Gulf tensions seen as bonus for arms makers

[Reuter / Michael Georgy]

DUBAI, Sept 9 (Reuter) - The U.S. strikes against Iraq will
stoke the tension that has made the Gulf a multi-billion dollar
arms bazaar, Western diplomats and industry executives said on
Monday.
``It may sound mercenary, but when you cut it down to the
bone, security is a major concern for Gulf states and that means
they will need weapons,'' an executive of a major U.S. arms
company said of Iraqi President Saddam Hussein's sweep into
northern Iraq.
The Iraqi leader's defiant speech on state television,
wearing a field marshall's uniform, after Washington retaliated
last week with cruise missile attacks was a reminder of the
continuing tension in the region.
Industry executives said this latest conflict would not
trigger an arms-buying spree, but tension means long-term gains
for Western arms makers seeking to sell to Gulf states that rely
on U.S. protection from Iraq and Iran.
``This does not mean a windfall. But over the long term, the
Gulf states will be concerned with security,'' said the
executive.
Gulf states have stressed the need to preserve Iraq's
sovereignty and territorial unity but diplomats say hawks Saudi
Arabia and Kuwait do not want Saddam to think he can act with
impunity.
``These types of tensions will continue to make the Gulf a
valuable market in the future,'' said a Western diplomat in the
United Arab Emirates, which has emerged as a major player in the
international arms market.
Armed with vast oil wealth, Gulf Arab states haunted by
memories of Iraq's lightning invasion of Kuwait in 1990 are
bristling with high-tech weapons, with more deals on the
horizon.
Western firms are competing to sell the UAE up to 80
long-range strike aircraft worth up to $6 billion. Lockheed
Martin Corp <LMT.N>of the United States and France's Dassault
Aviation <AVMD.PA>are remaining bidders in what is expected to
be the last contract of its size this century.
Saudi Arabia is also a key customer in the international
arms market, with deals worth $75.9 billion concluded between
1987 and 1994. About a third of state spending has gone on
defence and security, including deals with Western allies such
as the United States, Britain and France.
Industry sources say any Iranian or Iraqi attacks would
tighten alliances between Gulf states and Western countries and
could pave the way for more arms sales.
``The latest problems with Iraq will not mean an immediate
rise in sales but will have a long-term effect. But military
action by Iraq would mean Gulf states would speed up plans to
buy weapons,'' said another executive from a leading U.S. defence
company.
Despite Gulf states' budget constraints caused by weaker oil
prices and enormous Gulf War costs, diplomats and industry
sources say volatility in the Gulf guarantees more profits to
arms suppliers.
``If you follow CNN, it seems as if the Gulf is a war zone.
The tensions are good for arms makers,'' said a Western diplomat.