Back in 2005, DID reported that talks were underway for a Saudi purchase of Eurofighter Typhoon Tranche 2 advanced air superiority and strike aircraft from Britain’s BAE Systems – with an important (albeit denied) set of conditions on the Saudi side.

December 2005 saw confirmation that Saudi Arabia had ordered Eurofighter Typhoons, but the 72-plane deal started sinking into the tar sands shortly thereafter. Investigations from Britain’s Serious Fraud Office swirled around a GBP 43 billion oil-for-planes deal from the 1980s called Al-Yamamah (see Appendix A); in return, the Saudis played some hardball of their own. The investigation was eventually called off at the highest levels of government, and later confirmed by the House of Lords. After a period of uncertainty, a contract was finally signed on Sept 11/07. Ironies aside, the price was a bit lower than many expected; even so, it comes with support arrangements that are likely to push the final value quite a bit higher.

This DID Spotlight article covers the Saudi Eurofighter deal, its associated controversies, and related developments. The latest development is an accompanying missile order for the Saudi fleet – but it’s not Britain’s ASRAAM (seen in the above photo), or the competing AIM-9X Sidewinder ordered for RSAF F-15s…

• Typhoons Incoming: Updates and Contracts (i.e. “Continue reading…”) [updated]
• The Long Road to the Deal
• Analysis: Effects on the Eurofighter’s Export Prospects
• Appendix A: From Al-Yamamah to Project Salaam
• Appendix B: Saudi Arabia: Dependence & Deployment Options (December 2006)

Typhoons Incoming: Contracts and Updates

As an August 2006 BBC article notes, the 72 Eurofighter Typhoon Tranche 2 planes will be assembled by BAE in Warton, UK from parts made by all the partners in the Eurofighter consortium. BAE itself makes the front and rear fuselage, while the European defence consortium EADS and Italy’s Alenia build the wings. Other British industrial winners will include jet engine manufacturer Rolls-Royce (stake in the Eurojet Turbo GmbH consortium), Smiths Group, and Dowty.

Saudi companies are also slated to benefit from the contract, as BAE Systems has committed to invest in local Saudi companies, develop an industrial technology transfer plan, and train “thousands” of Saudi nationals to help provide through-life support. BAE currently employs about 4,600 personnel in Saudi Arabia.

This new UK-Saudi cooperation program, known as “Project Salaam” involves BAE Systems investment in local Saudi companies, development of an industrial technology plan, logistics support and suitable training for thousands of Saudi nationals who will provide through-life support for the fleet. Overall support will also include substantial logistical and training packages, including the opportunity for RAF and Royal Saudi Air Force aircrews and ground technicians to train alongside each other in the UK.

The UK MoD release makes it clear that “Project Salaam” is an expansion of the Al-Yamamah accords (q.v. Appendix A), and The Guardian places its 20-year value at about GBP 20 billion.

Oct 12/09: With 4 of 72 Typhoons delivered to the Royal Saudi Air Force, and flying operations commencing, BAE systems announces a detailed 3-year contract for “The Salam Support Solution.” This is a full availability-based service contract, which also includes Saudi pilot training in the UK and training for RSAF maintenance technicians. The deal’s value was not disclosed, but Saudi support contracts tend to be large due to the range of contractor services they request.

Britain is already implementing the Typhoon Availability Service (TAS) for its Eurofighter fleet.

Sept 7/09: Diehl BGT receives an interesting spin-off order for its 5th generation IRIS-T (InfraRed Imaging System – Tail/thrust vector controlled) short range air-air missiles, which will equip Saudi Arabia’s Eurofighter Typhoons and its Tornado strike aircraft. The size of the order was not announced.

The Saudis have ordered comparable American AIM-9X Sidewinder missiles for their F-15 fleet, but IRIS-T has already been integrated with Tornado and Typhoon aircraft belonging to Germany and Italy, removing the need for that additional work.

