While not as great as it had been in the recent past, the role of arms and military spending in the societies and economies of the Gulf states is still much larger than in any other area of the world. It was not until after the Iran-Iraq War and the 1991 Gulf war that these states felt that they could make reductions, necessitated by the 1980s fall in world oil prices, in their very large levels of military spending. Only in Kuwait, for understandable reasons, did military spending in 1995, measured in current dollars, exceed that of 1985. Excepting Kuwait, military expenditures per capita are down across the region, as is the percentage of gross domestic product (GDP) spent on the military.
Those reductions, however, are in levels of military expenditure that were the highest in the world. Even today, the Gulf remains one of the most militarized areas of the world. In 1995, every Gulf state except Iran devoted more of its GDP to military expenditures than the world average of 4.2 percent. Only North Korea, Bosnia, Croatia and Serbia joined four of the Gulf states at a rate above 10 percent of their GDP.  While the yearly dollar values of arms imports have decreased in the last few years for every Gulf state, particularly when compared to the early 1990s, the Gulf remains by far the largest regional market for the world’s weapons trade.
According to the US Arms Control and Disarmament Agency (ACDA), during the period 1992-1994 the Middle East as a whole imported $34 billion in arms, 43 percent of the world’s total; the eight Gulf states account for more than 70 percent of Middle East imports.  Up until 1991, Iraq was attempting to develop weapons of mass destruction. It is unclear whether Iran is following a similar course.  Iran, Iraq and Saudi Arabia have all obtained significant surface-to-surface missile capacity.
It is easy to understand why military expenditures in the Gulf states are so high: The area has been the scene of two major wars since 1980, there are active territorial disputes between Iraq and Kuwait, Iran and the United Arab Emirates, Qatar and Bahrain, Yemen and Saudi Arabia and latent disputes among several other Gulf dyads. Moreover, these high levels of spending reflect the fact that militaries in these countries provide domestic security for the ruling regimes. Finally, powerful individuals in each of these states benefit from military spending through contracts with defense establishments and commissions on arms purchases.
For three decades, the only significant restraint on military spending had been the amount of revenue available to state elites. The effects of the UN economic sanctions on Iraqi military spending are obvious. In the Arabian Peninsula, monarchical governments are finding increasingly that they can no longer have both unlimited guns and unlimited butter. The oil wealth of the 1970s and early 1980s allowed all Gulf states to increase military spending, seemingly without regard for the price tag. When oil prices fell in the mid-1980s, Gulf monarchies sustained high levels of military and social spending by drawing on reserves and borrowing international and domestic funds. Kuwait and Saudi Arabia funded the Gulf war by substantially depleting their foreign reserves. With oil prices relatively flat since 1991 and growing populations straining the welfare states built during the 1970s, Gulf governments have had to subject even the military to cuts. The extent of those cuts is disputed. The data in this article are taken from The Military Balance, the annual publication of the International Institute for Strategic Studies. Other sources, report slightly different figures. The Stockholm International Peace Research Institute (SIPRI) reports somewhat higher figures for Gulf state military spending;ACDA’s figures differ from country to country, sometimes higher and sometimes lower. But the general trend in Gulf military spending is reflected in all the sources, namely, real declines, but still very high levels compared to other areas of the world.
The declines in overall military spending are reflected in similar declines in the dollar value of arms imports. Again, these decreases come from extremely high levels, and the Gulf remains the major arms importing region in the world. Revenue constraints, however, are limiting what seemed in the 1970s and 1980s to be unlimited Gulf spending on arms imports. An important indicator of these revenue constraints is the fact that Saudi Arabia, which in the 1970s and early 1980s paid cash for American arms imports, has now run up arrears of $13.5 billion dollars in its foreign military sales account with the US government, with a promise to bring the balance down to $10 billion by the end of the year. 
One important distinction to keep in mind when examining arms import figures is that arms sales contracts, which get front-page coverage when they are signed, are not the same as yearly arms imports. Major arms sales contracts are always paid for over a number of years, with product deliveries similarly spread out. In the two years following the Gulf war when Gulf monarchies signed orders for over $30 billion in weapons, their actual imports were much less.  As a result, the true annual economic burden of arms sales contracts is much less than one might assume from the value of the contracts, although the contracts lock the states into financial obligations for years.
