Armed with German Help

BERLIN/RIYADH (Own report) - Germany is helping Saudi Arabia establish an independent arms industry. Via its South African subsidiary, the Rheinmetall Group has already set up an ammunition factory in Riyadh, in which Saudi Arabia can produce artillery shells and bombs for its Air Force. Next month, a Rheinmetall manager will be appointed chair of the new arms producer - SAMI (Saudi Arabian Military Industries). Saudi Arabia, which competes with Russia for the third place of countries with the highest military budgets, is seeking to buy half its weaponry eventually from domestic companies. SAMI should thus become one of the 25 most important arms manufacturers in the world - with close contacts to US arms manufacturing giants and the EU's military industry. This project is being launched at a time when Riyadh is on an extremely aggressive course, to win a power struggle with Iran for predominance in the Middle East.

Ammunition and Bombs

Germany is not only supplying Saudi Arabia with military hardware,[1] but has occasionally also supported the Saudi's - still quite rudimentary - arms industry. Already in 1969, the Federal Republic of Germany granted a license to the state-owned Military Industries Corporation (MIC), headquartered in Riyadh, for the production of G3 assault rifles, later followed by licenses for the MP5 machine gun and the G36 assault rifle (in 2008), both of which - like their G3 predecessor - had been developed by Heckler & Koch (in Oberndorf).[2] When in 2010, Saudi Arabia began planning its own armaments plant, the German Rheinmetall Group, via its South African subsidiary Rheinmetall Denel Munition (RDM), submitted an application. It received the commission to manage the construction of the factory in Al Kharj southeast of Rijayd.[3] The plant opened in March 2016. Since then, MIC has been producing mortar and artillery shells as well as bombs weighing from 500 to 2 000 lbs for the Saudi Air Force. Rheinmetall Denel Munition (RDM) was paid nearly $240 million for its aid in constructing the plant and it continues to support the plant.[4]

Shared Markets

It is not unusual for German arms companies to transact their business with non-NATO countries - or their closest allies - via off-shore subsidiaries. Such an approach skirts conflicts with German arms exports regulations and above all, avoids critical public debates. This applies not only to RDM, jointly operated by Germany's Rheinmetall (51 percent) and South Africa's Denel (49 percent). In the context of RDM, Rheinmetall explicitly says that "Rheinmetall Defence’s business is mainly focused on NATO countries. RDM’s focus is on Asia, the Middle East, South America, South Africa and African countries. Rheinmetall and its South African unit are able to draw on an expanded product portfolio when serving their respective core markets."[5] A second example is RWM Italia (Rheinmetall Waffe Munition Italia). In 2014, 39 percent - and in 2015, 55 percent - of this subsidiary's intake was through sales to Saudi Arabia. The subsidiary manufactures guided as well as unguided aerial bombs.[6] The fact has been documented that heavy bombs produced by RWM Italia have been used in the war on Yemen.[7]

Vision 2030

Saudi Arabia is now also receiving German support in its current efforts to create its own arms industry. Riyadh seeks to transform the Saudi economy and break its acute dependency on the oil sector to create a modern, diversified national economy. For this purpose, the current Crown Prince, Mohammad bin Salman al Saud introduced a comprehensive program entitled "Vision 2030" in late April 2016. Alongside many other aspects, this program calls for no longer domestically providing five percent of the Saudi military's weaponry and maintenance, but rather 50 percent in the future.[8] On the world's arms expenditures scale, Saudi Arabia and Russia alternate between third and fourth place. A more efficient domestic arms industry would increase the overall economic benefits of these expenditures and also make the Saudi Armed Forces less dependent on arms imports. To reach this objective, the government's Public Investment Fund (PIF) founded the Saudi Arabian Military Industries (SAMI) Group in May 2017. By 2020, SAMI is expected to generate 900 million Saudi Riyal (€204 million) in sales and grow rapidly with around 5,000 employees. The goal is to become one of the 25 largest arms companies in the world. Observers consider these hopes very overblown, while admitting that Riyadh is placing a great deal of energy into the project and could at least be partially successful.

Open Doors

To accelerate the development of the defense industry, Riyadh has now appointed the German manager Andreas Schwer to head SAMI. Whereas Mohammed al Mady, President of the long-established Saudi arms producer MIC, has close ties to the United States (among other distinctions, he is Co-Chairman Emeritus of the US-Saudi Arabian Business Council) Schwer is, on the other hand, closely enmeshed with the EU's arms industry. He has served on the management board of Airbus - particularly in the arms department - and September 1, 2012, following a brief stay in the US, he joined the executive board of Rheinmetall Defense, where he was in charge of the Division Combat Systems department. Next month he is supposed to take charge of the SAMI management. Since its founding in May, the company (with its four departments - Defense Electronics, Air Systems, Land Systems and Weapons and Missiles) has concluded letters of intent with the US arms giants, Lockheed Martin, Raytheon, General Dynamics and Boeing for cooperation. More recently, an agreement was reached with Russia's Rosoboronexport for the delivery of the S-400 air-defense system. The Saudi company seeks also access to Russian know how in this field. Schwer, who is currently still manager at Rheinmetall in Düsseldorf, can possibly open doors for SAMI at the EU's arms producers or their subsidiaries outside the EU.

Riyadh's Aggressive Course

SAMI's founding - like the rest of the "Vision 2030" program - is aimed at Riyadh's attempt to become a predominating power in the Middle East. Riyadh is, therefore, taking a very aggressive course, to weaken its rival Iran. Already during the Syrian War, Riyadh sought to neutralize Iran's influence in Damascus - to no avail. In March 2015, it launched its war on Yemen for the same reason - again without the aspired success.[9] This year, it first attempted to force the Qatari Emirate into a strict anti-Iranian policy with a total blockade,[10] then, in early November, Lebanon became the target of its aggression. Lebanon's Prime Minister, Saad Hariri was forced to resign while visiting Riyadh, and obviously prevented from returning home. Yesterday, he was allowed to leave Saudi Arabia - for France. According to observers, the Saudi leadership is also seeking to bring anti-Iranian hardliners to power in Lebanon - which until now has also not happened. With its extremely dangerous escalation course, Riyadh not only has German military hardware at its disposal, but in the foreseeable future, will have German support in the development of its own arms industry.


[1] See also Ein Spitzenkäufer deutschen Kriegsgeräts und Assisting Famine (III).

[2] See also Mit dem G36 gegen das G3.

[3] Otfried Nassauer: Hemmungslos in alle Welt. Die Munitionsexporte der Rheinmetall AG. BITS-Research Report 16.01. Berlin, Oktober 2016.

[4] Saudi Arabia opens munitions factory built by Rheinmetall Denel Munition. 04.04.2016.

[5] Rheinmetall Denel Munition (Pty) Ltd.

[6] Otfried Nassauer: Hemmungslos in alle Welt. Die Munitionsexporte der Rheinmetall AG. BITS-Research Report 16.01. Berlin, Oktober 2016.

[7] Marta Rizzo: Armi, "Basta con le esportazioni in Arabia Saudita e Yemen". 14.05.2017.

[8] Vision 2030: The Public Investment Fund Program (2018-2020). Riyad 2017.

[9] See also In Flammen und In Flames (II).

[10] See also Der Anti-Trump.

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