Tuesday, Sep 18, 2007

Saudi Arabia confirmed yesterday it had agreed with the British government to buy 72 Eurofighter Typhoon warplanes at a cost of Pounds 4.3bn as part of a contract that defence sources said could grow to Pounds 20bn or more.

The announcement came in a statement from the official Saudi Press Agency, which said that the price of each aircraft - which works out at Pounds 61.5m - was exactly that paid by the Royal Air Force.

The reference to the price reflects Saudi sensitivity to the alleged corruption surrounding a previous order with the UK for Tornados, first signed in 1986 and enlarged in 1993.

The UK's Serious Fraud Office abandoned an investigation into alleged bribery over the so-called al-Yamamah deals last December, citing national security, but the US Justice Department has since embarked on its own investigation.

The Saudi agency, quoting an official source at the Ministry of Defence and Aviation, said the agreement - known as Project Salam - was signed on September 11 "within the framework of the existing close defence relationship between the two countries". A statement from the UK defence ministry described Saudi Arabia as "an important strategic ally for the United Kingdom in the Middle East".

The aircraft will be assembled by BAE Systems at its plant in Warton, Lancashire. BAE's partners in Euro-fighter are EADS, the Franco-German-Spanish aerospace and defence company and and Italy'sFinmeccanica.

An adviser on strategic affairs to the Saudi government said that, unlike the Tornado deal, no middlemen were involved in negotiating the agreement.

He said a ministerial committee, to be headed by a respected minister of long-standing, would be established to supervise the payments and report to King Abdullah.

Negotiations are continuing for the armaments systems to be carried by the aircraft, which could cost an estimated Pounds 5bn.

A further contract - estimated by some sources at up to Pounds 10bn - for support and maintenance of the Typhoon envisages building a big new defence infrastructure in the kingdom.

This is expected to include the expansion of air bases and the eventual building of capacity that will allow aircraft components to be manufactured in Saudi Arabia.

The Saudi adviser said a further negotiation was also envisaged for the upgrading of the existing Tornado aircraft to achieve what he called "a complete redesign of its fighting capabilities".

UK officials said 24 of the Typhoons would be supplied from aircraft previously scheduled for delivery tothe RAF.

These aircraft would come from the second of three tranches of the RAF's order for Typhoons.

The 24 RAF planes would be delivered later and, as a result, the RAF's existing Tornados would have to be kept in service for longer.

Negotiations for a third tranche - a further 88 planes on top of the 144 already ordered - were not scheduled to be completed for 18 months, MoD officials said.

There is speculation that the third tranche order may be curtailed, with the UK defence budget under pressure and the UK already involved in the US-led Joint Strike Fighter project.

By STEPHEN FIDLER