United Arab Emirates Defence and Security Report Q1 2009

Although the UAE has established an enviable reputation for stability in the Middle East, it nonetheless scores fairly poorly in our long-term political risk ratings (64.3 out of a possible 100.0, compared with 75.8 in our short-term ratings) due to its lack of representative democracy. This is not a problem at present - the government's huge wealth means it can ensure its citizens enjoy a high standard of living.

Although the UAE is forecast to enjoy robust growth over the next five years, the danger of property sector correction looms large over the economy, posing risks to consumer spending, investment and the banking sector.

In general the UAE enjoys good relations with most of its neighbouring and regional states, with only very limited disputes to note. The UAE holds suspicions towards Saudi Arabia with regard to the regional dominance of the latter, and Iran remains an adversary to the UAE due to a long running dispute between the two states over a number of strategically placed small islands in the Persian Gulf. Conflict between the two is unlikely, although the UAE has repeatedly sought international mediation over the dispute.

The UAE's armed forces are small, but very well equipped with sophisticated technology hardware. As the UAE emerges into a formidable military power, contesting with Saudi Arabia for military dominance in the region, its armed forces are able to pose a significant deterrent to any potential aggressor. In addition, the Emirates enjoy the support of numerous allies, including those in the Gulf Cooperation Council (GCC) security guarantee, the US, UK, France and Germany.

The UAE's modernisation programme has created a military with the potential to challenge Iran and Saudi Arabia for regional dominance. The confluence of strategic imperative and accessible wealth contributed to the UAE's establishment as a procurer, not a producer, of arms. With the exception of its recently developed capacity represented by Abu Dhabi Ship Building, the UAE lacks an established local defence industry and its forces are almost entirely reliant upon foreign procurement, training and expertise. To dilute the potential political effect of heavy reliance of foreign arms producers, the UAE consciously aims to diversify its suppliers among the four main global suppliers of arms: the US, France, the UK and Russia. The UAE does not export arms to any significant degree.

It seems that, consistent with recent evaluations, the Emirates have little to worry about for the time being - a stable political system, a strong economy, limited security threats and a military with technology that can, in some aspects, rival the best in the world.