BAE to Seal $40B Eurofighter Deal With Saudis

[SaudiArabian]

Saudis set to pay cash, not oil for UK jets
Tue Sep 11, 2007 12:14pm EDT

By Jason Neely, European Aerospace & Airlines Correspondent

LONDON, Sept 11 (Reuters) - Britain and Saudi Arabia are close to a multibillion dollar fighter jet deal that will use cash in a break from controversial arms-for-oil pacts of the past, according to a source familiar with the process.

The deal, which the source said could be struck as early as Tuesday, is aimed at providing greater transparency after secretive past deals triggered investigations into suspected bribery. Saudi Arabia is expected to spend up to 20 billion pounds

($41 billion) on 72 Eurofighter Typhoon combat jets, including weapons, spares and maintenance.

Saudi Defence Minister Prince Sultan was due to present terms of the deal to King Abdullah for approval in a meeting in Jeddah on Tuesday, the source said, adding it was not certain whether the Saudi government would announce the outcome immediately.

Saudi Arabia's defence ministry was not available for immediate comment.

A spokesman for Britain's Ministry of Defence declined to comment except to say a deal was expected by year's end.

The company that will serve as prime contractor, BAE Systems declined to comment on the state-to-state deal.


AL YAMAMAH

Previous Anglo-Saudi arms-for-oil deals, dubbed Al Yamamah, Arabic for "the dove", began in the mid-1980s and remain the largest export contracts in British history.

Al Yamamah netted BAE and other firms more than 40 billion pounds ($87.11 billion) in business, with Saudi Arabia earmarking as much as 600,000 barrels of crude oil a day to be sold on account for the UK to pay for Tornado combat jets and other equipment and services.

Equipment and services were supplied according to the value of allocated fixed daily volumes of oil output, with occasional cash compensation when crude prices dipped.

When the latest requirement was agreed in 2006 it was seen by analysts as an extension of the Al Yamamah deals, with further volumes of oil to be sold for the UK.

At current prices, the programme's estimated 20 billion pound price tag would be worth some 250 million barrels, or enough to meet the UK's oil needs for almost five months.


PROBES LAUNCHED

The new deal is expected to break from that arrangement, however, using cash that will come from the Saudi defence budget instead, the source said.

The barter for oil used in the past spurred concerns about transparency and probes into possible bribes paid to Saudi officials were launched by both UK and U.S. authorities.

The UK's Serious Fraud Office dropped its two-year investigation last December only after then Prime Minister Tony Blair said pursuing it further could harm UK-Saudi diplomatic relations.

The U.S. Department of Justice said in June it would investigate BAE. Sources told Reuters the focus would be on BAE's past compliance with the Foreign Corrupt Practices Act, which prohibits bribes of foreign officials.

BAE, now the sixth largest defence company in the U.S. market, has denied any wrongdoing.

Britain tightened its anti-bribery laws in 2001, more than 20 years after the United States did so.

The Eurofighter Typhoon combat jet is built by a consortium of BAE, Airbus parent EADS and Alenia Aeronautica, a unit of Italy's Finmeccanica.

((Editing by Mike Elliott; +44-207-542-8825, fax +44-207-542-7634; Reuters Messaging: [email protected]; e-mail: [email protected]))

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[SaudiArabian]

Saudi plans to build aerospace industry
Saudi Arabia: Saturday, September 15 - 2007 at 14:36

A major Saudi order for British military aircraft looks set to be confirmed during or near the time of King Abdullah's state visit to the UK in October.

Diplomats say that both countries are committed to concluding the defence agreement which is expected to be the most ambitious and complex yet reached by the kingdom with the UK, or any other supplier of military equipment.


A history of deals

The core deal involves an estimated $40bn delivery of 72 Eurofighter aircraft, designated by the British Royal Air Force as the Typhoon. Another $9bn is thought likely to be spent on acquiring armaments, spare parts and training services for the aircraft.