IRIS-T emerged after Germany pulled out of the joint US-UK-German ASRAAM program, following testing with its “new” East German MiG-29s and their AA-11/R-73 Archer SRAAMs. The Germans came to believe that ASRAAM’s entire philosophy was wrong, and sought to develop their own missile based on the A-11’s lessons. IRIS-T is being developed by a multinational European consortium, and the missile has now been ordered by Germany, Denmark, Greece, Italy, The Netherlands, and Spain among consortium countries; plus small export orders to Austria and South Africa. Saudi Arabia appears to be the first sizeable export order beyond the consortium.

June 25/09: Data Link Solutions in Cedar Rapids, IA receives a $28.9 million firm-fixed-price delivery order for MIDS-LVT Link 16 terminals. It combines purchases for the USA (45%), Saudi Arabia (15%), Canada (10%), South Korea (8%), Switzerland (6%), Finland (6%), Poland (5%), Japan (4%), and Norway (1%).

See Sept 26/08 entry, re: Saudi Arabia’s official DSCA request to equip its new Eurofighter Typhoons.

Work will be performed in Wayne, NJ (50%), and Cedar Rapids, IA (50%), and is expected to be complete by December 2010. Contract funds in the amount of $425,983 will expire at the end of the current fiscal year. This delivery order was competitively procured, with 2 proposals solicited and 2 offers received via the Space and Naval Warfare Systems E-commerce web site, after the synopsis was released via the Federal Business Opportunities web site (N00039-00-D-2100).

June 11/09: Saudi Arabia’s Assistant Defense and Aviation Minister Prince Khaled bin Sultan formally receives 2 Eurofighter Typhoon jets at a ceremony at BAE Systems’s facility in Warton, UK. Saudi Arabia’s Arab News | Agence France Presse.

Oct 20/08: BAE Systems flies the first aircraft destined for Saudi Arabia, with a second Saudi aircraft due for completion “in the next few weeks.” A Defense News report adds that:

”...the British have yet to secure export approval from Washington for American equipment used in the combat aircraft. The approval remains blocked by U.S. Justice Department investigations into alleged corruption by the British in an earlier aircraft deal with the Saudis.”

See: Defense News report | BAE release.

Sept 26/08: The US Defense Security Cooperation Agency announces [PDF] Saudi Arabia’s request for 80 MIDS/LVT-1 terminals for its Eurofighter Typhoon aircraft, along with data transfer devices, installation, testing, spare and repair parts, support equipment, personnel training, training equipment, contractor engineering and technical support, and other related elements of program support. The estimated cost is $31 million.

The prime contractor will be Data Link Solutions, LLC of Cedar Rapids, IA. There are no known offset agreements proposed in connection with this potential sale, and implementation of this proposed sale will not require the assignment of any additional U.S. Government or contractor representatives to Saudi Arabia.

Aug 10/08: Reports are surfacing in the media that the Saudis may be looking for up to 48-72 more Eurofighters from Britain, to add to the 72 already under contract. If true, this would probably add about GBP 4.5-7 billion to the existing contract, along with increased support costs down the road. BAE has called the reports ‘speculative,’ which is true, but it has not denied them.

If true, this could resolve a key issue for Britain. The MoD was already wondering whether it could afford its commitment to buy 88 Eurofighter Tranche 3 aircraft, which offer full multi-role capabilities as well as other enhancements. Selling 48 of these aircraft to the Saudis would go a long way toward resolving its budgetary difficulties. The Times | Thomson Financial News.

July 30/08: Under the British system, the House of Lords is more than just the upper chamber of Parliament – it is also the country’s highest court. The House of Lords unanimously overturned a London High Court decision that said the SFO had acted “unlawfully” in halting its inquiry. In an unusually strong comment, Lord Bingham of Cornhill, the senior peer on the panel, said:

“The director’s decision was one he was lawfully entitled to make. It may indeed be doubted whether a responsible decision maker could, on the facts before the director, have decided otherwise.”

