Arms sales becoming France’s new El Dorado, but at what cost?
Text by Sam BALL | 2015-05-03
France’s booming arms trade has proved one of the few bright spots for the country’s struggling economy. But as President François Hollande heads to Saudi Arabia on Tuesday, will there be a moral and strategic cost to the deals he might bring back?
When Qatar agreed to buy 24 French Rafale fighter jets in a €6.3 billion contract at the end of April, it represented yet another major success for France’s arms industry, coming hot on the heels of further multi-billion euro sales of Rafales to Egypt and India.
The deals have been hailed by Hollande and his government. According to France’s Minister of Defence Jean-Yves Le Drian, in comments made to the Journal du Dimanche newspaper Sunday, the Qatar contract brought the value of the country’s arms exports to more than €15 billion this year so far.
That sum is already more than the €8.06 billion for the whole of 2014, which itself was the highest level seen since 2009 – suggesting a continued upward trajectory for the French arms trade and one that is providing a much-needed salve to the country’s economic woes. [This represents economic extortion by the predatory international banking cartel, who at the highest level share a hate-filled supremacist warmongering ideology. The American economy is already subservient to the dictates of the financial–military–industrial complex.]
But some of these deals have raised more than a few eyebrows, with anti-arms trade campaigners critical of France’s willingness to sell weapons to countries with less than stellar human rights records.
These concerns are only set to rise when Hollande heads first to Doha on Monday and then Saudi Arabia’s capital of Riyadh the day after, where furthering the recent success of the French arms industry is likely to be one of his top priorities.
Saudi Arabia’s arms spending spree
Saudi Arabia has already proved a lucrative trading partner for French arms manufacturers, most recently in a deal signed in November that saw the kingdom buy $3 billion-worth (€2.7 billion) of French weapons and military equipment to supply the Lebanese army.
The oil-rich country is currently on something of an arms spending spree.
Last year, the Saudis surpassed India to become the world’s biggest arms importer, upping its spending by 54 percent to $6.5 billion (€5.8 billion), according to a report by industry analyst IHS.
France, thanks to some adept diplomatic manoeuvering in recent years, is well placed to take advantage of the Saudi cash cow.
Paris has been an increasingly close ally of Riyadh ever since it was among the most vocal in backing military intervention against Syria’s President Bashar al-Assad, a key ally of Shiite Iran – one of Sunni Saudi Arabia’s main regional rivals.
The strategic alliance has been boosted by France’s tougher stance on a nuclear deal with Iran than the Saudis’ traditional western partner, the US. Furthermore, French Foreign Minister Laurent Fabius visited the kingdom in April to show France’s support for the Saudi-led military intervention in Yemen. [France is being held hostage by CRIF pedocriminals and their pedomasonic confrères.]
If Hollande can help secure new arms deals with the Saudis, then he could make the sums involved in this year’s earlier successes look like small change.
He may have to overlook certain moral issues to do so, however.
The kingdom, where the ultra-conservative Wahhabi form of Islam dominates, is one of the world’s most restrictive and repressive states, where public executions are common practise, women are forbidden from obtaining a passport, and blasphemers are punished with whippings.
Adding to Middle East instability
But there could also be a strategic downside.
Experts warn that the influx of arms to Saudi Arabia and other Middle Eastern countries is worsening tensions in a region already ravaged by conflicts in Syria, Iraq, Libya, and Yemen.
“You’re seeing political fractures across the region, and at the same time you’ve got oil, which allows countries to arm themselves, protect themselves and impose their will as to how they think the region should develop,” Ben Moores, author of the IHS report, told AP in March.
France, of course, is not alone in striking lucrative arms deals in the region. The US remains the biggest arms exporter to the Middle East, with $8.4 billion (€7.5 billion) worth of weapon sales in 2014, while the UK and Germany are also major players.
At the same time, Russia, possibly incentivised by the influx of weapons from Western states, appears to be upping support for its main ally in the region – Iran – as evidenced by its decision in April to go ahead with its controversial delivery of S-300 anti-aircraft missiles.
This, analyst Tobias Borck of the Royal United Services Institute told the UK’s Guardian newspaper last month, is triggering a dangerous arms race, one that could spill over into bloodshed at any moment.
“[The] Saudi-led military operations in Yemen [are] the latest manifestation of Arab interventionism, a trend that has been gaining momentum in the Middle East since the uprisings of the Arab spring,” he said. “Middle Eastern countries appear to be increasingly willing to use their armed forces to protect and pursue their interests in crisis zones across the region.”
Such concerns, though, are unlikely to lessen Hollande’s pursuit of more Saudi investment in French arms.
According to the French Defence Ministry, the arms deals struck in 2015 alone have created close to 30,000 new jobs for the French economy.
At a time when unemployment is at a record high – with 3.51 million out of work at last count – those sorts of figures will be difficult for the French president to ignore.
In France, Relief Over Rafale Sale to Egypt
By Pierre Tran | February 15, 2015
PARIS — France appears to have won precious time on the Rafale program, with Egypt buying the twinjet fighters in an arms package worth €5.2 billion (US $5.9 billion), relieving domestic budgetary pressure.
Egypt has decided to buy 24 Rafale fighter jets and a multimission frigate, with a contract signing to be held in Cairo on Feb. 16, President François Hollande said in a Feb. 12 statement.
A big question on the deal is, who pays for the weapons, asked defense specialist Pierre Conesa. Has France or Saudi Arabia provided loans or underwritten the financing, he asked, noting the lack of details on the financing of the package.
