U.S. companies set sights on Middle East arms market: global arms sales.

• Author: Jovovic, Aleksandar D.
• Position: Industry overview

The exodus of U.S. defense executives to the Persian Gulf region was palpable in February as the Abu Dhabi-based IDEX trade show kicked off the year's international defense business development cycle. Most recently, the U.S. government confirmed agreements to provide $10 billion worth of arms packages to Israel, the United Arab Emirates and Saudi Arabia.

Motivated by increasingly ambitious international growth targets, leading U.S. defense firms are justified in giving the region their full attention. In the next five years, it is projected that Gulf nations will invest more than $170 billion in military hardware. Saudi Arabia and the UAE are in the lead, with an impressive $115 billion during that period. Aspiring players include Qatar and Iraq.

But challenges abound for U.S. suppliers, including rigorous competition, complex and drawn out decision making and demanding offset and partnering requirements.

The Gulf countries have proven keen customers across the defense portfolio, with requirements for fighter jets, air and missile defense and land combat equipment. The latter recorded one of the most notable wins for a U.S. firm at the show, with Oshkosh Corp. inking its all-terrain armored truck deal with the UAE worth roughly $380 million.

Unmanned air vehicles took center stage as well, with General Atomics Aeronautical Systems announcing the sale of the export version of the Predator to the UAE armed forces. Traditionally strong on the maritime side, European firms announced several naval contracts, though U.S. firms are also working opportunities in the region, notably in Saudi Arabia.

New competitors are also encroaching, with firms from South Korea, Turkey and South Africa showcasing their offerings, as well as the usual suspects from Russia and China, focused mostly on ground vehicles, munitions and missiles.

U.S. firms may be anxious to book new sales in the aftermath of sequestration, but the Gulf defense markets are a long-term play. And while urgent requirements occasionally rule the day, firms that have correctly positioned themselves for the long haul and developed strong customer familiarity usually reap the rewards.

Arms suppliers lavish time and attention on their domestic customers, in an effort to learn about their needs and tailor offerings to their requirements. Similar efforts are called for in the Gulf, which faces the threat of widespread regional insecurity, distinct political dynamics, post-Arab Spring...