BAE Not Currently Finalizing Saudi Jet Deal

By REUTERS, LONDON

DefenseNews

 

BAE Systems, Europe’s largest defense firm, said on Nov. 28 it was not moving forward on finalizing a deal to supply Saudi Arabia with 72 Eurofighter Typhoon jets.

 

In an interview in the Financial Times, the company’s chief executive, Mike Turner, was quoted as saying BAE could not speak on behalf of the two governments.

 

"But I do know we are not currently moving forward on finalizing the Typhoon contract," Turner was quoted as saying.

 

A BAE spokeswoman said the sentiment of Turner’s comment was that "since Ramadan negotiations between the two sides had not exactly moved apace".

She added: "Regarding the precise situation on the status of the negotiations, that really is a matter on which only the UK or Saudi governments can comment."

 

The comments came a day after BAE shares fell 3.1 percent on reports it might lose the Eurofighter deal to French aerospace group Dassault if a fraud probe was extended to the Saudi royal family.

 

The UK Serious Fraud Office (SFO) launched its investigation of suspected accounting irregularities related to BAE in 2004. The probe has focused on the relationship between BAE and two small travel firms which made arrangements for Saudi Arabian officials on behalf of BAE.

 

Saudi Arabia and Britain signed an agreement in August for the Gulf state’s purchase of 72 Typhoon aircraft in a deal analysts said could be worth more than 6 billion pounds ($11.6 billion).

 

Turner reiterated in the Financial Times that his firm had done nothing wrong. "We don’t want to interfere with the judicial process, and politicians clearly cannot do that, but we do want to see a resolution of the SFO investigation. It is damaging for our business," he said.

 

BAE said it would be inappropriate to comment further about the investigation.

 

Shares in BAE were trading 1 percent lower at 387-1/4 pence by 1558 GMT on Nov. 28.

 

The Sunday Telegraph said the Saudi government was set to tear up its Eurofighter Typhoon agreement with Britain and give the jets contract to France if the SFO opened Swiss bank accounts allegedly linked to members of the Saudi royal family as part of a long-running investigation.

Dassault said on Nov. 27 it was unaware of any Saudi decision.

 

Saudi defense ministry officials were not available for comment on Nov. 28.

Commenting on the news reports, a spokesman for Britain’s Foreign Office said: "We are committed to ensuring that existing bilateral trade agreements with other countries, including Saudi Arabia, are implemented effectively and smoothly."

 

"With regards to the Serious Fraud Office inquiry, the SFO is an independent government department and part of the criminal justice system. Other parts of the government cannot and would not interfere in or prejudice its investigations," he said.

 

British Prime Minister Tony Blair’s office and the Ministry of Defence declined to comment.

 

The multinational Eurofighter consortium that makes the jets includes BAE Systems, European aerospace group EADS and Italy’s Finmeccanica.

From

Flight International

 

DATE: 13/02/07

SOURCE:Flight International

 

Game on again: BAE Systems-led Eurofighter Typhoon deal with Saudi Arabia back on after UK fraud office drops Al Yamamah inquiry

By Craig Hoyle

 

With a UK investigation into past BAE Systems deals abandoned, Saudi Arabia is close to signing the biggest export order for the Eurofighter Typhoon

 

The UK-brokered sale of 72 Eurofighter Typhoons to Saudi Arabia is back on track, despite a well-publicised - but apparently temporary - freeze in relations caused by an investigation into earlier Al Yamamah arms deals between the countries. The sale will represent one of the largest defence contracts ever signed in the Middle East, and see Saudi Arabia increase its industrial capability by assembling and supporting the multirole aircraft with more independence than ever.

 

An announcement by the UK's Serious Fraud Office (SFO) in mid-December that it was to discontinue its investigation into alleged accounting irregularities by main Al Yamamah beneficiary BAE Systems raised a political outcry that continues to prompt debate. Press interest in the proposed sale was high before the 14 December statement, as the Saudis had made little effort to disguise their anger at attempts by a foreign body to dig into distant dealings, halting advanced negotiations in an unusually public show of protest.

 

The removal of the SFO action has cleared the way for a resumption in talks, with other sticking points before their brief suspension understood to have included production arrangements and an air-launched weapons package for the new strike fleet. Revived negotiations are believed to be close to conclusion, with industry sources suggesting a contract could be signed around mid-year.

 

In-country assembly

 

Saudi Arabia wants most of its Typhoons assembled in-country, in an expansion to a practice referred to by BAE as "Saudi-isation". The manufacturer has provided in-service support to the Royal Saudi Air Force (RSAF) since starting deliveries of its Panavia Tornados and Hawks in the late 1980s, and is increasingly using Saudi nationals rather than British expatriates for the work. At least 48 of the new aircraft are expected to be completed in Saudi Arabia, the first time such work will have been done there. Riyadh is seeking assurances that it will be able to ensure operational freedom across the Typhoon's decades of service in the Gulf region, while drawing on UK experience in fielding the type.

