Amid Western arms embargoes on Saudi Arabia, SAMI has a backup plan

BEIRUT — Saudi Arabian Military Industries is prepared to move forward with product development and weapon system projects should Western embargoes limit those efforts, the CEO told Defense News.

“We have signed more than 25 agreements with foreign partners, so we have multiple opportunities to acquire alternative technologies from other partners where there are no limitations. There is no risk that any limitation of a single country or government can block Saudi Arabia from getting a full localized portfolio of products,” Andreas Schwer said during the Dubai Airshow in November.

In June 2019, a British court of appeals ruled that the country’s arms sales to Saudi Arabia were unlawful, citing human rights concerns amid the kingdom’s participation in the Yemen conflict. Additionally, Germany froze arms deliveries to Saudi Arabia after journalist Jamal Khashoggi was killed in October 2019. The West has blamed Saudi Arabia for the death, but the kingdom has denied involvement.

And in July 2019, the U.S. House of Representatives approved three resolutions to block President Donald Trump’s planned sale of guided missiles and other weapons to Saudi Arabia, the United Arab Emirates and Jordan.

“If the U.S. blocks us, we still have the opportunity for almost any of the products and any of the weapon systems to get it localized through our partnerships. Opportunities can be European, Asian, South African and Far East sources,” Schwer said.

When asked about possible cooperation with Russian or Chinese firms, Schwer said his state-owned defense firm "respects any international embargo, so currently we are not in a position to cooperate with any Russian entity or company because of the existing regulations. As such, Russia is not a partner of SAMI, but business with China is possible for SAMI. That is one of our potential sources of partnerships.”

Saudi Arabia agreed to buy Russian S-400 air defense systems during King Salman’s visit to Moscow in October 2017. The kingdom also signed a memorandum of understanding to locally develop Russian equipment.

Schwer noted that SAMI will not be part of the S-400 because it is a Russian product.

Aram Nerguizian, a senior adviser on civil-military relations in Arab States at the Carnegie Middle East Center, didn’t doubt the kingdom has options for reducing the effect of sanctions.

“Every country that seeks to acquire or gain access to top-tier U.S. defense technologies will eventually do some combination of government-to-government engagement and active lobbying tied to the legislative branch. None of this is new, and a host of countries will and do engage in these kinds of activities; KSA is no different,” he said, using an acronym for the Kingdom of Saudi Arabia.

Nerguizian said that in almost all cases — even among the most trusted of allies — there is some form of barrier to technological access.

“KSA can and will work to reduce the effect of arms export controls tied to sensitive or leading-edge technologies. It will also, undoubtedly, not achieve all the objectives it hopes to achieve, or secure the kind of access [it] feels are critical. It is just the nature of the U.S. arms control regime writ large, and the reality that the U.S. — like any country — will seek to preserve its technological edge,” he added.

As for SAMI’s potential cooperation with China?

“China, much like Russia, also presents the challenge of destabilizing the U.S.-KSA relationship at a time when U.S. strategic competition is clearly focused on those two countries," Nerguizian said.

SAMI also plans to collaborate with the UAE to build complementary systems and avoid redundant projects.

“We’ve had in the past lots of good talks with strategic partners in the UAE, which are most notably EDIC, Tawazun and Mubadala. We will include Edge in future talks and are keen to future collaboration ... to hopefully finalize this in the course of 2020,” Schwer said. Edge is a government-owned company in the UAE formed to address the threat of hybrid warfare and streamline the local defense industry.

In accordance with the economic plan Saudi Vision 2030, the kingdom continues to consolidate companies within SAMI to achieve a 50 percent technology transfer target. On June 26, SAMI announced it would take full control of Advanced Electronics Company and buy all its shares.

SAMI’s business plan involves three phases. “Phase 1 of two years’ length is the setup and definition phase, and is about to conclude by the end of 2019. Phase 2 is the rollout of production lines, which is expected to take three years and finish by the end of 2023. The last phase we planned is a stable growth phase,” Schwer explained.

The executive expects dramatic growth in the second phase.

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