The ruling renders the British investigation dead for all practical purposes, though there is still a nominal case before the US Depatment of Justice. The international stakes involved in continuing that investigation have just become immensely higher, however, as it would become a direct, high-level international clash with the British government. That outcome can be considered unlikely. The Times | The Guardian | The Independent | Telegraph op-ed (supportive) | Guardian op-ed (critical) | Al Jazeera | AP | Agence France Presse | Bloomberg | The Hindu.

Jan 27/08: The Saudi Arabian Arab News quotes Deputy Minister of Defense and Aviation for Military Affairs Prince Khaled ibn Sultan as saying that the kingdom will receive the first of 72 Eurofighter Typhoon Tranche 2 aircraft in 2009.

Dec 7/07: Rolls-Royce announces that the Salam Project will be worth up to GBP 1 billion ($2.06 billion) for EJ200 turbofan engines and support. The European EUROJET consortium (owned Rolls Royce 33%, Avio 21%, Industria de Turbo Propulsores 13%, MTU Aero Engines 33%, slightly differing work shares) has overall responsibility for the EJ200, and each Eurofighter Typhoon carries 2 engines.

The twin-shaft EJ200 turbofan produces 13,500 pounds thrust, or 20,000 pounds with afterburner. This is not an exceptional thrust rating, but that was not the design objective. Rolls Royce says that the Eurojet EJ200 was designed to be both smaller and simpler in layout than current powerplants of a similar thrust class (esp. PW F100, GE F110), with lower fuel consumption and an exceptional power-to-weight ratio. Rolls Royce produces major components for the EJ200 at sites at Ansty, Derby, Hucknall and Sunderland.

Nov 5/07: The latest Typhoon test aircraft IPA6 has made its maiden flight from BAE Systems flight test facility at Warton Aerodrome in Lancashire. The purpose of the New Instrumented Production Aircraft is to prove out the Tranche 2 system design. This will underpin the Type Acceptance process in 2008, leading to the delivery of the first Tranche 2 production aircraft. Later software releases will introduce enhanced capabilities on an incremental basis.

The Tranche 2 airframe has been strengthened to carry heavier air to surface weapons and features enhanced main mission computers and upgraded electronics, increasing the aircraft’s multi-role versatility and making it compatible with the next generation of air-air and air-ground weapons. BAE Systems’ release confirms that the 4 Eurofighter partner nations (Britain, Germany, Italy, Spain) and Saudi Arabia will all receive new Eurofighters at the Tranche 2 standard.

Oct 28/07: France’s Minister for Defense Herve Morin effectively concedes that the Dassault Rafale sale to Saudi Arabia is dead, derailed by the Eurofighter sale. See “Saudi Rumors of Rafale: Stalled?” for full details, and see “Saudis May Go Russian As France Loses Out” for indications that the biggest problem may have actually been the French approach to the deal.

Sept 17/07: All parties formally announce the signing of a contract for 72 Eurofighters. The actual contract was signed on Sept 11/07:

“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 [DID: about $8.86 billion/ EUR 6.5 billion]. 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.”

A figure that would place the Eurofighter’s per-plane flyaway cost for the RAF at about GBP 61.5 million, or $123.5 million. This is less than the GBP 6 billion deal many were expecting, but maintenance of the Saudi fleet over the next 20 years will raise the deal’s value considerably, and localized maintenance partnerships tend to attract very little scrutiny.

Saudi Press Agency | UK MoD | Bloomberg | Financial Times | The Guardian | Jerusalem Post | Finmeccanica (estimates a EUR 2 billion | $2.77 billion share) | Society of British Aerospace Companies.

Sept 11/07: BAE announces that a new training program to produce the first multi-skilled Tornado aircraft technicians for the Royal Saudi Air Force (RSAF) is up and running at BAE Systems Warton. The first batch of RSAF students has arrived at BAE Systems’ Technical Training Academy for the final stage of the training program before they return to the Kingdom of Saudi Arabia, and this program is very likely to serve as a model for the Typhoon effort as well.

