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MAJOR SAUDI – FRANCO DEFENCE DEAL ANNOUNCED

15 Apr 05. Jean-Pierre Neu of the FT in Paris said that Saudi Arabia has agreed in principle to acquire up to 96 Rafale combat aircraft from France’s Dassault Aviation for some €6bn, Les Echos, the FT’s French sister newspaper, has learnt.

The agreement forms the cornerstone of a broader defence, security and industrial accord estimated to be worth up to €20bn ($26bn, £14bn) signed during a meeting in Paris yesterday between Jacques Chirac, French president, and Crown Prince Abdullah, Saudi Arabia’s de facto ruler. Crown Prince Abdullah will fly to Washington next week, where the US administration could put pressure on Saudi Arabia to back away from the preliminary deal, as it has on similar accords in the past that drew US objections.

According to people familiar with the signings, Saudi Arabia agreed to finalise a contract by year-end that would lead to the purchase of 48 Rafale jets and an option for another 48. The accord would be worth €6bn to Dassault and French suppliers, notably electronics maker Thales and missile maker Safran. The project, if finalised, also could mark the first foreign sale of Rafale jets for Dassault. To date the French military has ordered 120 jets, and the jet is competing for an order of eight aircraft from Singapore with Boeing’s F-15 and the Eurofighter Typhoon, built by a four-nation European consortium.

In addition to the preliminary accord for Rafale, Saudi Arabia yesterday agreed in principle to a security systems contract with Thales worth up to €7bn, according to sources. The “Miksa” project has been in the making for the past 15 years and includes radars, drones and communications systems.

Dassault Aviation is 50.2 per cent owned by the Dassault family, which is close to Mr Chirac, and 46 per cent by EADS, the Franco-German aerospace and defence group. The remainder is publicly held.

Comment: This is a blow to the Eurofighter consortium which had been hoping for a deal, led by BAE SYSTEMS to sell 60 jets to Saudi Arabia. It also reflects the crass move by the labour Government to investigate bribes to Saudi officials and the purchasing of holidays through Al Yamamah and could jeopardise BAE’s lucrative £10bn support programme if the Typhoons are not purchased following on from the Tornados which are ageing and require an upgrade which has yet to be announced. This announcement and that Rover is to close today will cause more gloom in the west Midland, but we assume the Government will give more grants to crate Balti bars and crisp makers.

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