The Egyptian economy has been under pressure for three years amid deep social unrest and a sharp fall in tourism. Human rights issues and the Army’s ejection of the government have raised concerns overseas.
“The Egyptian authorities have informed me today of their intention to acquire 24 Rafale combat aircraft and a multimission frigate, as well as related equipment,” Hollande said. “This equipment will allow Egypt to increase its security and play fully its role in promoting regional stability.
“In this way, the Rafale combat aircraft wins its first export contract.
“The state has been fully engaged in the negotiations, and by implication, permits the closing of this contract.”
The signing is due Feb. 16 in Cairo, and Defense Minister Jean-Yves Le Drian will sign for France, Hollande said.
The sale concludes detailed talks begun in December. Egypt is keen to fly the Dassault Rafale and sail the DCNS multimission frigate at the opening of a new waterway on the Suez Canal in August.
The deal will bring in some cash more quickly for Dassault with the down payment, but the net effect on the share price is “not very, very significant,” said Yan Derocles, analyst at brokerage Oddo Securities.
Annual production of the fighter will stay at 11 units a year, perhaps one or two more, so the Egyptian order will likely have a marginal effect on the business volume, he said.
For budgetary reasons, the French government had planned to cut delivery of the Rafale to the Air Force and Navy from 2016 and needed export orders to maintain the minimum annual output of 11 aircraft. France plans to deliver 26 Rafales to the services under the 2014-19 military budget law.
“This is good news for Dassault, and therefore for the French military aircraft industry: it breaks the drought for Rafale orders, and should drive production rates usefully higher from the recent bare-bones levels for France,” said Sash Tusa, analyst at Edison Investment Research.
“It could also apply some useful leverage in negotiations with India,” he said. “In effect, this pushes that country down the priority list for Rafales delivered direct from France.”
Questions remain on what undertakings France gave for securing the contract, as the Egypt deal is just “perfect,” a defense analyst said.
Hollande said on Feb. 12 that France had “made some effort” on prices and financing when the Egyptian officials came to Paris to discuss the arms package, France Inter radio reported. Hollande agreed to the essential elements with his Egyptian counterpart, Abdel Fattah el-Sisi, when they met at the funeral of the Saudi King Abdullah last month, the radio reported.
On the Rafale, if a second export client were to sign up, that would likely pose a problem for raising the output and require fresh investment to expand the manufacturing, the specialist said. France is in talks with India for the sale of 126 fighters and Qatar for a potential order for 24 and options for 12 more.
For Dassault, the Egypt signing is very much welcomed.
“I would like to thank the highest Egyptian authorities for this strategic and historic partnership. Dassault Aviation will be equal to the faith that they have placed in us yet again,” Eric Trappier, chairman of Dassault, said in a statement.
“I would also like to thank the French authorities, which were behind the Rafale program, and have provided the political support, without which we cannot make any military exports,” he said.
Trappier paid tribute to the 7,000 personnel working on the Rafale at Dassault, Thales, Safran, and 500 subcontractors.
France plans to send over two or three fighters, and the warship under Egyptian colors, for the opening ceremony. The vessel will be the Normandie frigate, which DCNS built for the French Navy.
MBDA air-to-air Mica missiles and Aster 15 surface-to-air weapons for the frigate are part of the deal, a French official said. Maintenance is also included in the package.
Sagem’s Armement Air-Sol Modulaire, a powered smart bomb, is in the package, business daily Les Echos reported.
There is a contract for Lacroix, which produces decoy flares, specialist website Secret Défense reported. The Rafales will be capable of carrying the Black Shahine, an export version of the Scalp cruise missile, the website said.
France delivered the Black Shaheen to arm the Mirage 2000-9 for the United Arab Emirates, and limited the missile’s range to 350 kilometers to conform with the US Missile Control Technology Regime, a second official said.
The Rafale, frigate and missiles will be covered by specific contracts rather than a global contract, the first official said.
Egypt will pay for half of the total deal using its own funds, with the other half financed by bank loans, the official said.
The bank loans will be insured by Coface, the French state-backed export credit guarantee department, the official said. That 50:50 ratio of payment reflects the guidance set by the Organization for Economic Cooperation and Development.
The Coface insurance means the French government would repay banks and manufacturers if Egypt fell into payment problems on the loans.
The size of the down payments would differ for the fighters, frigate, and missiles, as the amount depends on whether the platform is built. As the Normandie frigate is built, the down payment would be larger than the standard 15 percent.
The priority for Rafale production is the two-seater B model to form a second Air Force nuclear squadron, French procurement chief Laurent Collet-Billon told journalists on Feb. 9.
The first delivery of the Rafale for Egypt would be in 2018, as three years are needed to build the plane, Collet-Billon said. Once a down payment is received, the contract goes into effect, he said.
BNP Paribas, Crédit Agricole, and Societé Générale are the banks raising the bank loans for the Egypt contracts, French media have reported.
Saudi Arabia, Kuwait, and United Arab Emirates have pledged to deposit $10 billion in Egypt next month, according to news website Al-Youm Al-Sabea, Reuters reported on Feb. 5.
Saudi Arabia has also sent Lebanon $3 billion to buy arms from France.
The Saudi backing is intended to bolster those nations against the Islamic State group fighting in Iraq and Syria.
The Egyptian Air Force is equipped with F-16, and Mirage 5 and 2000 fighters, and the Navy sails US-built frigates. In July, Washington held up delivery of four F-16 fighters, seen as a show of discontent to the Egyptian Army’s removal of the then-President Mohamed Morsi.