The idea is to reduce the numerous single-skill vocations currently used to maintain the RSAF Tornado fleet to a set of multi-skilled trades, in line with the RAF’s current approach. A period spent at the Technical Studies Institute in Dhahran is followed by 6 months of English language training; an intensive year at the RAF’s Defence College of Aeronautical Engineering in Cosford, Shropshire; and then the final element of the program at Warton involving a mixture of classroom-based theory and specific on-the-job training, using the academ’s own aircraft.

This first batch of students will be equipped with the skills in one of 4 trades – airframe, propulsion, avionics, or electrical; then they return to Saudi Arabia for deployment to an RSAF squadron. The relationship does not end at that point, however, as the student will have an experienced multi-skilled BAE Systems technician trainer on hand to perform consolidation training before he can become a fully qualified, multi-skilled technician. BAE Systems release.

The Long Road to the Deal

While both BAE and the UK Ministry of Defence kept mum about the precise number of Eurofighters in December 2005, The Financial Times reported that the agreement was understood to be for 48 Eurofighter Typhoon jets, with an option for a further 24 (total: 72). The BBC added that the deal is rumored to be worth more than GBP 6 billion (about $11.7 billion). Government to government “understandings” were signed in August 2006 that appeared to clear the way, but BAE’s recent admission that the deal has stalled, a significant fraud investigation by Britain’s Serious Fraud Office alleging GBP 1 billion in bribes, major public revelations about details of the GBP 40+ billion Al-Yamamah accords, and rumors that the Saudis may be about to buy French Rafale fighters were keeping things very interesting.

Eventually, the British formally abandoned all fraud investigations related to Al-Yamamah. They took intense criticism for that decision on many fronts, ranging from the OECD to the USA who opened a Justice Department investigation. The British government has held firm on the matter, however, with no change once Gordon Brown replaced Tony Blair to become Britain’s Prime Minister in June 2007. In September 2007, the wait ended, and the deal for 72 aircraft was done. In August 2008, thre House of Lords ended the remaining legal wrangling by ruling that the Serious Fraud Office had the authority to call the investigation off.

What follows is a partial timeline whose entries contain additional information of interest. More details and links may be found in Appendix A:

Sept 11/07: A deal for 72 Eurofighter Typhoons, and their support arrangements, is concluded. See previous section.

July 17/07: The Guardian: “Diplomatic clash looms with US over BAE arms sale investigation.” That American investigation is still technically ongoing, though progress seems very slow.

June 27/07: Tony Blair tenders his resignation as Britain’s Prime Minister, per an agreement announced a year earlier. Gordon Brown assumes the job because he is the new leader of the Labour Party, which holds a majority in the House of Commons.

June 26/07: The US Justice Department begins its own investigations into the corruption allegations. See: BAE’s position | Prince Bandar of Saudi Arabia and others comment (videos) | The Guardian | MarketWatch | The Times.

Dec 15/06: British officials have dropped their fraud investigations related to the Al-Yamamah deal on two grounds. The first set of grounds is that some of the allegations predate the Anti-Terrorism, Crime and Security Act 2001, which extended the pre-existing law of corruption to the bribery of overseas officials. With respect to allegations covering conduct after 2001, the UK Attorney General had this to say:

“I have, as is normal practice in any sensitive case, obtained the views of the Prime Minister and the Foreign and Defence Secretaries as to the public interest considerations raised by this investigation.

They have expressed the clear view that continuation of the investigation would cause serious damage to UK/Saudi security, intelligence and diplomatic cooperation, which is likely to have seriously negative consequences for the UK public interest in terms of both national security and our highest priority foreign policy objectives in the Middle East. The heads of our security and intelligence agencies and HM Ambassador to Saudi Arabia share this assessment….” See Defense Aerospace.

Dec 6/06: The Business online reports that the Saudi government is in talks to buy 36 Rafale fighter jets from the French regardless of how ongoing issues with Eurofighter Typhoon contract are resolved. The Rafale contract would reportedly be in addition to the Eurofighter, not an either-or deal. With support and weapons added in, this could easily be additional $5-15 billion transaction all its own. See full DID coverage.

