IN FOCUS: Middle East defence market keeps growing

Washington DC
Source:
This story is sourced from Flight International
Subscribe today »

A news conference by the elusive ministry of defence of the United Arab Emirates was announced unexpectedly on 18 November 2009. The Dubai air show was all but over, but now the MoD would meet with the press on the afternoon of 19 November.

Until that moment it had appeared the air show - the most important aerospace industry event in the Middle East every other year - was a bust in terms of achieving clarity on several major defence orders.

Entering the event, industry officials ­wondered if a flurry of contract signings and announcements would finally settle several of the UAE's biggest armament decisions. ­Question marks hovered over potential deals for Dassault Rafale fighters, Alenia Aermacchi M-346 Master jet trainers and either Boeing 737 airborne early warning and ­control (AEW&C) platforms or Northrop Grumman E-2D Hawkeyes.

e-2d advanced hawkeye, northrop grumman

 © Northrop Grumman

The E-2D Advanced Hawkeye offers long-range AEW abilities

Fifteen minutes before the 19 November press conference was supposed to begin, a look around a room gave away the likely purpose of this event. Several executives of ­Alenia Aermacchi waited with a handful of ­reporters for the MoD representative to arrive.

Several minutes late, a uniformed UAE military officer entered, strode to the front and announced the press conference was ­cancelled - alas, there would be no answers for defence industry watchers at this Dubai air show.

It is now two years later, and remarkably the three biggest questions about the UAE's armament needs remain unanswered, along with another big-ticket mystery over the status of Saudi Arabia's acknowledged interest in acquiring another batch of 72 Boeing F-15E Strike Eagles.

Once again the Dubai air show is preceded by whispers of breakthroughs at bargaining tables, especially in regards to new fighters. But arms buyers in the Middle East have always proven fickle negotiators, and there are no guarantees for any company entering this event with hopes of a signed contract.

The lack of resolution on three of the UAE's biggest deals, however, does not mean the ­region's second-largest arms buyer behind Saudi Arabia has been idle. Indeed, the UAE has led the region's spending growth over the past decade. Military spending by the six-member Gulf Co-operation Council (GCC), which includes Saudi Arabia, the UAE, ­Bahrain, Kuwait, Oman and Qatar, has grown from about $49.6 billion in 2007 to $73.4 billion in 2011, including a $5 billion jump from 2010, according to market intelligence firm Forecast International.

dassault rafale, dassault

 © Dassault

Rafale prices have forced the UAE to consider alternatives

Growth is expected to continue among GCC members at a 14% annual rate through 2015, when total spending would rise to $82.5 ­billion, Forecast estimates.

This does not include heavy investment by other countries, particularly Iraq's rapidly rebuilding military force. Forecast estimates that Baghdad will invest $12.5 billion annually in force structure, nearly equaling the ­annual expenditure of the UAE or Israel.

The increased spending of the past decade has elevated the GCC from a region dependant upon allies for security. Nowhere is this more evident than the UAE, which committed ­Dassault Mirage 2000 and Lockheed F-16 fighters to coalition air operations over Libya.News photos also revealed that Libyan rebels operated the UAE-based Adcom Systems ­Yabhon-N - a target drone likely converted into a unmanned air vehicle to provide ­airborne ­surveillance.

Meanwhile, the UAE's biggest deals for fighters, trainers and command and control aircraft are still left to sign, but the MoD in Abu Dhabi has continued an aggressive ­modernisation programme since 2009.

The first contract was signed only a month after the show ended, when the UAE purchased 26 Sikorsky UH-60M Battlehawks on 30 December 2009. It also became the first customer for the AirTractor AT-802U, a light attack version of a popular crop duster.

EXPANDING FLEET

Six Viking Air Guardian 400s - a special ­variant of the DeHavilland DHC-6 Twin Otter - purchased by a UAE company will also be operated by the country's military, according to the Stockholm International Peace ­Research Institute (SIPRI).

