ARMS TRANSFERS TO THE PERSIAN GULF: TRENDS AND IMPLICATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83B00851R000100090003-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 34
• Document Creation Date: December 21, 2016
• Document Release Date: October 30, 2008
• Sequence Number: 3
• Publication Date: August 1, 1982
• Content Type: REPORT

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" F\ Directorate of 1up secret
Intelligence ,
Arms Transfers to the
Persian Gulf:
Trends and Implications
State Dept. review
completed
USAF review
completed.
DIA review
completed.
Top Secret
G1 82-10L55r-,
August 1982
Copy 3 18
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Directorate of Top Secret
Arms Transfers to the
Persian Gulf:
Trends and Implications
This paper was prepared byl Office of
Global Issues. It was coordinated with the Directorate
of Operations. Comments and queries are welcome
and may be directed to the Chief, Weapons
Proliferation Branch, OGI,
Top Secret
GI 82-10155C
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Arms Transfers to the
Persian Gulf:
Trends and Implications
Key Judgments Iran, Iraq, and the eight nations on the Arabian Peninsula will remain the
largest arms market in the developing world throughout the 1980s,
although declining oil prices and cash flow problems in some Gulf states
probably will limit the size of arms agreements in the next year or two.
? Saudi Arabia will be the largest importer of military equipment and
services in dollar terms.
? Iraq is likely to increase its arms purchases to replace losses and build in-
ventories above prewar levels.
? Iran will seek additional arms to strengthen its armed forces but probably
will not build inventories as large as those acquired by the Shah.
The United States probably will retain its position as the leading military
supplier in the region. Iraq and Iran will seek US arms through third
parties. Efforts by conservative states to diversify arms purchases, which
previously cut into the US share of sales, are likely to be curbed by the de-
sire for implicit US security guarantees and by the already substantial
training and logistic problems created by nonstandardized inventories.
The USSR is unlikely to obtain new arms clients because the conservative
Arab states are wary of Moscow's intentions. While Iraq will sign large
arms contracts with the Soviet Union, it will also try to reduce its
dependence on Moscow by expanding its dealings with Western Europe.
The Soviets could garner some additional sales in Iran if Western suppliers
continue to deal cautiously with Tehran. Kuwait and the UAE may make
small purchases from the Soviet Bloc but will remain dependent on the
West for nearly all their arms.
Projected arms sales trends pose several potential problems for US
interests:
? Military expansion in the region creates additional stresses within
modernizing Gulf societies and may make military takeovers more likely.
Information available as of 14 July 1982
has been used in the preparation of this report.
iii Top Secret
G182-10155C 25X1
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? Moscow's arms sales and advisory ties in the region give it a continuing
potential for meddling in local politics. The Soviets could make large,
rapid deliveries of arms to their customers at any time and threaten local
military balances, although there are no current indications that Moscow
wants to give one side a decisive edge in the Iran-Iraq or North-South
Yemen conflicts.
Despite these dangers, the projected pattern of arms sales in the Persian
Gulf has a number of positive implications for regional stability and US in-
terests. Likely Western sales to North Yemen, Iran, and Iraq will reduce
their potential dependence on the USSR and will help reduce the hostility
of Baghdad and Tehran toward the West. Reliable US delivery of arms
and support for local military requirements make it more likely that US ef-
forts to influence local policies will have some effect. In addition, US
advisory ties with local military elites generally hell) tilt the attitudes of
local leaders toward the United States, provide a means of monitoring
changes in military opinion, and may reduce the danger of military plotting
against governments.
Top Secret iv
25X1
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Top Secret
Arms Transfers to the
Persian Gulf:
Trends and Implications
Iran, Iraq, and the eight nations on the Arabian
Peninsula constitute the largest and most dynamic
arms market in the Third World. Each of these
nations is seeking more sophisticated weapons for its
armed forces, and all Gulf countries-except Iran,
which is content to maintain its current level of
military strength-are buying weapons to expand
their military establishments. The continuation of
large arms transfers to the Persian Gulf has important
implications for relationships between local states and
supplier countries and for regional stability. This
assessment will outline current and projected trends
and analyze their broader implications for US inter-
ests in the region.
the PRC, North Korea, and Yugoslavia emerged as
significant military suppliers during 1981, largely as
alternative sources of Soviet-style equipment for Iraq
or Iran. Poland, East Germany, Hungary, and
Czechoslovakia sold $609 million in the region with
Soviet approval. Romania sold $1.1 billion to Iraq and
Iran, and State ndicates that
Bucharest arranged its sales independent of the 25X1
USSR. All Warsaw Pact states sell arms to earn
badly needed hard currency, and we believe that Gulf
states increasingly perceive purchases from Eastern
Europe as preferable to direct dependence on the
USSR. 25X1
Market Trends: 1972-81
Two significant trends provided impetus to the growth
in arms spending in the Persian Gulf over the past
decade. Every Gulf nation sought to expand the size
of its armed forces, creating a need for additional
weapons of all types. Second, ever more sophisticated
and expensive weapons systems were purchased as
Gulf nations tried to arm themselves with firstline
equipment from East and West. While Iran was an
early leader of this buying surge, large purchases
since 1977 by Saudi Arabia and Iraq have accounted
for most market growth. The remaining small states
in the Gulf region have increased their arms pur-
chases substantially over the last decade, but their
aggregate position in the regional market remains
small.
Arms sales in the Gulf have been dominated by four
suppliers: the United States, the Soviet Union, the
United Kingdom, and France. Until 1981, these
nations regularly accounted for 85 to 90 percent of
annual sales. The United States, because of its close
political ties with Saudi Arabia and Iran, has been the
largest arms supplier to the region. The United
Kingdom and the USSR have seen their market
shares decline steadily over the decade, while France
has emerged as the second leading supplier. Insignifi-
cant suppliers for most of the decade, Eastern Europe,
The Growth of Demand. Arms sales to the Persian
Gulf began to grow rapidly in the 1972-74 period
following the withdrawal of the British military pre-
ence and the quadrupling of oil prices.' By piecing
together trade data
we estimate that regional purchases jumped fro-
a total of $330 million annually between 1954 and 25X1
1971 to $4.8 billion annually over the 1972-74 period.
