David Robertson, Business Correspondent
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BAE Systems will clinch a £20 billion deal to supply 72 Eurofighter Typhoon jets to Saudi Arabia next week.
It is understood that the British Government sent the Typhoon contract to King Abdullah bin Abdul Aziz two days ago. The King is expected to sign the contract next week, sealing one of the largest export orders ever won by the UK.
BAE led the FTSE 100 risers this morning as shares jumped by 4 per cent to 466.25p.
Completion of the deal will be an enormous relief to BAE, Europe’s largest defence company, as negotiations have dragged on for a year and were nearly derailed by a Serious Fraud Office (SFO) investigation into the company’s dealings with Saudi officials.
The Typhoon deal will be called al-Salam, meaning “peace”, and defence analysts said that it would be vital to building closer military links with Saudi Arabia.
Last year the Saudis threatened to drop the deal as the SFO investigated allegations of corruption in an earlier contract for Tornado jets. The Saudis also gave warning that they would suspend all security and terrorism cooperation if the SFO attempted to access Swiss bank accounts of Saudi royalty.
The SFO investigation was halted by the British Government and senior ministers are understood to have travelled to Saudi Arabia this year to ensure the deal was completed.
Al-Salam is expected to break down into an initial £5 billion contract to supply the fighters, a further £5 billion to be spent on munitions and armament systems, and the remaining £10 billion to come from through-life maintenance of the jets.
BAE is building a large operation in Saudi Arabia in preparation for Typhoon deliveries and now employs 4,600 people there. The first 24 Typhoons are likely to be built at BAE’s factory in Warton, Lancashire, and the remaining jets will be assembled in Saudi Arabia.
The completion of the contract negotiations indicates that the Saudis have put aside their concern over the SFO investigation. However, they are not expected to make a formal announcement of al-Salam’s completion, partly out of concern that past corruption allegations will resurface.
A plan to have King Abdullah sign the contract in London during his state visit in October has been dropped.
The renewed cooperation between the UK and Saudi Arabia could lead to other big contract wins for BAE.
It is understood that Saudi officials have been invited on board Daring, the first of six new destroyers being built by BAE for the Royal Navy. The Saudis will join the warship for sea trials, which are currently taking place off the north coast of Scotland. They are thought to want to buy at least two of the £600 million vessels.
BAE’s links with Saudi Arabia go back to 1966, when the UK sold Lightning aircraft to the kingdom. In 1984 Britain signed the landmark al-Yamamah deal to supply Tornado jets and other military equipment.
Al-Yamamah remains the largest export order won by the UK and has been worth more than £43 billion to BAE. Its successor, al-Salam, is expected to last at least 20 years as BAE maintains and upgrades the Typhoons. The British Government had hoped to finalise the Typhoon deal in June but the Saudis pushed back completion to ensure that Gordon Brown endorsed it as the new Prime Minister.
A spokeswoman for BAE said: “This is a government-to-government negotiation and we are unable to make any comment on it.”
The Ministry of Defence made its usual statement in relation to the Typhoon deal, saying negotiations were continuing.
The Eurofighter is one of the most advanced fighter jets in the world and is built by a consortium of European defence companies It is a joint venture between the UK, Germany, Italy and Spain and was first proposed in 1985.
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The Eurofighter has been widely reported as out-of-step with our current requirements and its design is very old. It was just bought to please the EU.
Sell the Saudi's the ones on order for the RAF or even the ones being operated by the RAF.
Brian Gilbert, HAMPTON, Middx
The Typhoon order for 72 aircraft could easily morp into a bigger aircraft procurement program to eventually replace older F-15C's delivered in 1981 and including those F-15C's taken from USAF European stocks during the August 1990 invasion of Kuwait by Iraq.
The RSAF has one of the lowest time F-15S fleets and they have not used much of their airframe time especially with frames rated up to 15,000 hours as is with F-15E's.
Iranian F-14's would not be any competition to any other modern aircraft such as the F-22, F-18E/F and the Typhoon. Besides the US would drop enough JDAM's and fire off enough cruise missiles to sink both the Iranian navy and the air force at its bases during the first 72-96 hours of combat. That woudl ensure there was no competion at all.
James Goodwin, Doylestown, PA, USA
Lets get real, bribes are part of business. The official term is 'hospitality' but all the big-boys do it to secure contracts.
