Joint Arab Defense Is An Economically Irrational Option

Without delving into politics or conspiracy theories, let’s take a look at the state of defense industries and defense cooperation in the Arab world, and try to understand why there is no joint Arab defense project. I will surprise you when I lead you to the idea that the choice not to cooperate in the field of defense is actually a rational decision.

If you are the type of person who looks for easy answers, such as saying that Israel and the United States do not want the Arabs to cooperate with each other, then this post is not for you. I am here to talk based on facts, reality, and reasons that are far from conspiracy theories and convenient answers.

In 2024, the Middle East spent $243 billion on defense. Saudi Arabia alone spent $80.3 billion, making it the seventh largest country in the world in terms of defense spending, by the way. If we add the UAE, Iraq, Egypt, Kuwait, and Qatar, we find that the total is approximately $150 billion spent on defense by these countries alone in one year. That’s a huge number, isn’t it? So where’s the problem?

To understand the current situation, let’s go back to 1982, when the Gulf Cooperation Council decided to establish a joint defense force. It was a great and important decision, and without going into political details, the result of this joint force was… zero. It had no impact, either technically or militarily, in the region.

In 2014, the Gulf states once again decided to establish a unified intelligence apparatus with a single command center. But, once again, the idea failed, mainly because each country was unwilling to relinquish part of its sovereignty or its priority, dominance, and right to make decisions within the region.

The problem we are talking about here is not military at all, but rather economic and institutional. It is natural that everyone would benefit militarily if there were a unified army or a joint defense industry in which we all participated.

Economically, however, the situation is different. When we look at the issue from an economic perspective, we find that Arab defense cooperation is the worst option for each individual party, even if it is the best for the group as a whole.

This problem is known in economics as the “collective action problem.” The idea is simply that there is always a difference between short-term individual interests and long-term collective interests. When each player makes a completely rational decision without any ill will, they find that the best option for them is not to commit to cooperation, even if they know for sure that full cooperation from all parties will lead to a better outcome for everyone.

The problem is that the collective return is distributed among everyone, while each party bears the cost directly and immediately. For example: relinquishing part of sovereignty, losing control, disclosing sensitive information, or participating in decision-making. Therefore, each country enters the game believing that if it cooperates while others do not cooperate to the same extent, it will be the loser. So it chooses to withdraw, obstruct, or set conditions that prolong negotiations, and the end result is that everyone loses, even though no one intended to sabotage the cooperation.

This is not betrayal or weakness, but simply cold economic calculation within a game designed to fail unless there are real institutions to break this equation.

Incidentally, this same thing is currently happening in defense cooperation within Europe.

We can look at the problem from a different economic angle.

In any defense project, there are several stages. The first stage occurs before the project even begins, when political decision-makers meet with military leaders and defense industries. The decision-maker says: “We need to enter into a partnership with such-and-such country,” but the military and defense companies respond with refusal, fearing the loss of their technical capabilities or the sharing of sensitive sovereign information.

Then we start the project, which includes different countries, and Saudi Arabia says, “I have the most influence,” and the UAE says, “No, I have the best technology.” This leads to disagreement over each country’s share and scope of responsibility within the project. Add to that the fact that each country enters the project with different motives; some want to develop specific technology, some seek to increase sales and profits, and others aspire to train their engineers technically. This diversity of objectives makes managing incentives and expectations a very complex and difficult process.

But let’s assume that the project has actually started and is up and running. Here comes another problem: not the cost of the project itself, but the cost of coordination within it. Defense industries have certain standards, and some countries may operate according to different standards than others, and trying to unify these standards at the technical and administrative levels is a daunting task. There is also the cost of monitoring and enforcement: who ensures that each country implements what it has committed to? Who monitors that technology or information is not leaked? Managing all of this is extremely difficult.

This brings us to another point. A recent study by PwC indicates that the unregulated rush to purchase defense systems in the Gulf states costs them billions more annually due to the complexity of supply chains and maintenance. This is true and important, but it is also very superficial, because trying to reduce these costs will cost countries more than leaving them as they are.

This means that the defense spending of the countries we mentioned amounts to about $150 billion per year, but what is spent locally on internal development does not exceed $6 billion. This means that most of this spending is directed toward imports, and each country has its own supply chains, from different suppliers and companies, which leads to increased costs for everyone. However, the cost of avoiding or reducing this increase is very difficult.

For example, someone might say: instead of each country buying five fighter jets on its own, if we all bought a single deal for 50 fighter jets for all of us, the price would of course be lower for everyone. But the problem here is that not all of these countries need the same type of fighter jet, and even if they all did, each country would likely request completely different specifications to suit its own needs. This is in addition to the political constraints imposed by relations between countries, which makes the issue much more complicated than simply saying, “Let’s unite and buy together.”

In Europe, Europeans do not face most of the obstacles that the Gulf or the Arab world suffers from. They have stable institutions, clear laws, and effective accountability mechanisms. However, when they attempted to implement a relatively simple joint defense project such as the Eurodrone drone project, the story quickly turned into a harsh failure in the economics of cooperation.

The project began between France, Germany, Italy, and Spain — four major industrial countries with strong armies and advanced defense industries. In theory, all the ideal conditions were in place, but in practice, each country entered the project thinking like an individual player rather than as part of a team.

Germany said, “We need a drone that can operate in bad weather and storms for our domestic needs.”

France responded, “That will make the system heavier and more expensive and will not be exportable, thus undermining the economic viability of the project.”

This was not purely a technical problem, nor was it even a political disagreement; it was a problem of economic incentives. Each party tried to maximize its national gains within a project that was supposed to be collective.

The outcome was predictable for most researchers and specialists: costs spiraled out of control and doubled, schedules were delayed for years, and in the end, France itself withdrew after finding that the calculations no longer made sense for it. The project remains to this day halfway through — neither fully completed nor officially canceled.

This is a European example among countries with strong institutions, similar economies, and long experience in military cooperation. If this failure occurred in such a strong and stable environment, the question should not be: “Why can’t the Middle East build a joint defense industry?”

The real question is: “How do we imagine that it will be easier for us?”

The problem is that countries view national security as a matter of sovereignty rather than economics, so the rational choice is for the state to spend more to preserve its sovereignty, even if the cost is high.

When the economic equation is calculated rationally, we find that entering into complex cooperation is more costly than continuing to import ready-made equipment from the United States, France, or Russia. This is because achieving defense cooperation requires starting with a long series of problems, the last of which is determining what needs to be manufactured jointly.

That is why I will give you two economic words to always keep in mind: Organized failure is sometimes more rational than joint success, as long as each party has adapted to the status quo and prefers its stability to the risk of an uncertain joint future.