Purchases by Gulf states grew again in the 1975-77
period to an annual average of $11.8 billion, nearly
half of the total arms sold to the Third World. By
modernizing and expanding their military establish-
ments, Gulf countries hoped to ensure their sovereign-
ty, acquire status, and compete with local rivals fo125X1
political influence and disputed border territories. =
25X1
A series of events beginning in 1978 provided new
impetus to the drive for arms in the Gulf. These
included:
? The establishment of a Soviet military presence in
Ethiopia and South Yemen, and South Yemen's
increasing military capabilities.
' Appendix A contains more detailed statistics on arms transfers to
the 10 nations in the Persian Gulf region: Iran, Iraq, Kuwait, Saudi
Arabia, Bahrain, Qatar, UAE, Oman, North Yemen, and South
Yemen.
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Figure 1
Turkey
*NICOSIA
Cyprus
HEIR UT't, DAMASCUS
Syria
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'
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Sudan
Ethiopia
Ba necegrepre entatlon is
t sarily authoritative.
Soviet Union
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Kuwait
N *KUWAIT
Administrative
line \
*SANAA
North
Yemen
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*ADEN
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* DJIBOJTI
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25X1
25X1
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Figure 2
Arms Agreements in the Persian Gulf, 1972-81
In Current Dollars
1972-74
Average annual sales: $4.8 billion
1978-80
Average annual sales: $12.4 billion
North and South-
Yemen 5
Kuwait and small
Emirates 7
? Growing Arab fears of Iran after the rise of the
Khomeini regime.
? The Soviet invasion of Afghanistan.
? An increased US willingness to sell arms to conserv-
ative Gulf states, coupled with more aggressive sales
on the part of other non-Communist arms suppliers.
? Growing local concern over the danger of superpow-
er confrontation in the region.
? War between Iraq and Iran.
? The Israeli air attack on Iraq's nuclear reactor.
1975-77
Average annual sales: $11.8 billion
Kuwait and small North and South
Emirates 5 Yemen 1
Saudi Arabia
49
Emirates 4 Yemen 2
Iran 10
Saudi Arabia 22 :0
Arms sales from 1978 through 1980 rose to a record
level of $12.4 billion per year, despite the fact that
Iran purchased virtually no military equipment in the
19 months between the fall of the Shah in January
1979 and the outbreak of the Iran-Iraq war in
September 1980. Incomplete information indicates at
least $12.4 billion in new arms agreements in 1981, an
amount likely to climb significantly as more data
become available.
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Figure 3
Supplier Shares of Persian Gulf Arms Sales, 1972-81
In Current Dollars
1972-74
Average annual sales: $4.8 billion
Other Western 5
Third World 3
Othei Communist 2
United States 51
1978-80
Average annual sales: $12.4 billion
Other Western 4
Third World 4
United Kingdom 5
Italy 6
1975-77
Average annual sales: $11.8 billion
Other Western 5
Third World 2
France 8
1981
Total: $12.4 billiona
Supply Trends. Although the United States benefited
most from the major expansion in Gulf purchases, in
the 1978-81 period Gulf nations showed growing
selectivity in their choice of arms supplier;. Because
of the increasingly insecure regional envirDnment,
they appeared more wary than before of excessive
dependence on one supplier for military equipment
and support. In particular, embassy and press reports
indicate that the increased interest of the superpowers
in the region heightened local fears that the United
States and the USSR would attempt to us.- their arms
sales for political purposes.
At the same time, the ability of the United States and
the USSR actually to use arms sales to acquire
influence or political support was reduced by the
availability of military equipment, spare parts, con-
sumables, and technicians from Western Europe, the
Third World, China, Yugoslavia, Romania, and
North Korea. These suppliers began to provide mili-
tary equipment at competitive prices, and most at-
tached no political conditions to sales. Buyers proba-
bly viewed them as political'y benign since they
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appeared primarily interested in earning hard curren-
cy and in strengthening relations in hopes of preferen-
tial treatment on oil deliveries. As a result, the United
States, the USSR, and the United Kingdom all lost
market shares to them.
Iraqi resistance to Soviet attempts to use arms sales to
control Baghdad's behavior and force it to move closer
to Moscow is the most pertinent example of buyer
resistance to supplier manipulations. The Soviet arms
embargo reduced Moscow's share of Iraqi purchases
from 25 percent in the 1978-80 period to less than
1 percent in 1981, even though Baghdad purchased
arms at double the 1978-80 rate. Only when an arms
supplier holds a monopoly on sales and the recipient
lacks the money to go elsewhere, as is the case for the
Soviets in South Yemen, can a supplier hope to shape
local actions or demand benefits in return.
Gulf states have also been willing to support the 25X1
policies of reliable suppliers when they have not
contradicted their own interests and to offer suppliers
other economic benefits to reinforce arms transfer
ties. For example:
? Iran and Iraq have offered unsolicited preferences
on oil supplies and prices to some major suppliers
like France and North Korea.
? Iraq has toned down its criticism of the USSR on
Afghanistan and its favoritism toward Syria.
Arms and Influence
Gulf states have purchased arms for political reasons
as well as to build their military capabilities. With the
exception of Iran and Iraq, they have been inclined to
buy arms to create at least symbolic political linkages
between themselves and more powerful states. For
instance, State reporting indicates that Saudi Arabia
and the smaller conservative states view Western-
especially US-military assistance as an implicit se-
curity guarantee. It also indicates that they believe
that US arms sales and the presence of US advisers in
the Gulf will both lead potential aggressors to believe
that the United States would join in their defense and
force Washington to do so. South Yemen probably
views Soviet aid similarly.
This desire for implicit security relationships has
conveyed some degree of influence to suppliers. While
there is no evidence that Gulf states have sharply
modified policies or taken positions contrary to their
perceived interests at the behest of arms suppliers,
Gulf states have tended not to make demands or take
actions that could jeopardize ties with major arms
suppliers. For example, Saudi Arabia has continued to
seek US military hardware and training despite its
embarrassment over restrictions on most US-supplied
arms and its perception that Washington is too sup-
Saudi Arabia tends to support or at least refrain
from opposing US policies that are controversial
among nonaligned states, such as Washingon's sup-
port for Britain during the Falklands conflict and its
position on global economic relations.