I worked on the Typhoon at Warton for many years; it is a superb fighter. The Saudi's are getting the best product they can get their hands on (F-22 has better stealth but much higher price and sales are restricted). Despite the cost of the 'hospitality' given to the Saudi's it is a small percent of the sale value to BAE. Buyer and seller are happy. The only damage is to the principle of no sweeteners. If the UK SFO enforced this principle it would be a joke because every other country out there does not. Frankly, as the nature of this was not bribing someone to give false evidence, or to cause harm I see no damage in companies offering clients 'discounts' on their products. Saudi money went to BAE and some of that money went back to Saudi. Dont many retail stores offer "cash back" in their sales terms to get your business?
Jack Sprat, Bristol, UK
Pat,
An F-22 can shoot down any F-14 easily. Do you really think the Iranians can get any of those F-14s off the ground. Get real.
Mar, Washington, USA
Pat Hefferman is wrong when he says that the USA has nothing that could combat the F14 at long range. The F22 Raptor could take out an F14 without it's crew knowing that it was there. THe USAF's F15E Strike Eagle and the US Navy's F/A18E/F Super Hornet could both blow an Iranian F14 out of the sky but it's crew might just might have time to say a quick prayer or two.
Have a nice day..
W D Toulman, Walkington,
Some may think this is good for the UK but when you consider how little tax large defence companies pay and how great they are at claiming every avaiable govt grant and loan, the only people who should be celebrating are BAE's shareholders.
SERKAN BOSTAN, London , UK
Last October Tony Blair clearly did the wisest thing in calling-off the Investigation.
UK industry will now have enefit by taking this huge order from Saudi for airplanes and services.
It gives an incentive to our teenagers to become engineers.
Maybe one day we will be told the real reason why the UK Government had to stage that investigation in the first place anyway?
Michael Blatchford, Bath, UK
Surely the definition of any Armed Force is the "professional application of extreme violence".
The potential threat of application of this extreme violence is paradoxically what keeps the PEACE.
If the Kingdom of Saud wish to have this option then surely that is their choice and not Dan's in Oxford.
Dave, Lincoln, UK
Fantastic for business, probably great for me and the country I live in. But those aircraft are still specifically designed to murder human-beings as effectively as possible - I can't seem to get too carried away with the whole deal.
Nick, Reading, UK
We can thank Tony for this.
Rob, Brum, West Mids
Well done BAe, you managed to shift some metal. Here is an idea, take the rest of the Eurofighters that the RAF can't fly...you know the hundred odd they are going to mothball because there are not enough pilots, and sell them to the Saudi's. I am sure they can share the same hanger space with the Tornados you 'sold' them 20 years ago. Better their mothballs than ours. 24 will be built in Wharton.....put that into perspective. And why you are at it see if you can 'sell' them some of those nice pointy Destroyers the Navy like so much. They look just super tied up in dock. Ironic is having a navy with more Admirals than surface ships, and Airforce with more Air Marshals than squadrons and a foreign policy that is shaped by BAe systems.
bruce bettridge, st albans, UK
Pat Hefferman is wrong when he says that the USA have nothing to combat the F-14 (Tomcat) at long range. The F22 Raptor could take out an F14 before the F14's crew knew that it was there. The US Navy's F/A 18E/F Super Hornet could blow an F14 out of the sky but the F14s crew might just have time to say a few prayers. Have a nice day
W D Toulman, Walkington,
Good Luck BAE
Nicholas Iles, Oswestry, Shropshire
It is always a pleasure to see how smoothly things can evolve in a civilised country. Romanian official are always accused of being corrupt and they will never even dream of receiving such good bribes as SFO presumed were given to the Saudi officials. But, alas, we are a poor country and the poor should always be punished. When the amount of money given and taken is small, we cry out "bribe", when the sums have at least six zeros they are (very nicely and civil like) being called "an investment made for ensuring the well being of our country". It is truely patriotic to offer bribe with only one condition: to be a citizen of an important country, a developed one.
Cristi Barbu, Bucharest, Romania
When the fanatics take over Saudi Arabia, these 72 Typhoon jets are going to come in damned handy!
shirley bowen, Blackpool,
I am sure the Americans thought "A win all round" when they sold F-14 Tomcats and long range Phoenix missiles to friendly Iran back in the 70s....
Now the US have nothing that can combat the F-14 at long range.
Hope this deal doesnt come back to haunt.
Pat Heffernan, Galway, Rep. of Ireland
'The Typhoon deal will be called al-Salam, meaning âpeaceâ.' Anybody else find that slightly ironic?
Dan Richardson, Oxford, UK
Fantasic news, it's good to see that despite the best attempts of some to scupper this project BAe has pulled it off.
Jobs secured, BAE in Warton protected, closer ties with a partner in the war against Islamic extremism. A win all round
Dave Rogers, London, UK