Nov 30/06: Jane’s Defence Weekly notes that:

“BAE Systems has conceded that negotiations regarding the sale of the Eurofighter Typhoon multirole combat aircraft to Saudi Arabia have “not exactly moved apace” in recent weeks. The comment came in response to speculation concerning the future of the agreement – reputedly worth up to GBP36 billion (USD69.3 billion) – which pushed down the UK group’s shares on the London Stock Exchange from GBP414.5 pence on 22 November to GBP386.75 pence at the close of trading on 28 November. Continuing UK Serious Fraud Office (SFO) investigations into BAE, including those relating to contracts for services in connection with defence contracts with the Saudi government, prompted media speculation that the Kingdom might withdraw altogether from talks on the Eurofighter deal.”

Nov 19/06 Articles like the Sunday Times “Blair hit by Saudi ‘bribery’ threat” appear in British papers. The reports say the Saudis have threatened to cancel the Al Yamamah contract unless the fraud investigation into Al-Yamamah bribes to Saudi officials is stopped, and notes steps taken in that investigation including legal action to access Swiss bank account information. In general, however, analysts interviewed for other media coverage at this stage tended to doubt that the Al Yamamah orders would be canceled, given BAE’s massive support infrastructure which the Saudis need and could not easily replace. Nonetheless, this certainly reflects increasing tensions.

Aug 17/06: A series of announcements are made re: the signing of an “Understanding Document” between the Saudi & UK governments. This is not a contract, but it does set out agreements in principle re: the structure of the program, industrial benefits in Saudi Arabia, etc. A Saudi Government news outlet puts the deal at 72 aircraft. See releases.

BAE Systems shares climbed 6% shortly after the news of the contract was released in December 2005, and according to The Independent, the August 17, 2006 news sent their shares up by 3% when it was announced.

Dec 21/05: The Saudi and UK governments sign an Understanding Document, which is intended to establish a greater partnership in modernising the Saudi Arabian Armed Forces and developing close service-to-service contacts especially through joint training and exercises.

“Under the terms of the signed document Typhoon aircraft will replace Tornado Air Defence Variant aircraft and others currently in service with the RSAF. The details of these arrangements are confidential between the two Governments.” UK MoD Press release (via Eurofighter GmbH) | BAE Investors Report: Dec 2005 | China’s Xinhua News covers it.

Autumn 2005: BAE refuses to comply when the Serious Fraud Office serves compulsory production notices on the company to obtain details of its secret offshore payments to the Middle East. Source: December 2006 Guardian report.

Sept 28/05: The Guardian newspaper reports that Britain has been in secret discussions with Saudi Arabia over a major arms deal that includes the Eurofighter Typhoon, and is said to be worth up to GBP 40 billion (USD $71 billion, EUR 59 billion). Talks are said to be stalling, however, after Riyadh asked for three “tricky” favors. Read “Eurofighters for Saudis? Only with Eurofavours.”

November 2004: BAE Systems confirms it is being investigated over the Al-Yamamah deal by the Serious Fraud Office (SFO), but strenuously denies any wrongdoing.

Analysis: Effects on the Eurofighter’s Export Prospects (updated)

Although it has not been completely shut out on the export front like the French Rafale, the Eurofighter has also lost its share of potential export orders beyond its initial consortium partners: Australia (F-35 JSF), Czech Republic (JAS-39 Gripen), Greece ( F-16 block 52), The Netherlands (F-35A or JAS-39NG), Norway (F-35A or JAS-39NG), Poland (F-16 block 52), Singapore (F-15SG), and South Korea (F-15K). Eurofighter is entered in India’s MMRCA competition, Japan has indicated some interest if it cannot get F-22EX aircraft from the US, and Greece and South Korea are seen as potential markets again after 2012-2015.

The Saudi order thus provides an important boost for the Eurofighter on the export front. Still, the length of its coat-tails remains uncertain, given the segmentation of the global fighter market described in DID’s analysis of the Singapore contract decision. The aircraft’s $120+ million per plane flyaway cost will make it very difficult for Eurofighter to compete in India, for example, especially when that country can buy the larger and more capable SU-30MKIs for far less.

