The political economy of war: Incentives, costs, and choices for Saudi Arabia and the GCC

War is never only a matter of strategy, ideology or security dilemmas. It is also a system of economic and political incentives that shapes who benefits, who pays, and how long conflicts endure. Understanding this political economy is essential for any serious discussion of regional stability — and for the choices facing Saudi Arabia and the wider Gulf Cooperation Council.
At its core, the political economy of war examines how budgets, contracts, employment, lobbying, and institutional interests influence decisions to initiate, prolong or exit conflicts. In the American experience — the most consequential modern case — a durable structure has emerged. Large defense budgets flow heavily to private contractors. Over successive years, a majority of the Pentagon’s discretionary spending has gone to outside firms.
Major manufacturers and an expanding technology sector maintain production lines, political relationships, and local employment that create a structural preference for high baseline spending and openness to intervention. The broader public absorbs debt, opportunity costs, and strategic setbacks; a narrower circle captures sustained financial and political returns. This dynamic does not explain every war, but it helps explain why open-ended engagements with limited vital interests and expansive objectives have repeatedly proven difficult to terminate.
The pattern is reinforced by asymmetry of resolve. Adversaries fighting for survival or core autonomy often display greater determination than a distant power fighting wars of choice. The result is attrition without clear resolution, depletion of high-end munitions, and recurring questions about long-term sustainability. These are not abstract observations. They describe a system in which the costs of prolonged conflict are widely distributed while the benefits remain concentrated.
Saudi Arabia and the GCC encounter this system primarily through three channels: arms procurement, regional security externalities, and the opportunity costs of instability. 

Ordinary people across the region continue to bear the cumulative burdens of prolonged instability.

Dr. Turki Faisal Al-Rasheed

Gulf states remain major destinations for advanced weapons systems. Large packages of air and missile defense equipment, precision munitions, and sustainment support continue to flow from leading suppliers. These transfers address genuine capability requirements in a volatile neighborhood. At the same time, they represent a significant and recurring claim on national budgets. Saudi military expenditure ranks among the highest in the world in absolute terms and accounts for a substantial share of government spending. The political economy of supplier states thus intersects directly with Gulf fiscal planning: External demand for advanced systems supports production and employment abroad while requiring sustained outlays at home.
Regional conflicts generate more immediate shocks. Disruptions to critical energy routes, infrastructure damage from missiles and drone exchanges, and the chilling of aviation, tourism, and investment produces uneven but tangible effects across the GCC. Economies, more fully dependent on a single maritime chokepoint, face sharper contractions in export volumes. Larger and more diversified economies possess partial mitigation options — alternative export routes, substantial non-oil activity, and fiscal buffers — yet still experience output losses, repair costs, and delayed progress on development agendas. Elevated risk premiums can raise borrowing costs and deter investment precisely when economic transformation requires both capital and confidence.
Chronic instability also imposes opportunity costs. Resources devoted to readiness and emergency response compete with investments in human capital, infrastructure, and the non-oil private sector that underpin national transformation strategies. The longer external conflicts remain open-ended, the greater the diversion of attention and resources from long-term priorities.
Gulf states are not passive objects of this political economy. Saudi Arabia’s systematic effort to localize defense spending illustrates deliberate adaptation. Through regulatory frameworks, industrial participation requirements, joint ventures, and the development of domestic capabilities, localization of military expenditure has risen substantially from very low levels a decade ago. The formal target of localizing more than half of military spending by 2030 remains ambitious and technologically demanding. Progress already converts part of the procurement bill into domestic industrial capacity, employment, and technological learning. This is not merely an industrial policy; it is a strategic response to reduce vulnerability to external supply chains and the political economies that shape them.
A complementary posture of strategic patience and diversified partnerships reflects the same logic. Rather than remaining locked into the role of indefinite frontline customer or proxy within external conflict systems, regional capitals have raised the reciprocal stakes of partnership, expanded economic and diplomatic ties across multiple powers, and prioritized national development timelines. This approach treats the costs of prolonged external attrition as constraints to be managed rather than destinies to be accepted. Strategic patience can appear passive in the short term. Across longer historical arcs, it has repeatedly served as a tool for survival and leverage.
The political economy of war does not erase genuine security dilemmas in the Gulf, nor does it dictate every policy choice. It does, however, systematically elevate the costs of open-ended engagement for regional states while generating concentrated benefits elsewhere. For Saudi Arabia and the GCC, the practical consequences appear in elevated import dependence (now being actively reduced), vulnerability to energy-route and infrastructure shocks, and the continuous need to balance immediate readiness against long-term transformation.
A more balanced approach would reduce the leverage of any single set of special interests, support mutual agency among the parties most directly affected by conflict, and measure success by reduced human and economic costs rather than by advantages secured for a few. Ordinary people across the region continue to bear the cumulative burdens of prolonged instability. Clearer definition of achievable ends, realistic assessment of material constraints, and recognition of the incentive structures that reward prolongation would better serve enduring national interests than attrition without a coherent framework for resolution.
Prudent strategy requires both resolve and restraint. Understanding the political economy of war is not an exercise in cynicism. It is a practical requirement for any society seeking to protect its security and development trajectory in a multipolar environment where no single power can or will underwrite others’ priorities on previous terms. The capacity to adapt — rather than absorb indefinite costs — remains a central measure of resilience.

• Dr. Turki Faisal Al-Rasheed is a visiting professor at the University of Arizona and an adviser at the American University of Beirut. He is the author of “Saudi Arabia’s Transformation: Uncertainty and Sustainability.”
X: @TurkiFRasheed