problem is accentuated by the fact that within a period of a few weeks every year over a million pilgrims converge on Mecca. In addition to the security problems, the pilgrimage requires the provision of housing, transportation, water, health, and other services. The pilgrimage also affords an opportunity to Muslims from poor countries to enter the country legally and then illegally seek employment. The very large number of foreigners is perceived by the authorities to be a security problem; pilgrims might expound what Saudi leaders view as subversive ideas or actively organize groups opposed to the regime. In 1985, the government imposed new restrictions on foreigners, including a requirement that they carry a letter from their employer when traveling from one city to another in the kingdom, and obtain the employer's written permission if they wish to rent housing outside the area of their employment From time to time there are large-scale roundups of illegal immigrants. In 1987, the Ministry of Labor reported that 300,000 foreigners had been expelled in the previous two years.