25X1
Suppliers have also indirectly influenced events and
politics in the Persian Gulf through arms sales that
have helped local governments pursue objectives that
also serve the interests of the supplier states. In the
lower Gulf, for example, French assistance has facili-
tated its own interest in reducing the East-West
dimension of regional conflicts by supporting the local
objectives of deterrence and defense against internal
and external threats without a highly visible US or
UK presence. Moscow's aid to South Yemen has been
effective in enabling Aden to pursue its (and Mos-
cow's) subversive aims in North Yemen. Similarly,
Soviet sales to Kuwait have allowed it to seem more
neutral in East-West matters, a posture that also
furthers Moscow's regional aim of reducing the pro-
Western bias of oil-producing states.
25X1
Finally, Western and Soviet military technicians and
advisers on occasion have been able to tilt the politi-
cal-military outlook of local military leaders in their
portive of Israel.
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favor. For example, the South Yemeni police, intelli-
gence and security services have become Moscow's
most reliable local supporters. In the Saudi National
Guard, State reporting suggests that US-trained offi-
cers want to strengthen military assistance ties with
the United States. A reputation for reliable arms
support may also help diplomatic efforts to shape local
government policies. For example, according to State
reporting, British influence in the Gulf has remained
much larger than its current regional naval presence
or military capability would suggest because of Lon-
don's longstanding military assistance and advisory
ties.
Purchases in the 1980s
The Persian Gulf almost certainly will retain its
position as the largest arms export market in the
Third World through the 1980s, although i`. is unlike-
ly that arms purchases over the next three or four
years will exceed the 1977-81 levels. Based on its
ongoing arms negotiations with a variety of suppliers,
Saudi Arabia probably will continue as the largest
regional importer of military equipment an3 services
in dollar terms. Total Saudi purchases will neverthe-
less decline as spending on military construction,
communications, and other military infrastructure-
which has accounted for more than two-thirds of their
military imports in recent years-drops off.
Arms purchases by Iraq and Iran will almost certainly
increase as these countries attempt to rebu:.ld inven-
tories lost in the war. Declining oil revenues and the
continued softness of the oil market will irr..pose some
restraint on their arms purchasing efforts and almost
certainly will encourage them to try to bar:er oil for
military equipment. Iran is not likely to build inven-
tories as large as those acquired by the Shah, but the
war highlighted the need for both nations to stockpile
large quantities of spare parts and consumables to
provide a cushion against supplier manipulation of
arms deliveries. In addition, substantial purchases of
logistics, radar, and command and control equipment
are likely because both nations discovered their inade-
quacies in these areas during their war.
Kuwait, Bahrain, Qatar, the United Arab Emirates,
and Oman plan large purchases of air defense and
naval equipment, according to embassy reporting. The
Iraq-Iran war exposed the vulnerability of their oil
facilities to air and sea attack. It also indicated a need
for larger stockpiles of spare parts and consumables.
Declining oil revenues will probably force a stretching
out of their military modernization programs, al-
though we believe that the UAE may draw on its
sizable financial reserves.
The recently formed Gulf Cooperation Council be-
tween Saudi Arabia and the small conservative states
could affect the future arms purchases of member
states. Riyadh has suggested the desirability of coop-
eration in developing indigenous arms industries and
in building more standardized defenses, according to
State reporting. In the medium term, any agreement
probably would produce some additional purchases by
states seeking to buy weapons recommended by the
Council or the Saudis.
Arms purchases by the Yemens will depend on the
largess of their benefactors. As long as Sanaa's
relations with Saudi Arabia remain stable, we believe
Riyadh will continue to fund arms purchases from the
United States or other Western arms suppliers. The
Saudis will also continue to encourage Sanaa to
discontinue its arms supply relationship with the
Soviets. If Soviet arms shipments increase, Riyadh
may threaten to reduce its financial aid to North
Yemen. This could reduce North Yemen's arms
purchases, but the Soviets will almost certainly con-
tinue to offer arms on credit and adjust repayment
schedules to maintain a presence there. For ideologi-
cal and financial reasons, the Soviet Bloc is likely to
remain the sole supplier of arms to South Yemen.
Aden's arms-modernization program appears to have
reached a plateau, however, and over the next few
years purchases probably will decline as emphasis is
placed on absorption of arms already on order.' =
Limits to Diversification
Although sales by the United. States and the USSR
are unlikely to grow substantially in the 1980s, both
countries may see an end to the erosion of their
7 The implications of these trends in specific Gulf states are
discussed in greater detail in appendixes B through F. F_
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market shares that took place in the late 1970s. For
several reasons, we believe that the diversification
policies of Gulf states are reaching their limits:
25X1
25X1
25X1
25X1
Deliveries of Soviet-style equipment to Iraq and Iran
by Eastern Europe, North Korea, Syria, and Libya
will help to perpetuate the Soviet position.
? War losses have forced Iraq to balance its recent
Western purchases with new deals with Moscow to
resupply its Soviet-style ground forces. Before this
Baghdad wante to reduce its Soviet ties as muc as
possible.
development,
? Conservative Gulf states are placing more value on
the implicit security guarantee provided by signifi-
cant US sales in the face of increasing threats from
Iran and the USSR.
? Military capability would be reduced sharply by
further shifts in suppliers because of the additional
time needed for retraining troops and stocking
additional spares and consumables.
? The training and logistics problems posed by non-
standard equipment are already substantial.
USSR will continue to supply key countries because
beyond the hard currency earned, this allows. numer-
ous Soviet Bloc military advisers into the region and,
in the case of South Yemen, helps maintain access to
facilities that enhance the operational capability of
the Soviet Indian Ocean fleet. 25X1
The United States. The United States will probably
retain its position as the leading supplier of military
equipment and services in the Gulf region over the
next five years. The conservative Arab states are
likely to seek large purchases from Washington,
although Kuwait may buy more from Western Eu-
rope. In addition,
? The practice of many Gulf states to use military
manpower assistance from developing nations as
another means of diversification has created a new
set of problems and may rapidly be reaching its
limits.'