Meanwhile, in June 2010 the UAE added two more Boeing C-17 Globemaster IIIs to its previous order from a year earlier, raising its total fleet to six aircraft. The C-17 purchase was not a replacement, but a major capability expansion for the UAE air force. Its six C-130H-30s are waiting to be replaced by Lockheed C-130J-30s. It should come as no surprise that so much activity on the ­acquisition front could overwhelm the bureaucracy of such a small air force. The service's total manpower requirement is about 4,000 members.

Riad Kahwaji, founder and chief executive officer of the Dubai-based Institute of Near East and Gulf Military Analysis, emphasises the limitations of such a small force. Major acquisition programmes consume thousands of labour hours for negotiations and processing, the lengthy process for completing the largest deals reflects this reality perhaps more than any difficulties at the bargaining table.

IMMINENT DEAL

But Kahwaji agrees with several recent press reports from Paris that a fighter deal is imminent. Unlike some reports predicting a Rafale-only deal, however, Kahwaji says he believes the situation is more complicated. The deal will likely be broken into two pieces, with the UAE air force acquiring both Rafales and more F-16 Block 60s. "The F-16 order is very possible," Kahwaji says. "I would not be surprised a bit."

The UAE already has almost 80 F-16 Block 60s, which feature the Northrop Grumman APG-80 agile beam radar and integrated forward-looking infrared sensor and targeting system. It was not expected to purchase ­additional F-16s, but the price of the Rafales has forced the UAE to consider alternatives to a sole-source buy from Dassault, Kahwaji says. The Block 60 variant of the F-16 is half the price of the Rafale bid, he adds.

Another major programme that could be decided in the near future is the UAE's future airborne early warning (AEW) platform. In 2009 the UAE postponed the decision, leading the air force to purchase two Saab 340 turboprops modified with the Saab Erieye radar as an interim solution.

Industry officials expected the Saab 340 system to serve as a training platform for the air force, allowing it to become more familiar with the AEW mission before committing to a final platform.

Northrop's E-2D Advanced Hawkeye is ­understood to have a slight advantage over the 737-based platform, which includes the Northrop multi-role electronically scanned array radar. An order from the UAE would be a huge coup for the E-2D. Boeing has managed to sell the 737 AEW&C platform to three ­customers - Australia, South Korea and Turkey - without the benefit of a US military customer, but the E-2D has been limited to a single domestic buyer, the US Navy, which has committed to buy 73 aircraft through 2022.

Less clear is the current status of the UAE's jet trainer order. The M-346 was selected in February 2009 to serve as a lead-in trainer, light attack fighter and aerobatic display aircraft. After the aborted press conference nine months later, the negotiations appeared to broaden to Alenia Aermacchi's competitors. Representatives of the Korea Aerospace ­Industries/Lockheed T-50 Golden Eagle confirmed the UAE had re-entered talks with other bidders for the 48-aircraft order.

ah-64d apache, us army

 © Boeing

Boeing is closing in on new AH-64D deals

The UAE's list of requirements for new and upgraded aircraft runs still longer, however. Boeing, for example, hopes to close a deal to replace the UAE's 12 Italian-made CH-47 ­Chinooks - which were acquired from Libya in 2003 - with more CH-47Fs. The company also is expected to complete deals for 60 ­AH-64D Apaches, including 30 remanufactured AH-64As and 30 new models. Another possibility for Boeing in the UAE is a possible order for the AH-6i scout helicopter.

Saudi Arabia's roughly $45 billion yearly military outlay represents the region's largest by roughly a factor of three. But even by the Kingdom's standards, the announcement on 20 October 2010 was breathtaking in scope and scale. The US Defense Security Co-operation Agency (DSCA) notified Congress of a possible weapons sale to the country ­amounting to more than $60 billion. The long-rumoured package, partly ­opposed by Israel, would include the ­acquisition of 84 new ­F-15Es and upgrades for 72 existing aircraft, plus 190 new helicopters, including 72 ­UH-60M Black Hawks, 70 ­AH-64D Apaches, 36 AH-6i Phoenix ­helicopters and 12 MD ­Helicopters MD-530Fs.