Japan will find itself with few realistic alternatives to the Eurofighter if the USA refuses to sell it F-22s, and price is unlikely to be a factor since Eurofighters will likely be cheaper than an F-22EX.

A Japanese buy would also boost Eurofighter’s future prospects in Phase 3 of South Korea’s F-X competition, due to the historical regional rivalry that already has South Korea asking for F-22s if Japan gets them. By that time, however, The F-35 Lightning II will provide competition in Korea. Greece, which probably won’t be buying new fighters until 2015 or so, will also have the F-35 as an option.

While the F-35 will be far inferior to the Typhoon in an air-air role, it offers more stealth and a much more advanced sensor package for strike and reconnaissance roles. Early production will be expensive, but by 2015 or so the F-35 should have a significant price advantage; the question will then become prospective customers’ willingness to pay the extra dollars for the excellent air-air and good air-ground performance of the Typhoon, vs. the F-35’s combination of mediocre air-air and very good air-ground performance.

Appendix A: From Al-Yamamah to Project Salam

Back in December 2005, Britain’s Independent newspaper added more specifics, calling the deal the third phase of the Al-Yamamah oil-for-planes arrangement, which had previously sold the RSAF 48 Tornado IDS/GR1 strike aircraft and 24 Tornado F3 air defense variants in 1989, and another 48 Tornado IDS aircraft in the 1990s:

“The Saudis are understood to have ordered a total of 72 Eurofighters to replace older aircraft, including Tornado jets bought in the 1980s and 1990s from BAE under the Al Yamamah arms-for-oil deal. The Eurofighter order in effect amounts to the third phase of the Al Yamamah programme, and marks the first time the aircraft has been bought by any country outside Europe…. the deal includes a full package of training, through life support, spares and technology transfer, which will at least double the value of the deal and perhaps increase its value by 150 per cent.”

Al-Yamamah added understandings regarding the RSAF’s trainer aircraft fleet, which would include BAE Hawk trainer/ light strike aircraft and PC-9 turboprop trainers and aerobatic aircraft. Those potential orders have yet to be filled, and represent additional potential spinouts from this deal.

The controversy around alleged bribes to key Saudi figures in exchange for the Eurofighter deal shone a bright light on Al-Yamamah, which may explain the decision to continue that framework via an updated protocol called “Project Salam” instead. From the Sept 17/07 UK Ministry of Defense release:

“As per the 1986 MOU the UK MOD will continue for Project Salam to ensure that all equipment, spares, training and technical work supplied by the main contractor (BAE Systems) are in accordance with Saudi requirements.”

In other words, the UK MoD maintains its oversight role, BAE remains to prime contractor, payment remains oil for jets, and the agreement features continued development of the ‘Saudi’ workforce and industrial offsets, as well as long-term maintenance contracts. One is tempted to ask in what meaningful respect “Project Salaam” differs from the Al-Yamamah framework, and whether it would even exist if recent controversies hadn’t turned “Al-Yamamah” into a term both sides wished to bury – even as they seek to keep the relationship alive.

Al Yamamah was always far more than an agreement with a defense contractor. It was a bilateral national agreement made at the highest levels of the British and Saudi governments, with BAE Systems serving as the contracted executor.

To the Saudis, it was a strategic relationship that would allow them to cultivate two foreign sources for its air force, just as it had done by having American-equipped and French-equipped formations in its army.

The agreement wasn’t as strategic to the British, but it did have a national security dimension by cementing cooperation against the Soviet threat. Its huge economic impact on one of the country’s biggest and most important defense firms was more obvious; Britain had sold fighters to the Saudis in the 1960s, but American firms had taken the subsequent contracts in the 1970s and early 1980s (F-5s, F-15C/Ds). These large contracts for BAE would make it far easier for Britain to maintain its own aerospace industrial base.

