Saudi Arabia Just Launched Its Military-Industrial Complex

Riyadh made good on its plans to establish a domestic arms industry with the formation of Saudi Arabia Military Industries (SAMI). The new enterprise, which is organized as a vast state-owned conglomerate, was announced on May 18 by the Public Investment Fund (PIF) that controls nearly a trillion dollars in capital siphoned from the absolute monarchy’s oil exports.

Although details remain scarce on the scope and scale of SAMI’s activities, it’s supposed to launch Saudi Arabia’s ambitious industrialization that cements King Salman bin Abdulazziz al-Saud’s legacy. Under the aegis of the “Saudi 2030” brand the Public Investment Fund, one of the world’s largest sovereign wealth entities, is going to funnel money into different local enterprises over the next dozen years. The cumulative effect is to wean the Saudi economy off oil and enhance its status as a regional power.

The Launch of SAMI confirms reports by a German magazine that reviving Saudi’s military-industrial complex was in the works for quite some time now.

SAMI will no doubt have a major role in the effort even when its initial preoccupations are limited. Its capabilities so far are the maintenance and repair of aircraft as well as UAV production. This could be linked to Riyadh’s deal with Beijing for joint UAV production and a little known domestic effort to assemble a medium altitude model just months later.

The focus on aerospace activities may also be tied to huge contracts with US defense contractors for jets and helicopter gunships. In 2013 Saudi Arabia announced it was paying a record amount, $29.5 billion, to develop the F-15SA–an F-15 tailored for the country’s specific requirements. An earlier model, the F-15S, has flown multiple sorties across Yemen and requires a serious logistical footprint to remain operational.

The burden of maintenance and repair for the F-15SA’s, with deliveries commencing in 2017, can give SAMI the know-how for enhancing the Saudi air force’s reach and range.

Further clues on SAMI’s activities can be gleaned from the enormous deal that came with President Donald Trump’s visit in May. Valuated at a headline grabbing $350 billion, the arms deal itself is actually a convenient package that covers previous Saudi acquisitions and future joint ventures–should the latter materialize under a different US administration.

The tangible part of the deal is worth $110 billion for 133 M1A2S tanks, multiple F-15SA squadrons, a handful of frigates, the THAAD theater defense system, and unspecified radar and ISR facilities. The main beneficiaries of these acquisitions are US defense contractors like Boeing, Lockheed Martin, Northrop Grumman, and Raytheon.

Though slammed as “the largest arms deal in history” the great US-Saudi arms package highlights why Riyadh is trying to go local with SAMI. Having to depend on a single ally for its hard power means getting entangled in diplomacy, drawn out negotiations, technological constraints, and exorbitant prices. By offsetting imported arms and equipment via domestic manufacturing the cost for these can, in theory, plummet.

Of course, it may take decades before a state-owned industrial endeavor like SAMI rolls out world class products, complete weapon systems, and then dive into possible exports.