UAE oil profits pay for fighters

The UAE has earned enough from high oil prices to finance a multi-billion dollar deal for the purchase of up to 80 fighters planes, defense sources said.

"It is package of the century for the UAE and one of the biggest arms deals in the Middle East," a Gulf defense source said.

"I believe the United Arab Emirates would not have pressed on with such a deal if there were financial problems. High oil prices have brought it large surplus funds, and I think a part of them has already been earmarked for the aircraft deal."

The United Arab Emirates, which controls nearly ten percent of the world’s recoverable oil reserves, is already reeling under the cost of heavy defense purchases involving a 3.8 billion US dollar tank deal signed in 1993 with Giat Industries of France.

Military sources said the United Arab Emirates has spent more than 6 billion US dollars on weapons over the past six years as part of plans to bolster its armed forces, following the 1990 Iraqi invasion of Kuwait.

Such purchases have combined with other military and security commitments to boost the country’s defense expenditure to 25-35 percent of its gross domestic product between 1990 and 1996, official figures show.

But such payments have not affected its coffers, as they were offset by a windfall of higher oil prices and production.

The United Arab Emirates produced nearly 1 million barrels per day of crude under an Opec quota before it was allowed to boost output to 2.16 million barrels per day to make up for the disruption to Kuwait and Iraqi crude during the 1991 Gulf war.

Despite growing military spending, the UAE’s financial position has remained robust, with its international reserves growing steadily from 4.5 billion US dollars in 1990 to 7.4 billion at the end of 1995.

They increased to around 8.7 billion US dollars at the end of March.

Firm oil prices encouraged it to boost total spending by more than 15 percent to 19.5 billion US dollars in 1996, from 16.9 billion US dollars in 1995.

There was no detailed spending breakdown, but military sources said large funds had been allocated for defense.

United Arab Emirates sources said last week that Abu Dhabi was nearing a decision on awarding the fighter contract that has triggered a contest between France, Britain and the United States.