Do Oil Exports Fuel Defense Spending?

This monograph explores the impact that oil revenue had on the national defense spending of five oil-exporting countries. Despite periods of falling oil revenues, these countries typically did not lower defense spending. In some cases, defense spending increased sharply, or the rate of decrease was much lower than the drop in oil revenues. This condition creates challenges for national security professionals. If nations face falling oil revenues and still have the will and ability to expand their military or security capabilities, then they might do so through the sacrifice of domestic spending or regional stability. Economic sanctions, worldwide recession, or falling oil demand may not stop these oil-exporting nations from purchasing weapons and creating large security forces. Policies that attempt to limit oil revenues of potential enemies alone may not be sufficient to inhibit them from creating regional instability through expansion of their defense capabilities. Hopes for reduced defense expenditures, by countries like Iran, as a result of a drop in energy demand seem to be diminished by these findings. A more complex picture emerges that forces analysts and policymakers to search more broadly for options to stem potential arms races that may be fueled by the riches of oil-exporting countries.