BAE Systems, previously known as British Aerospace, has had a long and lucrative relationship with the kingdom since 1966, when Lightning fighter and Strikemaster trainer aircraft, as well as surface to air missile systems and support, were sold for the then enormous sum of $2bn.

Much larger contracts for the company followed notably in 1986 when 72 Tornado fighter bombers, 30 Hawk advanced jet trainer aircraft and 30 Pilatus PC-9 initial trainer aircraft were sold. A second phase of the deal, known as Al Yamamah, came in 1988 with an additional order for Tornado and Hawk aircraft, as well as helicopters and minesweepers.


Training and employing Saudis

BAE's CEO Mike Turner says that the Al Yamamah programme has resulted in $43bn worth of orders since 1985. As a result, the company is a major employer in the kingdom, retaining almost 5,000 staff, more than half of them Saudis.

Since 1966, some 19,000 Saudis have been trained at the Technical Training Studies Institute run by BAE. The company says it has trained 2,000 Saudi pilots and other air crew and another 2,000 ground support officers.

A unique element in the new contract will involve at least half the aircraft being built in the kingdom at a purpose built aerospace industrial site that could ultimately provide employment for thousands more Saudis.

The nucleus of an aerospace industry does already exist in the kingdom. Maintenance of Saudi Tornado aircraft is, for example, carried out by the Alsalam Aircraft Company and the Aircraft Accessories and Components Company, established as part of a Boeing offset venture.


Developing the industrial base

BAE Systems has also been involved in orchestrating the establishment of new industries in the kingdom through an economic offset programme since 1985. The latest memorandum of understanding involves UK support for the development of a regional defence centre of excellence.

Unlike US and French defence procurement arrangements with the kingdom, the Al Yamamah deals though have not included offset contractual obligations. BAE Systems as the prime UK contractor has undertaken to use its best endeavours to achieve investment targets. Whether or not this will be sufficient in future remains to be seen, since the proposal to build Typhoon aircraft in the kingdom raises any new deal to a whole new level.

The aim, BAE says, is to develop an engineering and manufacturing footprint in the kingdom that will result in original equipment manufacture in Saudi Arabia and provide a platform for aerospace exports.

AME Info

 

[Khairul Alam]

BAE lands Saudi plane deal

Richard Wachman
Sunday September 16, 2007
The Observer

Aerospace giant BAE is part of a consortium that has clinched a £40bn contract to supply 72 Eurofighter Typhoons to Saudi Arabia in the world's biggest defence deal.

The aircraft will replace the Tornados bought by the Saudis under the al-Yamamah oil-for-arms package agreed when Mrs Thatcher was Prime Minister in 1984. The Typhoon transaction will be worth £20bn to BAE over the next 20 years.

Al-Yamamah was the target of a Serious Fraud Office inquiry until the investigation was shut down after intervention by ex-PM Tony Blair in December. Prince Bandar bin Sultan, the son of the Saudi defence minister, is said to have received payments from BAE as part of the Tornado contract, but the company and the Prince have denied that the payments were improper.

One of the reasons cited for the abrupt closure of the Serious Fraud Office investigation was that it could jeopardise relations with the Saudi royal family and therefore the UK's efforts to fight terrorism. BAE also claimed that it could threaten the Typhoon order, which has bolstered the company's share price.

But the company still faces an investigation from the US Department of Justice, which in June announced a probe into whether the al-Yamamah deal broke anti-corruption laws.

Mike Turner, chief executive of BAE, said that the American investigation 'has not affected our business in the US in any way'. It denies any wrongdoing.

Eurofighter is a pan-European project and profits from the Saudi deal will be shared between BAE, Franco-German group EADS and Italy's Finmeccanica. The Typhoon is the most advanced fighter in the world after the American F22 Raptor.

The Typhoon deal, called Al-Salam, which means 'peace', is broken into several parts: a £5bn contract to supply the fighters, a further £5bn to spend on munitions, and the remaining £10bn to come from maintenance and upgrades.

BAE is building a large presence in Saudi in preparation for Typhoon deliveries and now employs 4,600 people there. The first 24 Typhoons are expected to be built at BAE's factory in Warton, Lancashire; the remaining jets will be assembled in Saudi Arabia.