Though the foreign policy landscape has undergone a radical shift since the agreement’s inception in the mid-1980s, national security issues are still playing a role in British-Saudi defense agreements. From the Sept 17/07 UK MoD release:

“The Governments share key objectives on national security and actions to combat global terrorism.”

In the post 9/11 era, Saudi intelligence cooperation on terrorism is cited as a key strategic reason for maintaining special agreements to cement British-Saudi relations. This is somewhat dubious. On the one hand, Saudi intelligence is indeed in position to provide useful information about Al-Qaeda, and may well be doing so.

On the other hand, the kingdom and its members are also known for playing both sides. In some cases, this stems from the beliefs of different individuals within a divided oligarchy. There is also a strong belief that the Saudis have pursued a policy designed to export potential trouble, and therefore serve as protection against local attacks. Additional constraints include internal tribal politics, and by the integral role of Salafist Islamic clergy as the second founding pillar of the Saudi state. To this day, significant funding and support for al-Qaeda continues to come from prominent “golden chain” members in Saudi Arabia; and Saudi financing remains vital for many radical Salafist mosques, who act as al-Qaeda’s key global clearing houses and are active recruiters in countries like Pakistan.

While the unspoken truce between the Saudi state and its radical ‘enemies’ has frayed considerably over the last couple of years, the term “frenemies” from the popular American TV show “Sex in the City” may well be an apt description of the situation from both al-Qaeda’s perspective and the West’s.

“Saudi Arabia continues as an important strategic ally for the United Kingdom in the Middle East, playing a moderating leadership role in promoting regional stability.”

Saudi efforts to finance local counterforces to Iran’s proxy warfare in the Mideast region and beyond are rarely mentioned explicitly, and this excerpt from the UK MoD release is a good example. Nevertheless, they have become a defining feature of the current Mideast environment, and from a British perspective they are a clearer-cut and more obvious form of mutual modern interests on the national security front.

All of these considerations find themselves inextricably intertwined with British-Saudi defense aerospace deals, alongside a Saudi environment that is widely reported to feature bribes as a matter of course if one wishes to conclude key deals.

BAE continues to be a target for investigation in the USA, but the question does arise: if BAE is the executor of a government to government deal in which payoffs were contemplated at the outset, how high does the investigation need to go? Given the reported business culture in Saudi Arabia and the extent of American defense activities there, one may also wonder what the results would be if Britain decided to open an investigation of its own, asking the same questions of the US government and its firms?

With BAE Systems’ acquisition of US firm Armor Holdings complete and official, and the sale of 72 Typhoon fighters to Saudi Arabia concluded with a contract, the US Justice Department finds itself sailing into a highly combustible situation with very little ability to make a difference. Its ability to harm America’s relations with both Britain and Saudi Arabia, however, remains intact and considerable. Bloomberg’s Sept 17/07 report features predictions that BAE’s most serious outcome may now be a substantial fine, but adds that even this outcome may be unlikely.

See also:

• BAE Systems – Project AY. Al-Yamamah page.

• BBC (June 26/07) – Timeline: BAE corruption probe

• The Guardian (Dec 16/06) – Brutal politics lesson for corruption investigators

• Sunday Times (Nov 19/06) – Blair hit by Saudi ‘bribery’ threat. The report says the Saudis threatened to cancel the Al Yamamah contract unless this investigation stopped, and notes steps taken in that investigation including legal action to access Swiss bank account information. In general analysts interviewed for other media coverage at this stage tended to doubt that the Al Yamamah orders would be canceled, given BAE’s massive support infrastructure which the Saudis need and could not easily replace. Nevertheless, this certainly reflects increasing tensions.