Saudi Arabia’s arms import figures justify close scrutiny. Those figures, taken from ACDA, are vastly higher than any other state in the Gulf or, for that matter, the world. They are not an accurate measure of Saudi arms imports, however, because they include the value of equipment purchased for military construction projects. SIPRI calculates that from 1991 to 1995 Saudi Arabia imported $7.1 billion in arms, ranking third in the world behind Turkey and Egypt for that period.  In general, SIPRI figures are lower than ACDA figures for arms imports.
The cost of American military involvement in the Gulf is beginning to generate controversy in the US. The debate begins with the numbers, on which there is little agreement among experts. Graham Fuller and Ian Lessor, in a recent article in Foreign Affairs, contend that the annual cost of American military activity in the Gulf could be as high as $60 billion per year, about one fifth of the total US defense budget.  Others contend that this figure vastly overstates the real costs of US operations in the area.
Beyond question, however, is that the US is the largest supplier of weapons to the Gulf area and to the Middle East as a whole. According to ACDA, during the period 1992-1994 the US was the source of over 50 percent of the arms sold in the Middle East as a whole, and approximately 43 percent of the arms sold in the Gulf. Great Britain was a close second on the strength of its massive, multi-year fighter plane sale to Saudi Arabia (known as the al-Yamama deal, with Russia and China supplying the vast majority of Iran’s arms imports. 
While the Gulf is an important sector of US military activity, the actual US presence is much smaller than in other areas of the world (Europe, East Asia) and much smaller than many people in the Gulf suppose. A significant part of the US deployment in Saudi Arabia maintains the southern “no-fly zone” in Iraq and presumably will leave the region once sanctions on Iraq are lifted. US officials claim that there are no permanent US military facilities in the Gulf aside from the naval headquarters in Bahrain.
Although the US military presence in the Gulf is modest in comparison with other world areas, the US military’s concentration on the region has grown steadily since the Soviet invasion of Afghanistan in 1979 prompted President Jimmy Carter to declare that the United States would use military force to defend its vital interests in the Gulf. The Rapid Deployment Joint Task Force established under Carter to coordinate US military activity has become a full-fledged regional command (Central Command), on the model of US commands in other world areas. The US naval force in the region has been upgraded to fleet status (the Fifth Fleet). The US naval deployments of 1987-1988, to protect Kuwaiti and Saudi shipping at the end of the Iran-Iraq War were quickly followed by the 1990-1991 Gulf war, which saw the deployment of more than 500,000 US military personnel and billions of dollars of US military equipment to the area. The US has negotiated access and/or prepositioning agreements with all the smaller Gulf monarchies. While Saudi Arabia refuses to codify the nature of its military cooperation with the United States, in a new defense agreement, that cooperation remains extensive.
 International Institute for Strategic Studies, The Military Balance 1996/97 (London: Oxford University Press, 1996), Table 1, pp. 306-311.
 US Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers 1995 (Washington, DC: US Government Printing Office, April 1996), pp. 10-13.
 See, for example, Shahram Chubin, “Does Iran Want Nuclear Weapons?” Survival 37/1 (Spring 1995).
 Jane’s Defense Weekly, February 26, 1997.
 F. Gregory Gause, III, Oil Monarchies: Domestic and Security Challenges in the Arab Gulf States (New York: Council on Foreign Relations Press, 1994), p. 126. For a full discussion of the arms issue in the aftermath of the Gulf war, see Yahya Sadowski, Scuds or Butter? The Political Economy of Arms Control in the Middle East (Washington, DC: The Brookings Institution, 1993).
 Stockholm International Peace Research Institute, SIPRI Yearbook 1996 — Armaments, Disarmament and International Security (Oxford: Oxford University Press, 1996), p. 466.
 Graham E. Fuller and Ian O. Lesser, “Persian Gulf Myths,” Foreign Affairs 76/3 (May-June 1997).
 ACDA, p. 155.