The completion of the contract negotiations shows that the Saudis have put aside their concern over the SFO investigation. However, they are not expected to make a formal announcement of al-Salam's conclusion, partly out of concern that past corruption allegations will resurface. A plan for King Abdullah to sign the contract in London during his state visit in October has been dropped.

The renewed co-operation between the UK and Saudi Arabia could lead to other big contract wins for BAE. Saudi officials have been invited on board HMS Daring, the first of six new destroyers being built by BAE for the Royal Navy. The Saudis will join the warship for sea trials, which are currently taking place off the north coast of Scotland. They are thought to want to buy two of the £600m vessels.

 

[Khairul Alam]

BAE lands Saudi plane deal

The aircraft will replace the Tornados bought by the Saudis under the al-Yamamah oil-for-arms package agreed when Mrs Thatcher was Prime Minister in 1984. The Typhoon transaction will be worth £20bn to BAE over the next 20 years.

Doesnt make sense!! SA had upgraded its Tornadoes only two years ago..now they are to be replaced by the Typhoons.The Tornadoes didnt even complete their operational life and the Yammamah deal cost them tens of billions of pounds. Replacing the Tornado ADV's wud have made some sense...they suck at air combat. But the Tornado IDS's are pretty good as strike aircrafts.

 

[SaudiArabian]

Doesnt make sense!! SA had upgraded its Tornadoes only two years ago..now they are to be replaced by the Typhoons.The Tornadoes didnt even complete their operational life and the Yammamah deal cost them tens of billions of pounds. Replacing the Tornado ADV's wud have made some sense...they suck at air combat. But the Tornado IDS's are pretty good as strike aircrafts.

the Typhoon will not replace the Tornado IDS , some articles should clarify when they talk about that matter to avoid confusing the readers

and al Yamamah projects were not just "planes for oil" armsales. it is a large project that includes many things other than aircrafts

 

[swerve]

Doesnt make sense!! SA had upgraded its Tornadoes only two years ago..now they are to be replaced by the Typhoons.The Tornadoes didnt even complete their operational life and the Yammamah deal cost them tens of billions of pounds. Replacing the Tornado ADV's wud have made some sense...they suck at air combat. But the Tornado IDS's are pretty good as strike aircrafts.

Saudi Arabian has provided most of the answer, but I'll add this. The Typhoons will replace the ADVs.

BTW, it isn't accurate to say "SA had upgraded its Tornadoes only two years ago". The upgrade programme is still underway. These things don't happen overnight. Neither will the Typhoons enter service immediately. Assuming the order is signed in the next few days, the last Typhoon of 72 won't be delivered for several years. While I'm not saying the Typhoon will replace the Tornado IDS, the timescale doesn't rule it out. Procurement takes time, the oldest airframes of type A may not be worth putting into the upgrade process, so you can replace them with some of the new type B . . . and upgrading some of a type at the same time as selecting its replacement is not unknown. Forward planning . . .

 

[SaudiArabian]

Saudi Buys 72 Eurofighter Typhoons for $8.84 billion (official)

Official Source of Defense and Aviation Ministry issues statement


Riyadh, September 17, SPA -- An official source at the Ministry of Defense and Aviation has issued the following statement:

"In line with the approval of the Custodian of the Two Holy Mosques, and with reference to what was earlier announced about signing an understanding document by the governments of the Kingdom of Saudi Arabia and the United Kingdom on 7/7/1427 AH, for the development of the Saudi Armed Forces within the framework of the existing close defense relations between the two countries and which include the purchase of 72 Typhoon planes in addition to transference of technology and investment in the field of defense industries in Saudi Arabia as well as training of Saudi citizens in the field of aviation, a contract was signed by the two governments on Tuesday, 29/8/1428 AH for purchase of the mentioned planes at a cost of 4, 430 million sterling pound.
It is worth mentioning that the price of one plane is similar to the price of the plane when it is sold to the Royal British Air forces.