The USSR. Moscow is likely to maintain its substan-
tial arms and advisory ties with Iraq, Iran, and North
and South Yemen. Indeed, in the case of Iran, we
believe that the Soviets have already dangled the
possibility of a major arms deal, which would supple-
ment the large number of Soviet weapons already in
the Iranian arsenal.' We believe longstanding depend-
ence on Soviet-style equipment, continuing suspicions
of the West, a perceived need for rapid deliveries that
only Moscow can provide, and, in the case of the two
Yemens, a need for easy credit terms ensures that the
25X1 USSR will maintain its current market in these
nations.
Developing World, for more discussion of this point.
' The Shah purchased over $1.5 billion of ground equipment from
the USSR. A significant proportion of Iran's armored personnel
carriers, antitank missiles, short-range air defense systems, trucks,
and engineering equipment were supplied by Moscow over the last
both Iran and Iraq are interested in obtaining US
equipment from other nations licensed to produce it or
through intermediaries. 25X1
We believe the US market share among the conserva-
tive states could even grow somewhat larger than its
1978-81 level if:
? The conservative Gulf states perceived the threat
from the USSR, Iran, or South Yemen to increase.
? A radical regime emerged in Iraq that was hostile to
the conservative states.
? US policy toward Israel appeared to change in favor
of the Arabs. 25X1
On the other hand, interest in US military assistance
would drop if:
? The US appeared to move even closer to Israel.
? New questions arose about the reliability of Wash-
ington as a security assistance partner.
? The Gulf Cooperation Council decided to demon-
strate equidistance from both superpowers through
arms purchases from Western Europe.
? Any of the conservative regimes were replaced by a
more neutralist or radical government.
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Implications for the United States
Projected arms sales trends pose potential ;problems
for US interests. Military expansion in the region
creates additional stresses within modernizing Gulf
societies by:
? Drawing into the military recruits who may not be
loyal to government elites.
? Stimulating corruption and thereby exacerbating
resentment against the privileged.
? Enhancing the power of military elites, which can
lead to coup plotting and possible military take-
overs.
plicit US security guarantees.
Despite these dangers, the projected pattern of arms
sales in the Persian Gulf has a number of positive
implications for regional stability and US interests.
We believe that arms transfers contribute to regional
stability by:
? Maintaining real or perceived local military
balances.
? Creating heavy dependence on foreign technicians
and technologies, which creates uncertainties about
the usability of local arsenals during crises.
? Enhancing the image of power and importance of
local rulers.
? Deterring attacks on US friends by providing im-
Aside from the commercial benefits, the United
States also should derive certain political gains from
continued large Western arms transfers to the Gulf:
? Large West European sales, to Iraq will reduce
Soviet influence and may make Baghdad less hostile
to the West.
Moscow's arms sales and advisory ties in the region
give it a continuing potential for meddling in local
politics. The Soviets could make large, rapid deliveries
of arms to their customers at any time and threaten
local military balances, although there are no current
indications that Moscow wants to give one side a
decisive edge in the Iran-Iraq or North-South Yemen
conflicts. Armed conflicts in the future between cli-
ents of the superpowers could pose a risk of direct US-
USSR confrontation.
Reduced purchases or the acquisition of less destruc-
tive weapons by every Gulf state might help reduce
regional tensions, but strong local demand for arms
and the availability of numerous suppliers almost
guarantee that the broad restraint necessary for this
kind of balanced limitation will not occur. US efforts
to unilaterally restrain its sale of arms would risk
losing the economic benefits of sales, as well as
opportunities for influence over local events.
? Likely US or West European sales to Iran and
North Yemen could deter development of a Soviet
weapons monopoly with all its potential for
influence.
? Continued US sales to the region will make it more
likely that diplomatic efforts to influence local
politicians will receive a hearing.
? US advisory ties with local military elites generally
help tilt the attitudes of local leaders towards the
United States, provide a means of monitoring
changes in military opinion, and may reduce the
danger of military plotting against governments.
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Appendix A
Arms Sales to Persian Gulf Nations, by Supplier, 1954-81
1954-71
1972-74
1975-77
1978-80
Iraq
1,277
3,054
7,301
9,639
USSR
1,004
2,247
4,229
2,349
Warsaw Pact b
93
216
244
368
United States
62
NEGL
NEGL
United Kingdom
70
23
1
205
France
11
267
1,880
2,920
Italy
7
32
42
2,156
West Germany
8
38
94
143
Other Western c
11
38
149
506
11
193
656
992
3,517
7,856
8,856
1,400
504
198
1,018
NEGL
Warsaw Pact
2
NEGL
1
United States
2,001
6,622
5,905
1,199
United Kingdom
476
244
899
2
France
3
225
3
West Germany
128
237
398
5
Other Western
148
19
57
20
North Korea
131
Others
142
140
126
9
Saudi Arabia
1,017
2,635
17,209
21,512
United States
333
730
15,563
15,367
327
633
872
1,058
187
979
414
4,351
West Germany
15
20
476
Other Western
130
17
172
79
Others
9
144
111
169
Kuwait
113
196
882
1,129
USSR
1
51
1981 Total
7,684 28,955
58 9,887
1,527 2,488
62
108 407
1,419 6,497
75 2,312
100 383
434 1,138
1,298 3,150
1,225 22,854
223 1,943
43 46
15,727
8 1,629
231
67 835
116 360
563 694
195 612
2,738 45,111
2,221 34,214
NA 2,890
1
433
77
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Arms Sales to Persian Gulf Nations, by Supplier, 1954-81 (continued) (Current Million US $) a
United Kingdom 6 1 2 NA 9
France 33 33
Bahrain 7 1 4 133 1
United States NEGL NEG L 1 7 1
Qatar 5 6 65 751 140 967
Warsaw Pact 1 1 2
United States NEGL 1 5 13 23 42
United Kingdom 8 119 5 65 175 372
Others 7 1 8
UAE 9 250 508 455 214 1,436
112 372
12 11
109
1 5
NEGL
29
78 6 31
Warsaw Pact 36 1
United States 1 132
United Kingdom 1
1,191
732
107
181
162
18
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Arms Sales to Persian Gulf Nations, by Supplier, 1954-81 (continued) (Current Million US $) a
131 228
2,396 7,386
West Germany 151 297
Other Western 295 78
Others 172 516
a Annual figures for arms transfers are highly variable for every
recipient and supplier. This reflects the impact of large deals in some
years. Annual figures have been aggregated into several periods to
