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The oil price slump and the consequent economic problems forced many oil-exporting countries to cut military spending last year, with Saudi Arabia recording the largest absolute decrease in spending—$25.8 billion—the Stockholm International Peace Research Institute (SIPRI) said in its annual update on Monday.
While in 2016 military spending in North America increased annually for the first time since 2010, and expenditure in Western Europe grew for a second year running, many oil-dependent economies saw their military budgets contract due to lower national oil revenues, SIPRI noted.
The largest percentage cuts in military spending related to falling oil income were made by collapsing economy Venezuela, 56 percent; civil war-torn South Sudan, 54 percent; Azerbaijan, 36 percent; Iraq, 36 percent; and Saudi Arabia, 30 percent. Oil producing countries including Angola, Ecuador, Kazakhstan, Mexico, Oman, and Peru also saw notable declines in their respective military expenditure, SIPRI said.
13 of the 15 countries with the largest declines in 2016 military expenditure are oil exporters, the institute data show.
“Falling oil revenue and associated economic problems attached to the oil-price shock has forced many oil-exporting countries to reduce military spending,” said Dr Nan Tian, researcher with the SIPRI Arms and Military Expenditure (AMEX) program.
Meanwhile, the U.S. stayed on top of the list of countries with the highest annual military expenditure in the world. U.S military spending grew by 1.7 percent yearly to $611 billion in 2016. China came second with a 5.4 percent rise in spending to $215 billion, and Russia was third, lifting spending by 5.9 percent to $69.2 billion last year. Saudi Arabia - the third largest spender in 2015 -- dropped to fourth place in 2016, after its spending fell by 30 percent to $63.7 billion, “despite its continued involvement in regional wars,” SIPRI said.
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Aeveral oil-exporting countries -- namely Algeria, Iran, Kuwait, and Norway – bucked the trend and continued on with their spending plans last year, since they were better prepared to face the oil price shock, according to SIPRI.
Feeling the effects of the oil price crash, Saudi Arabia has not only cut military spending, it is also looking to freeze multi-billion-dollar projects.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.