Saudi Press Agency


i hope this statement puts an end to the estimation numbers been suggested oftenly by various media resources

[Moderator edit]
Merging threads - we don't really need two on the same topic, even though I understand your wish to emphasise the price.

PJI
[/edit]

 

[Alpha Epsilon]

Apparently the first two Saudi Typhoons are already on the Warton final assembly line, the Tornado GR1 upgrade is going along too.

 

[Izzy1]

Doesnt make sense!! SA had upgraded its Tornadoes only two years ago..now they are to be replaced by the Typhoons.The Tornadoes didnt even complete their operational life and the Yammamah deal cost them tens of billions of pounds. Replacing the Tornado ADV's wud have made some sense...they suck at air combat. But the Tornado IDS's are pretty good as strike aircrafts.

As already stated on here, Typhoon initially only replaces the Tornado ADV in Saudi service, with RSAF's single ADV unit - 29 Squadron - having stood down at Tabuk in November 2006. Their remaining 19 ADV's are being purchased back by BAE Systems as part of the Al Salam (Typhoon) Programme. The introduction of Typhoon will also go someway to shoring up gaps left by the retirement of the F-5E Tiger II squadrons in the early 1990s.


RSAF's Tornado IDS (export variant GR.1) are also as stated, not being replaced yet by Typhoon and still undergoing the first phase of TSP - the Tornado Sustainment Programme. Phase 1 essentially deals with avionic and systems improvements to the platform with an improved navigation package and GPS, a greatly enhanced communications suite and a major revamp of the WSO's rear-seat workstation. Most of this work will be carried out within KSA and should be completed by 2009.

The likely yet still unsigned contract for Phase 2 of TSP introduces a complete range of new weapons systems for RSAF's Tornado IDS fleet. RSAF's ALARM ARM stocks will be refurbished. ASRAAM AAMs are likely to be introduced for the Tornado (no decision yet on whether this will be introduced to the Typhoon as well - Saudi has also ordered AIM-9X for its Eagles and may wish to see them integrated). Brimstone and Storm Shadow are also highly probable as well as Paveway IV PGM to replace older Paveway II systems and iron bombs. There is also speculation that RSAF's Tornado's may be rigged for JDAM, but personally I doubt that will happen.

 

[Izzy1]

Apparently the first two Saudi Typhoons are already on the Warton final assembly line, the Tornado GR1 upgrade is going along too.

This is correct, RSAF's initial aircraft are being diverted from batches originally assigned to RAF production to meet the customers introduction timeframe demands.

 

[SaudiArabian]

Saudi Typhoon pilots to train in UK
by Lynne Roberts on Tuesday, 25 September 2007

Saudi Arabia is to train the first 22 pilots and initial engineers for the Eurofighter Typhoon in the UK, following a recent $8.8bn 72 aircraft deal between the countries.

Initial training will take place at RAF Coningsby in Lincolnshire, alongside RAF pilots, according to Flight International.

‘Project Salam’ was inked earlier this month following 21 months of negotiations amid ongoing repercussions from the earlier al-Yamamah arms deal.

Under the deal Saudi Arabia will procure aircraft for a similar price to those produced for the RAF, according to its defence ministry. However further arms and support contracts will substantially boost the value of the deal.

Riyadh’s first 24 Typhoons will be drawn from the UK’s deferred delivery of early Tranche 2 examples from a BAE Systems Lancashire assembly line, with the remainder to be completed at a new facility in Saudi Arabia, Flight International said.

The RAF and RSAF have co-operated with bilateral exercises for Tornado forces since February 2006. The UK service recently sent a senior officer to Riyadh for the first time to liaise between the nations’ air force chiefs.

ArabianBusiness.com

 

[Gripenator]

May I ask just a couple of questions regarding this deal:


-What are the capabilities/Tranches of these Saudi Typhoons compared to RAF and Luftwaffe EF's? Inclusion of future Meteor BVRAAMs?