indicate general trends more clearly. The periods chosen reflect
politically significant eras for the Persian Gulf. From 1954 through
1971, Gulf states emerged from the protectorate era, and arms sales
were dominated by the USSR, US, and UK. Arms purchases in the
1972-74 period reflect the impact of the British withdrawal from the
Gulf. The 1975-77 period indicates the major impact of massive oil
price increases in 1974 on local purchases. From 1978 through 1980,
25X1 major political developments in the region produced growing local
insecurity. The 1981 arms agreements are listed separately because
1,182
26
244 490 1,735 2,828
2,061 1,880 540 6,830
622 891 169 2,130
384 621 551 1,929
954 1,471 5,168 8,281
b Warsaw Pact suppliers are Bulgaria, Czechoslovakia, East Ger 25X1
ny, Hungary, Poland, and Romania.0
c Other Western suppliers are Australia, Austria, Belgium, Canada,
Denmark, Finland, Greece, Japan, Netherlands Norway, Portr --'
Spain, Sweden, Switzerland, and Turkey 25X1
d Other suppliers are Brazil, Cyprus, Egypt, Hong Kong, India, Iran,
Israel, Jordan, Kuwait, Libya, North Korea, Pakistan, China, Saudi
Arabia, Singapore, South Africa, South Korea, Syria, Taiwan,
UAE, and Yugoslavia. China and North Korea are listed separately
for Iraq and Iran, respectively 25X1
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Appendix B
Iraq: Drifting West
25X1
25X1
25X1
25X1
25X1
The most significant shift in arms transfer relation-
ships appears to be in Iraq, which is trying to reduce
its dependence on the USSR for military equipment
(figure B-1). Soviet-Iraqi relations have been declining
since 1975 when Moscow, irritated over the repression
of the Iraqi Communist Party, dragged its feet in
responding to Baghdad's request for arms needed for
its military campaign against the Kurds. Moscow's
near monopoly on Iraq's arms inventory was broken
by several large purchases from France in 1974 and
1975. Soviet-Iraqi relations reached a low point in
September 1980, when the USSR imposed an embar-
go on arms deliveries or new contracts in an attempt
to dissuade Baghdad from continuing its war with
Iran.
In response to the Soviet embargo on the direct
shipment of arms to Iraq, Baghdad turned to Western
sources of supply, China, and several East European
nations. At least $5.5 billion worth of military equip-
ment was purchased from these sources in 1981, a
figure likely to expand as more deals are confirmed.
France continues to receive large orders because of its
reputation as a reliable supplier. In contrast to the
USSR, France not only continued to deliver arms
after the war began, but signed new contracts and
sent technicians to help maintain Iraqi equipment. In
1981 deals worth almost $1.4 billion were concluded
for helicopters, missiles, artillery, ammunition, elec-
tronic gear and additional Mirage Fl fighters.
Italy delayed the completion of a $1.9 billion contract
for warships when the war broke out.
Italy is ham-
strung in its dealings because a large segment of its
arms manufacturing capability is under US license
and coproduction agreements. The need to obtain US
approval to export this equipment or the need to
substitute non-US components in Italian equipment
have made Rome appear as a rather reluctant arms
supplier. This held Italy's sales to less than $100 25X1
million in 1981, but
embassy reporting reveal that negotiations are under
way for helicopters, artillery, personnel carriers, addi-
tional naval equipment and an Italian AWAC-type
plane. Up to $1.5 billion in additional purchases are
possible, particularly if the United States allows Italy
to export equipment and components produced under
license. 25X1
attractive because they are similar to much of Iraq's
Soviet-supplied arsenal. This avoids the loss of combat
effectiveness that would occur if Western equipment
were substituted for Soviet items too rapidly. Egyp-
tian, North Yemeni, Romanian, and Yugoslavian
agreements provide the same advantages. F_
25X1
As the scale of Iraqi purchases of non-Soviet equip-
ment became evident, Moscow realized that its em-
bargo strategy was backfiring. Iraq did not knuckle
under by modifying its policies, Soviet-Iranian rela-
tions did not improve as a result of the embargo, and a
permanent rift with Baghdad seemed possible. In
particular, Iraqi interest in acquiring US equipment
from Italy or even directly probably was expressed 25X1
several Middle Eastern arms brokers as well as
Jordan, and probably startled Moscow.
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Figure B-1
Iraq: Arms Sales by Supplier
In Current Dollars
Others 8
Other Western 4 -
Eastern Europe 4
1975-77
Average annual sales: $2.4 billion
1981
Total: $7.7 billions
25X1 The USSR has sought to repair its damaged ties with
least $1.1 billion in sales were concluded with East
European suppliers. These nations were more than
willing to sell in exchange for hard currency or oil,
and this had an additional benefit for Moscow by
reducing the pressure it faces to aid stagnant Warsaw
1978-80
Average annual sales: $3.2 billion
Others 5
Other Western 9
Brazil 6
Pact economies. Poland, in particular, has taken
advantage of this opportunity by providing over $250
million in tanks, spare parts, and ammunition. 25X1
Moscow moved one step further in April 1981 when it
resumed direct deliveries of ammunition, spares, and
logistic items. Embassy reporting suggests that it
offered to resume deliveries of major equipment if
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Iraq restored a friendly veneer to its ties with Mos-
cow. The visit of several high-level Iraqi delegations to
Moscow beginning in May were followed by deliveries
of MIG-23 and MIG-25 aircraft and T-72 tanks
under existing contracts. Embassy reporting indicated
that by March 1982 the USSR and Iraq appeared
ready to conclude a new deal worth several billion
dollars, although Iraqi bitterness over the embargo
lingers.
The USSR probably has slowed the erosion of its
position in Iraq. To maintain the capability of its
forces, Iraq must resupply its forces with equipment
rekindled by events such as the rise of the Mitterrand
government in France with its more friendly attitude
toward Israel. Baghdad has seen the consequences of
excessive dependence on one nation or bloc of nations
for arms, however, and is still likely to seek greater
diversification in its arms supply. Large deals with
West European nations for tanks, artillery, and other
types of equipment are under negotiation. Over the
longer term, Iraq also hopes to build a domestic arms
industry through licensed assembly and coproduction
arrangements with France, Italy, and the United
Kingdom. An arms inventory balanced between East-
ern and Western suppliers is the probable Iraqi goal.
