'The Land of K-Defense Opportunities' Rising in the Middle East... Outlook [Yang Nakgyu's Defence Club]

Israel’s Strengthened Defense Industry and Numerous Competitors
Rising Defense Export Revenues from Rival Countries
Trump Administration’s Middle East Arms Export Approvals as a Variable

The Middle East, often called the "powder keg of the world," is emerging as a key region for 'K-Defense Industry' exports this year. Unlike Europe, which strengthens its defense market alliances based on close-knit partnerships, the Middle East consistently demands military modernization due to threats from neighboring hostile countries and internal rebel groups.

According to the Stockholm International Peace Research Institute (SIPRI) on the 19th, the defense spending as a percentage of GDP in Middle Eastern countries in 2023 is 8.9% for Lebanon, 7.1% for Saudi Arabia, 5.4% for Oman, 5.3% for Israel, 5.3% for the UAE, 4.9% for Jordan, and 4.9% for Kuwait, all higher than the global average of 2.3%. This is two to three times higher than South Korea’s defense spending ratio of 2.8%, which is currently in a ceasefire state. The annual defense market size in the Middle East, where arms procurement projects are increasing, reaches 40 trillion KRW. This contrasts sharply with the European Union (EU), which is considering expanding its regional weapons procurement ratio from the current 20% range to 60% by 2035.

Israel’s Iron Dome and Numerous Competitors

During the one year and four months of the Israel-Hamas war, Middle Eastern countries have realized the importance of air defense and have shown interest in Israel’s air defense network. Israel’s air defense system is regarded as one of the best in the world. To protect a land area roughly the size of Gyeongsangbuk-do Province, Israel has prepared a multi-layered air defense system divided into five altitude levels.

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Below 10 km altitude, the Iron Dome, first introduced in March 2011, is responsible. It is equipped with 11 batteries, each having 3 to 4 launchers capable of firing 20 intercept missiles. Up to 15 km, two batteries of David’s Sling cover the area; up to 25 km, eight batteries of PAC-3; up to 50 km, two batteries of Arrow 2; and beyond 100 km, one battery of Arrow 3 is responsible. Arrow 3 is the top-tier defense system and is referred to as Israel’s version of THAAD (Terminal High Altitude Area Defense). All these air defense systems are integrated under a joint command and control system, enabling efficient interception operations.

As the air defense network gained popularity, Israel’s defense industry also flourished. By the third quarter of last year, orders received by Israel’s three major defense companies?Elbit Systems, Rafael Advanced Defense Systems, and Israel Aerospace Industries (IAI)?increased by 25% compared to the same period the previous year. The total order value reached 63 billion USD (approximately 91.9 trillion KRW). Recently, Slovakia signed a contract with IAI to purchase an air defense system worth 560 million euros (approximately 842.1 billion KRW).

Increasing Defense Export Revenues from Competitor Countries

The reason K-Defense air defense systems are gaining popularity can be summarized as cost-effectiveness and fast delivery. Israel’s Iron Dome, which boasted an interception rate of over 90% against Palestinian rocket attacks by armed factions such as Hamas in 2023, revealed vulnerabilities against Hamas’s "rainstorm surprise attacks." Middle Eastern countries have turned their attention to South Korea’s air defense capabilities. Following the United Arab Emirates (UAE) in 2022, Saudi Arabia in 2023 and Iraq in 2024 imported the ‘Cheongung-II’ (M-SAM 2). At the defense industry exhibition ‘IDEX 2025’ held in Abu Dhabi, UAE, starting on the 17th, UAE President Mohamed bin Zayed Al Nahyan visited the LIG Nex1 booth, showing great interest.

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Interest has also increased in other weapon systems beyond air defense. In 2022, Egypt signed a contract to export the K9 self-propelled howitzer. Last year, Iraq signed a contract to export the multipurpose mobility helicopter ‘Surion,’ marking the first successful export of a domestically produced helicopter. Since the export of Cheongung to the UAE, exports have expanded to neighboring countries, raising expectations that the Surion export could also expand to Iraq’s neighboring countries.

Defense companies are focusing on Saudi Arabia, which is pushing large-scale military modernization projects this year. It is forecasted that Saudi Arabia’s export volume, including land, sea, and air, will reach 5 billion USD (approximately 7.25 trillion KRW).

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Hyundai Rotem plans to actively market the K2 tank in the Middle East. To this end, Hyundai Rotem is developing a domestic transmission to replace the German-made transmission, the heart of the K2 tank’s powerpack. Due to German regulations restricting the export of domestic products to the Middle East, the K2 tank could not be exported there, but the strategy is to plant a flag in the Middle Eastern market through parts localization. It is estimated that a market worth 18 trillion KRW will be formed in just Saudi Arabia and the UAE, where tank replacement periods are approaching. SNT Dynamics (transmission) and HD Hyundai Infracore (engine), which produce the domestic powerpack (transmission + engine) of the K2 tank, exhibited the Middle East-type K2 tank and the domestic powerpack at Hyundai Rotem’s outdoor booth at the ‘IDEX 2025’ exhibition.

Hyundai Wia is attending the UAE defense exhibition ‘IDEX 2025’ with mobility-based artillery systems. Representative products include a lightweight 105mm self-propelled howitzer, vehicle-mounted 81mm mortars, and an integrated anti-drone defense system (ADS). Kia plans to mainly exhibit military special vehicles such as the medium standard vehicle (KMTV) bonnet-type bare chassis, small tactical vehicle (KLTV) 2-seat cargo, and Tasman.

Trump Administration’s Middle East Arms Export Approvals as a Variable

There are also voices of concern. In 2021, the Biden administration temporarily froze arms exports to Saudi Arabia and the UAE, but the second Trump administration took a different approach, targeting the Middle Eastern defense market. On the day Israeli Prime Minister Benjamin Netanyahu visited the U.S., President Donald Trump notified Congress of plans to sell weapons to Israel, gifting nearly 11 trillion KRW worth of advanced weapons. According to the plan, the U.S. will deliver 3,000 Hellfire air-to-ground missiles and related equipment to Israel starting in 2028, and over 2,100 GBU-39 bombs and guidance systems starting next year. This has drawn criticism from Palestine, Saudi Arabia, the Arab League, and European countries, accusing it of violating international law.