But the proposed sales are yet to be ­consummated, leaving industry watchers to speculate about plots of subterfuge.

In reality, the deals are likely at the end of a long queue of acquisition priorities for the Saudis, which start with fielding the last batch of 48 Eurofighter Typhoons from a 72-aircraft deal brokered via the UK government. But the interval has raised questions about Boeing's ability to sustain the F-15 production line in the absence of other commitments. The ­manufacturer is due to deliver the last F-15E currently on order the middle of 2012. To avoid a production break, Boeing may already be internally financing the production of long-lead parts for the expected Saudi order.

The deal would be a breakthrough in terms of adding new military capability to the ­region. The proposed F-15SA configuration includes the Raytheon APG-63(V)3 active electronically scanned array (AESA) radar.

The addition of an AESA sensor, as well as a package including the joint helmet-mounted cueing system and Enhanced Paveway III bombs, had been opposed by Israel, which seeks to maintain a qualitative military edge over an Arab regime with air bases located within a 10min flight at supersonic power of its biggest city.

OBAMA THUMBS-UP

The Obama administration, however, settled the debate with the DSCA announcement on 20 October, indicating its willingness to present the packaged deal to Congress for final approval.

If, however, negotiations with Saudi ­officials falter or break down, the US contractors face an eager set of rivals. The Eurofighter consortium still lists Saudi Arabia on its list of candidates for future Typhoon sales. Russian and European helicopter makers would also be pleased to step in if any of the helicopter deals fall apart.

Since 2009, the Saudi military's acquisition community has been unusually dormant in signing new deals. Only one contract is ­believed to have been signed.

Last October, Sweden announced the sale of a Saab 2000 AEW aircraft with an Erieye radar to an undisclosed customer. It has since been widely reported that Riyadh is the buyer. The Royal Saudi Air Force already operates the more capable Boeing E-3A airborne warning and control system aircraft, but the Saab 2000 will likely be transferred to or operated jointly with Pakistan. Such a transfer would make up for Pakistan's original order for six of the AEW platforms, which was reduced in 2007 to five aircraft.

But the biggest opportunity left unclaimed is a contract to replace a fleet of 30 ageing Lockheed C-130Hs. The candidates include the C-130J, the Airbus Military A400M and the Boeing C-17. Each are hoping for at least a share of the replacement order, with the ­Alenia Aeronautica C-27J and Airbus Military C-295 as low-end alternatives.

Elsewhere in the region, military ­acquisition programmes have largely been overtaken by the so-called "Arab Spring" - a series of bloody uprisings starting in Tunisia and spreading to Bahrain, Egypt and Syria.

Neighbouring governments may not have faced mass protests, but many were forced to scale back or defer weapons purchases to concentrate on popular demands for economic and political reforms. Iraq, for example, has recently completed a deal for 18 F-16C/Ds, but the signed deal represents only half of the originally planned order for 36, and it was delayed by several months as Iraqi authorities diverted funding to domestic welfare programmes. Iraq still remains the most active weapons buyer in the region outside of Saudi Arabia and the UAE. It has been quickly rebuilding what had been the Arab world's strongest air force. The currently envisioned force is still a relatively modest organisation, but is growing. Since 2009, Iraq has signed orders for 15 Hawker Beechcraft T-6A Texan IIs, 27 armed Bell Helicopter 407 light helicopters and six C-130J Hercules transports.

Around the other GCC nations, big opportunities still exist. Kuwait is considering the Boeing F/A-18E/F Super Hornet and the Rafale, with the same pairing also in competition in Qatar. Oman is reportedly considering a new round of F-16 or Typhoon purchases.

It may be too soon to expect to see much progress on major weapons contracts with the Arab Spring protests still erupting, but the backlog of unfulfilled contracts has never been longer, and there is little doubt another round of contract signings are imminent.