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Appendix C
Iran: Searching for
Necessary Arms
25X1
25X1
25X1
25X1
In 1981 the Khomeini regime signed contracts worth
$1.2 billion more than it bought during the previous
two years Tehran probably will seek
some additional major items like tanks and fighter
aircraft in the future, but we do not expect the
mullahs to attempt to rebuild to prewar inventory
levels established under the Shah. The current regime
has no interest in resuming a direct sales relationship
with the United States,
The abrupt
cancellation of more than $10 billion in arms con-
tracts in 1979, the political instability that until
recently marked the Tehran government, Khomeini's
espousal of revolution in the rest of the Gulf, and a
growing stake in arms sales to Iraq have caused
Western arms suppliers to be wary of dealing with
Iran. Given Iranian military victories and a more
stable political situation, however, some Western na-
tions may become more interested in the Iranian
market, especially after the war ends.
25X1 North Korea emerged as Iran's leading arms supplier
in 1981 with sales of nearly $600 million.F___-]
25X1
.25X1
ammunition, antitank rockets, naval mines, and small
numbers of artillery and tanks have been delivered. In
addition, North Korea has sent a few military techni-
cians to teach Iranians how to use the equipment and
to assist in its repair.
North Korea probably initiated its sales in Iran with
Soviet blessing. some
items were provided by Moscow, and the Soviets may
have acquiesced in the export of items that North
Korea produces under Soviet license. Pyongyang
needs little encouragement from Moscow, however,
because arms sales provide badly needed hard curren-
cy and oil as well as an outlet for its expanding arms
industry.
The North Korean-Iranian relationship will probably
continue at its present level over the next one or two
years, but North Korea will not be able to supply the
quantities or types of equipment needed to rebuild
Iran's war-torn forces. 25X1
We believe that the USSR has dangled the possibility
of a major arms deal before Iran. Its embargo on arms
shipments to the belligerents early in the war primari-
ly affected Iraq and was partly an effort to ingratiate
a weak and isolated Iran.
estimate that as many as 200 Soviet military advis25X1
are in Iran to assist with training. We believe that
greater influence in Iran is the major opportunity the
Soviets see in the Gulf region. They almost certainly
want to increase Tehran's dependence on Soviet
equipment, but Iran appears reluctant to become
beholden to Moscow and probably is fearful of the
long retraining process required. 25X1
25X1
The provision of equipment by North Korea, Libya,25X1
and Syria serves Moscow's objectives by increasing
Iran's dependence on Soviet-made weaponry. Syria
and Libya have given Iran aid because of their mutual
antagonism toward Iraq. Syria has provided ammuni-
tion, SAMs, AA guns, and training
Damascus does not appear affected
by pressure from Saudi Arabia and other Arab states
to end this activity, and recently increased substan-
tially its economic relations with Tehran by agreeing
to refine Iranian crude in Syrian refineries and to
provide additional support for the Iranian petrochemi-
cal industry. 25X1
Colonel Qadhafi feels an ideological kinship to the
Khomeini regime and has provided military assistanc25X1
to illustrate Libya's value as an "arsenal of radical-
ism." According to
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ammunition, antitank missiles, artillery, and at least
100 tanks have been delivered, much of it free of
charge. However, Libya has become increasingly iso-
lated in the Arab world because of unpred:.ctable
actions like its aid for Iran, and Tripoli could shut off
its Iranian tie at any time as part of a larger effort to
move back into the Arab fold.
The only other major suppliers of military equipment
that are presently available to Iran are China and
Western Europe.
In the short run, Iran has turned to Israel and private
arms brokers for critical spare parts and consumables
for its Western equipment. Israel sold at least $28
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25X1
25X1
million in equipment to Tehran in 1981, for example.
Iran probably will increase its direct dealings with
Western suppliers when the war ends. France will not
sell major equipment to Iran because it already has a
lucrative market in Iraq and does not want to offend
other large Arab buyers. Italy has similar concerns,
but is more open to future sales.
When the war ends, Rome
may be in a position to sell some major weapons like
artillery, patrol boats, helicopters, and tanks, especial-
ly if US restrictions are lifted.
According to State reporting) Ithe Brit-
ish Government-concerned about Iran's political iso-
lation and weakness-is keeping open the possibility
of resuming sales. London might be willing to make
selective sales in the context of a broader normaliza-
tion of relations, but it will try not to endanger its
emerging arms sales campaign in the Arab world.
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Appendix D
Saudi Arabia:
Qualified Dependence on
the United States
Saudi Arabia has obtained most of its military needs
from the United States, and the US share of the
Saudi arms market is likely to increase over the next
three years (figure D-1). Early in 1982 the United
States concluded its largest arms sale in the region
with agreement for the $8.5-billion AWACS- and
F-15-enhancement package. State reporting and Sau-
di Arabia's persistent pursuit of the full range of
American equipment indicate that Riyadh views the
United States as the Western nation most capable of
supporting its ambitious military modernization ef-
fort-the largest in the region-and will not consider
arms purchases from the USSR or its allies. State
reporting notes that the Saudi royal family hopes to
create a military structure that can deal with internal
challenges as well as deter attack from other nations
in the region. They value US arms sales as a political
symbol of Washington's readiness to come to their aid
if larger external threats materialize.
Riyadh will continue to purchase significant amounts
of military equipment from Western Europe and to
depend upon Pakistan and others for military man-
power assistance because it is unwilling to become
totally dependent on Washington. State reporting
indicates that the Saudis do not subscribe to US goals
in the region, either cooperation between Israel and
moderate Arab states against the USSR, or a direct
US military presence in the Gulf. Riyadh fears the
consequences of excessively close association with the
United States because of Washington's support for
Israel in the Arab-Israeli dispute, according to State
reporting. Riyadh is embarrassed by the public con-
troversy and informal restrictions that accompany US
deals such as the AWACS package, as is indicated by
State reporting and Saudi press commentary.