-The nature of the ToT

and won't the deal for 72 EFs alter the balance of airpower in the region away from the IAF?

The F-16I's and even the F-15I's chances vs Ef-2000 Tranche 1 are not looking too good. I'm sure IAF training can negate some of the EF-2000 advantages but just how much?

Saudi Arabia isn't exactly the most stable country in the world with an headline unemployment rate of 25% and also being the birthplace of Wahhabism in addition to being 70/163 on the list of most corrupt countries in the world makes for a volatile mix. I'm just concerned the Saudi royal family will lose it and the entire country could be overrun by Wahhabi fanatics and this weaponry could fall into their hands.

 

[Titanium]

Thanks for your concers for humanity... from the evil what? "Wahabbiosm". Where did you come with the term? Did you learn in your school? coz as for me no one on earth claim himself to be follower or beloiver of "wahabism".
Oh I now get it ... you watch a lot of FOX News he he.

 

[Izzy1]

Moderator Statement:

Gentleman,

Lets not descend this thread into anarchy.

I accept that the "wahhabi" subject is for many people, especially from this part of the world, an emotive subject matter with a wide and varied range of opinions. However, it has nothing to do with the subject of this thread and Defence Talk is certainly not the forum for such discussion. Past threads, which have mentioned this subject, ended up in acrimony and disciplinary measures. The rules are clear.

So, let’s stop this before it gets going and stay on topic.

Gripenator does make some valid military comments in regards to Typhoon, let’s stick to answering those.

Thank You.

 

[Khairul Alam]

May I ask just a couple of questions regarding this deal:


-What are the capabilities/Tranches of these Saudi Typhoons compared to RAF and Luftwaffe EF's? Inclusion of future Meteor BVRAAMs?

-The nature of the ToT

and won't the deal for 72 EFs alter the balance of airpower in the region away from the IAF?

The F-16I's and even the F-15I's chances vs Ef-2000 Tranche 1 are not looking too good. I'm sure IAF training can negate some of the EF-2000 advantages but just how much?

As for technology transfer, SaudiArabian's posts make them pretty clear. In brief, building of an assembly plant in Saudi Arabia which will result in high end knowhow being trasferred to the Saudis with the aim of instigating "original equipment manufacture in SA".
Well the F-22s will be the best fighter jet in the Middle East, much better than the IAF F-15I and F-16Is (lets not consider the US F-22s, if there are any). But that wudnt mean the balance wud tip away from Israel. A key point is what air-to-air missiles these Typhoons will carry. I guess there hasnt been any word on that yet. Moreover, SA's air battle doctrine is mainly defensive, so Israel need not worry about intrusions.

 

[Waylander]

There are not many possible BVR missile combinations.
It could be AMRAAM (Maybe up to C-5) or Meteor in the future.

WVR missiles could be Sidewinder, ASRAAM and IRIS-T.

All these missiles are not what one would normally consider as outdated.

 

[swerve]

ASRAAM seems most likely. It appears to be the leading candidate for a WVR missile for their Tornado upgrade.

 

[Waylander]

Sure. Especially with BAE doing the negotiation with the Saudis...
I don't expect them to sell IRIS-T instead of ASRAAM.

So with AMRAAM/METEOR and ASRAAM I don't see the Saudis being inferior to the Israeli fighters when it comes to AAMs.

 

[radiosilence]

The Israelis recently order 200 Aim-120 C7. They will still retain the edge to a certain extent.

 

[Brandon]

You know what's really sad: We (the U.S.) are going to have to end up selling our prized fighter (the F-22) to Israel because our European friends couldn't refuse the money Saudi Arabia was offering for the Eurofighter and keep it to themselves. Now the whole Israel lobby is going to force us into selling the Raptor. Why can't Europe just ever keep their best weapons to themselves? If they didn't sell the Typhoon to S.A. we wouldn't have to sell the F-22 to Israel. How can it be that the countries of NATO are basically forcing each other to sell weapons that shouldn't be exported? We should be keeping them safe in our own hands. Hell, this is absolutely absurd and truly baffles me.