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

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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.

 
© Eurofighter    
The sale of 72 Eurofighter Typhoons is back on track after the UK Serious Fraud Office dropped its investigation into BAE Systems

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.

MORE ON BAE'S SAUDI DEALS

Read Flight International's opinion piece on how dropping the SFO inquiry was just 'not British'
The Typhoon acquisition is not the only aspect of Saudi Arabia's air force modernisation to benefit BAE. Read more.
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.