 

The RSAF's Typhoons will be Tranche 2 production aircraft, with the first 24 to be drawn from the UK's production line at Warton in Lancashire. The UK Royal Air Force is to receive 89 aircraft under its Tranche 2 order, including just two two-seat trainers, but will defer acceptance of some aircraft to enable Saudi Arabia to take early delivery of the type. The aircraft - to be delivered by 2012 - are to replace Riyadh's Tornado air-defence variants.

 

The RAF says the late arrival of some aircraft will have no operational impact on its Typhoon force, which will eventually cover the delivery of 232 aircraft. Thirty-nine F2 fighters and T1 trainers have been handed over so far, with operations ramping up at RAF Coningsby in Lincolnshire. The base is likely to be the training location for the first Saudi instructors preparing for delivery of the RSAF's Typhoons. Later instruction is expected in Saudi Arabia under a contractor-backed mechanism similar to the Case White model that successfully introduced the UK's first aircraft into operational service.

 

Europe's MBDA is likely to be the main recipient of a major armaments deal for Saudi Arabia's Typhoons, with types including a modified version of the Storm Shadow cruise missile - potentially similar to the reduced-range Black Shaheen system fielded by the United Arab Emirates - likely to be sought. Riyadh could also be interested in acquiring the company's Meteor beyond-visual-range air-to-air missile, but this may not be available in time to arm Tranche 2 Eurofighters. If an agreement is not reached on the latter type, a future development of Raytheon's AIM-120 AMRAAM medium-range air-to-air missile could be acquired.

 

The Saudi deal will represent the second export success for the Typhoon - 18 are in production for Austria. It will also be a major coup for the four-nation Eurofighter consortium, which had faced competition from Dassault's Rafale to secure the deal. Most of all, the government-to-government sale will be good news for BAE, which was by mid-2005 believed to have secured business worth around £40 billion ($79 billion) from the two earlier Al Yamamah deals. Unlike its earlier equipment sales, the new deal with the House of Saud will not be funded using oil reserves and will not share the Al Yamamah name.

 

Political interference

 

While the SFO insists the decision to halt enquiries was purely its own, the numerous attempts made by the UK government to force its hand since late 2005, when Riyadh signed a so-called understanding document to buy the Typhoon, have led to allegations of political interference. The matter was the subject of a debate in the House of Lords on 1 February, when Attorney-General Lord Goldsmith again defended the government's perceived role in speeding the investigation's demise.

 

Several lords questioned the SFO's assertion that the BAE case had been dropped as it was "necessary to balance the need to maintain the rule of law against the wider public interest", noting that the UK government had repeatedly lobbied the organisation to halt its work. This had included representations by several ministers, and was supported by three visits to Saudi Arabia by successive defence secretaries Geoff Hoon and John Reid and two trips by UK prime minister Tony Blair.

 

Combined with Goldsmith having spent three days looking at the SFO evidence in detail late last year, they argued that commercial and national economic interests swayed the decision, and contravened a UK-ratified international convention on bribery. This amounted to "commercial and political chicanery", noted one. Following his review, Goldsmith said he "formed the conclusion that, ultimately, this case was not going to succeed". Its continuation also posed a "risk to national and international security", he added, noting that the Saudi authorities "were not bluffing" when they had threatened to withdraw intelligence support in the fight against al-Qaeda.

 

One of the key weaknesses of the investigation was that the SFO was trying to retrospectively apply anti-corruption legislation not brought into effect until 2002, while also seeking access to private Swiss bank accounts held by Saudi nationals.

 

The SFO's move was perhaps the worst-case scenario for BAE, which had hoped to clear its reputation through the investigation's failure to deliver evidence, or else draw a line under the affair via a conviction for anyone found to have acted improperly - a charge BAE has always denied. But as the SFO is to "vigorously pursue" other investigations into activities in Chile, the Czech Republic, Romania, South Africa and Tanzania, BAE may still get its chance.

From Defense Talk

 

BAE Systems sees Saudi Eurofighter deal by year end

BAE Systems | Feb 23, 2007

 

LONDON: BAE Systems said on Thursday it expected Saudi Arabia to sign a firm contract for Eurofighter combat jets by the end of the year.

 

Chief Executive Mike Turner told reporters on a conference call that he expected a deal this year, noting they were government-to-government negotiations, with BAE serving as the prime contractor.

 

Finance Director George Rose told reporters on the call that the Saudi deal would not impact BAE's profits for several years, likely "in the last two" years of its five-year outlook.

 

CEO Turner, when asked about a series of probes into past BAE dealings by the UK's Serious Fraud Office (SFO), said the firm would continue to cooperate with requests from the SFO.