Saudi Arabia fears Israel, particularly after the Israe-
li air raid on Iraq's nuclear reactor demonstrated that
the Gulf is within range of an Arab-Israeli conflict. It
wants military equipment from non-US suppliers that
it can use without restriction against an Israeli attack,
and probably wants to retain the option of supplying
equipment to Arab frontline states in the event of
another Arab-Israeli conflict. It looks primarily to the
United States to restrain Israel, however.
25X1
A Saudi diversification policy calling for increased
purchases of major weapons systems from Western
Europe has existed since the early 1970s, according
numerous statements by Saudi 25X1
officials, and provides a model for other Arab states in
the Gulf. About $3 billion worth of weapons were
purchased from Washington between 1978 and 1980,
compared with over $4 billion from West European
sources.' Washington shares with several West Euro-
pean suppliers the Saudi market for combat aircraft,
SAMs and other tactical missiles, and artillery and
armored vehicles. France gained most of the naval
market in 1980 when a deal for four guided-missile
frigates and two support ships was concluded. F___1
Saudi Arabia's diversification is encouraged by West
European sales efforts. British, French, and Italiar25X1
Government officials, as well as those of other Euro-
pean nations, frequently visit Saudi Arabia to press
their arms offerings. Beyond the appeal of hard
currency earnings and closer ties with the world's
leading oil exporter, US allies fear that Washington's
effort to dominate the market will expose Riyadh to
growing internal dangers, according to State report-
ing. This view is based on the problems posed by the
Palestinian issue and does not reflect greater West
European sensitivity to the internal stresses caused by
the effort to absorb highly sophisticated technology-
US or European-in a traditional, Islamic society.
25X1
' During this period 80 percent of US and 30 percent of West
European military sales were for construction, training, electronics,
consumables, logistic material, and other nonlethal items. F
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Figure D-1
Saudi Arabia: Arms Sales by Supplier
In Current Dollars
1975-77
Average annual sales: $5.7 billion
1978-80
Average annual sales: $ 7.2 billion
West Germany 2-
United Kingdom 5
In 1981 West Germany entered the West European
sales picture for major equipment when Bonn ap-
proved the sale of a howitzer produced jointly with
Britain and Italy,
The
relaxation in April 1982 of Bonn's prohibition on the
sale of lethal military equipment to "areas of tension"
made an agreement possible, but in late May Chan-
cellor Schmidt announced that the Federal Republic
of Germany will not approve deliveries of 'battle tanks
to Saudi Arabia or other Middle Eastern countries.
Embassy reporting and German press commentary
indicate that domestic political controversy forced this
decision on Schmidt, but we believe that Bonn may be
able to sell other less potent armored vehicles in the
future. Washington probably will be asked by the
Saudis to supply M-1 tanks as the next best and most
prestigious vehicle after the Leopard II, according to
embassy reporting.
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France already has a large stake in Saudi Arabia and
robably will sell
additional warships. Paris will also continue to com-
pete with the United States as a source of air defense
equipment and offer its AMX-32 tank in place of the
Leopard II as indicated in both press
State reporting and British press commen-
tary indicate that London is worried that it has lost
ground in Saudi Arabia and the smaller Gulf states to
France and the United States, and it has focused its
worldwide arms sales campaign on the Persian Gulf.
Arms offers were an important topic during Prime
Minister Thatcher's tour of the Gulf in April 1981.
Press reports suggest that some sort of joint funding
was worked out with Saudi Arabia for the develop-
ment of the P-110, Britain's planned ground attack
fighter for the 1990s. State reporting indicates that
London also may have suggested as a complement to
the US AWACS the Nimrod, an electronic warfare
and early warning aircraft, which would not be
restricted in its area of deployment.
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Figure E-1
Kuwait: Arms Sales by Supplier
In Current Dollars
1981
Total: $77 milliona
Average annual sales: $376 million
Others 1 Italy 7 -rr:z~ Others 2
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Appendix E
Kuwait, Oman, and
the Emirates
25X1
25X1
25X1
25X1
Kuwait, Oman, Bahrain, the UAE, and Qatar have
become particularly concerned about the inadequacy
of their defense forces in the last two or three years, as
indicated by the rapid escalation in their military
spending (figures E-1, E-2, and E-3). Local press
reports, commentary by US and European specialists
on the region, and statements by local leaders indicate
that the common new concerns of these states are the
rise of the Khomeini regime with its attempts to incite
local Shia populations and the fear of becoming
engulfed in regional conflicts begun by others. State
note that Oman is also fearful
of South Yemen's growing military arsenal, a devel-
opment that also leaves others in the lower Gulf
uneasy. Political rivalries among the small states give
arms buying in the lower Gulf some of the aspects of
an arms race. Embassy reporting indicates that none
of these states wants another to gain a prestige
advantage by acquiring more advanced equipment or
a more favored status with important arms suppliers.
This market is likely to grow substantially in the next
three years, although arms purchases will be con-
strained somewhat by declining oil revenues. Oman
and Bahrain also must depend upon the largess of
Saudi Arabia or others to make major purchases.
Most of the lower Gulf states have followed the Saudi
example of diversification, although with important
differences in choice of suppliers. Kuwait initially
turned to the United States for most of its military
assistance, but its stated policy of neutrality produced
rapid diversification. Kuwait was the first conserva-
tive Gulf state to obtain Soviet weapons. It purchased
$51 million worth of FROG surface-to-surface and
France and West Germany seem the most politically
attractive Western suppliers. We believe that Kuwaiti
suspicions of US and UK influence in Gulf affairs, as
reported in the press and embassy commentary, and
the US friendship with Israel reduce their acceptabil-
ity as suppliers. 25X1
Bahrain, Qatar, and the UAE were once British
protectorates, but aggressive French marketing and
their desire to display independence have given
France the major share of the Emirates' purchases.
The United States has never sold much to these states,
but growing insecurity has produced an interest in
closer US ties. For example, embassy reporting notes
that Bahrain wishes to purchase F-5Es and the im-
proved HAWK missile system, and the UAE wants
F-16s or F-18s as indications of Washington's com-
mitment to their defense. US and UK sales may also
improve because of dissatisfaction with the quality of
French weapons and followup support that has been
expressed by UAE leaders to US officials. Prime
Minister Thatcher obtained an oral commitment from
the UAE for the HAWK jet trainer in 1981, accord-
Oman's almost total dependence on the United King-
dom for arms was challenged in 1980 when Sultan
Qaboos agreed to allow US forces use of Oman
airfields and port facilities in return for military
assistance. Both London and Oman's Arab benefac-
tors are concerned over this new relationship. Accord-
ing to State reporting '_
British wish to retain their dominance in military
assistance and are worried that Oman's close associa-
tion with Washington could undermine internal sta-
bility. State reporting shows that Oman is under
pressure in the Gulf Cooperation Council to become
more independent of the United States.