• The Guardian (Oct 28/06) – The secret Whitehall telegram that reveals truth behind controversial Saudi arms deal. The article asserts that “The MoD documents reveal that the price of each Tornado was inflated by 32%, from GBP 16.3m to GBP 21.5m. It is common in arms deals for the prices of weapons to be raised so that commissions can be skimmed off the top. The GBP 600m involved is the same amount that it was alleged at the time in Arab publications was exacted in secret commissions paid to Saudi royals and their circle of intermediaries in London and Riyadh, as the price of the deal.” Includes original documents mistakenly revealed in a Freedom of Information request:
  • Initial “Al-Yamamah” agreement [PDF format] signed by Britain and Saudi Arabia in September 1985 (known formally as a memorandum of understanding).
  • Telegram from Sir Colin Chandler [PDF format], the then head of MOD’s arms sales unit, in January 1986.
  • Briefing prepared by the Ministry of Defence for Margaret Thatcher for the Al-Yamamah deal [PDF format], September 1985, containing descriptions of key Saudis.
  • Minutes of meeting between then defence secretary Michael Heseltine and Prince Sultan [PDF format], in September 1985

• The Sunday Times (Aug 20/06) – BAE cashes in on GBP 40bn Arab jet deal. “Mike Turner, the plain-speaking chief executive of BAE Systems, Britain’s biggest defence group, let the cat out of the bag at a dinner on the eve of last year’s Paris Air Show. “The objective is to get Typhoon in Saudi Arabia. We have GBP 43 billion from Al-Yamamah over the past 20 years and there could be GBP 40 billion more…” The article pegs the sale at GBP 5.5 billion, with up to GBP 25 billion more for support to 2030.

Appendix B: Saudi Arabia: Dependence & Deployment Options (December 2006)

This purchase gives Saudi Arabia the most capable air superiority aircraft in its region. It also dovetails with The Saudi Kingdom’s objectives of moving away from its dependence on American weapons. Their “special relationship” has soured somewhat, due to increased scrutiny from both sides of the American political spectrum of the kingdom’s internal practices, and of its role in funding the worldwide spread of violent Salafist Islamism. From a Saudi perspective, the Al-Yamamah agreements have represented an important step toward that goal of reduced dependence.

Saudi Arabia currently operates about 120 Tornado aircraft, including both the strike-optimized Tornado IDS (96 aircraft, Scramble places them within 7, 66, 75 & 83 Squadrons at Dhahran on the east coast), and Tornado F3 ADV long-range interceptors (24 planes in 29 Sqadron at Tabuk near Jordan). The Independent notes that the Al-Yamamah deal has been worth at least GBP 20 billion since its inception (a figure placed as high as GBP 43 billion by other reports), and has included both types of Tornado aircraft.

Given the Eurofighter’s current optimization for an air-air role and the continued usefulness of Saudi Arabia’s Tornado IDS strike aircraft, however, observers are urged to be cautious about assuming that all Royal Saudi Air Force Tornados will be withdrawn from service as the Eurofighters arrive, as some media reports are suggesting. The December 2005 UK Ministry of Defence release said simply:

“Under the terms of the signed document Typhoon aircraft will replace Tornado Air Defence Variant aircraft and others currently in service with the RSAF.”

Note the lack of specificity beyond the Tornado F3s. Saudi Arabia also has 72 F-15S downgraded Strike Eagle variants delivered under the Peace Sun IX contracts that could take over the Tornado IDS’ strike role, but this would reduce the kingdom’s current strike capabilities. The Eurofighters could serve at least as well as replacements for the 24 Tornado ADVs of 29 Squadron, the elderly American-built F-5/RF-5 Tiger IIs of 17 Squadron near Jeddah, and the 62 Boeing F-15 C/D Eagle air superiority fighters acquired during the 1980s.

It remains to be seen how the Saudi kingdom will choose to play its cards when the time comes.

Additional Readings

• DID (Aug 4/09) – Eurofighter’s EUR 9B Miltinational Tranche 3A Contract. Explains the Eurofghter’s production arrangements and history, and where the Saudi orders fit in.

• DID (Sept 12/06) – The 2006 Saudi Shopping Spree: BAE Wins Tornado Fleet Upgrade Contract, via a $4.66 billion deal.

(Originally published December 23, 2005. Thanks to readers Guy Cramer and Eric for their update tips.)