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25X1
25X1
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Figure E-2
Sales to Bahrain, Qatar, United Arab Emirates by Supplier
In Current Dollars
1975-77
Average annual sales: $186 million
Others 5
United States 1-
United Kingdom 3
West Germany 19
1981
Total: $355 milliona
1978-80
Average annual sales: $433 million
United States 2 -
Italy 4
West Germany 5
The Gulf Cooperation Council-consisting of Saudi member states to follow its more neutral stance and is
Arabia, Kuwait, Qatar, Bahrain, Oman, and the encouraging others to establish diplomatic relations
UAE-was formed after the outbreak of the Iran- with the USSR or East European nations.
Iraq war heightened security fears and made it possi-
ble to create an organization that excluded both Iran
and Iraq. Although initially stress was placed on
political and economic cooperation, exchanges on
security issues have occurred and the group may have suggested publicly before an after Council meetings
an impact on future arms purchases beyond Oman. the desirability of cooperation in developing indige-
Embassy reporting and public statements in the local nous arms industries and in building an integrated air
press by Gulf leaders indicate that Kuwai ` wants
25X1
25X1
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Figure E-3
Oman: Arms Sales by Supplier
In Current Dollars
1975-77
Average annual sales: $34 million
Others 6
defense system. Different arms diversification pro-
grams reinforce the political obstacles to greater
security cooperation, but movement in this direction
probably would result in some common purchases of
military equipment. The United States could lose
sales if purchase of West European arms remains the
only politically accepted basis for coordination in all
Council states.
1978-80
Average annual sales: $133 million
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Appendix F
North and South Yemen
Arms purchases by North and South Yemen grew
faster than those of any other state in the Persian
Gulf region over the 1978-80 period (figures F-1 and
F-2). This expansion results from massive deliveries to
Aden, and competing Soviet, US, and Saudi efforts to
provide military assistance to Sanaa. We believe that
both states probably are unable to pay for or absorb
new equipment. Arms purchases over the next three
years are likely to decline as both states attempt to
integrate new equipment into their inventories.
To overcome its perceived encirclement by hostile
states, South Yemen's Marxist-oriented regime wel-
comes Moscow's willingness to provide jet aircraft,
SAMs, tanks, other ground equipment, and military
advisers on favorable credit terms. In return, Aden is
willing to serve Soviet as well as its own interests in
the area. It has provided military facilities for Soviet
use and turned down a Saudi offer to finance non-
Communist arms purchases. South Yemen is likely to
remain the only true Soviet ally in the region, and its
heavily armed status and revolutionary ideology will
continue to be a destabilizing factor on the Arabian
Peninsula. The Soviet Bloc's monopoly on Aden's
arms purchases is unlikely to be affected seriously by
the tripartite agreement between South Yemen, Lib-
ya, and Ethiopia to engage in security cooperation.
In the late 1970s, Saudi Arabia urged the United
States to provide military assistance to North Yemen
to forestall Soviet influence in Sanaa and offset
Aden's arms acquisitions. Saudi Arabia and Oman
probably regard continuing US aid to Sanaa as an
indication of Washington's commitment to stability
on the lower peninsula. Other Western nations share
Washington's concern about the dangerous regional
implications of an absorption of North Yemen by the
South. Britain and West Germany have shown an
interest in cooperating with the United States in
providing economic as well as military assistance to
the shaky Sanaa regime. 25X1
Increased Saudi-financed aid to North Yemen may be
complicated by political suspicions between Sanaa
and Riyadh that have delayed Sanaa's arms pur-
chases in the past. The USSR made major sales
inroads, in part, because of Saudi footdragging in
1979, and it could gain new sales if this problem
continues. 25X1
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Figure F-1
South Yemen: Arms Sales by Supplier
In Current Dollars
1975-77
Average annual sales: $69 million
United Kingdom 0.1
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Figure F-2
Arms Sales to North Yemen by Supplier
In Current Dollars
1975-77
Average annual sales: $82 million
Others 3
USSR 13
1978-80
Average annual sales: S 397 million
Others 3
Saudi Arabia 12
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Appendix G
Problems With Military
Technicians From the
Developing World
In 1981 there were 16,515 foreign military techni-
cians stationed in the region, double the number
present in 1978. Nearly 75 percent of these techni-
cians were from developing nations (notably, Pakistan,
Jordan, and Morocco) as opposed to about 40 percent
in 1978. More importantly, a growing proportion of
these personnel were expected to operate weapons
rather than serve only as advisers.
Although foreign military personnel are ostensibly
allied forces intended to strengthen the military posi-
tion of recipient nations, a foreign presence frequently
produces discord. Cultural and linguistic differences
make cooperation difficult. Surrogate forces are often
isolated from the indigenous population to minimize
friction, but such special arrangements may seem like
inferior treatment to the personnel involved and may
reduce their military effectiveness. Alternatively, the
Estimated Foreign Military Advisers
and Technicians in the Persian Gulf a
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recipient's own troops may resent the special treat-
ment-higher salaries and better living conditions-
sometimes given foreigners, thereby weakening the
loyalty of local troops. 25X1
Another potential problem is that the interests of
suppliers and recipients of surrogate manpower differ
in important ways. Most suppliers of manpower, such
as Pakistan and Morocco, are interested in the eco-
nomic benefits obtained and not in the security of the
recipient. Thus, availability of foreign personnel may
be jeopardized suddenly if disagreement arises be-
tween supplier and recipient. Even if a supplier is
concerned about the security of a Gulf nation and
allows its technicians to man weapons, most provide
manpower for symbolic political purposes and not for
 Top Secret Approved For Release 2008/10/30 :
Top Secret
Approved For Release 2008/10/30: CIA-RDP83B00851 R000100090003-4