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DASSAULT

Sweden beats France to $4.5b fighter jet deal

French hopes of landing a $4.5 billion contract to supply 36 fighter jets to Brazil were shot down on Wednesday when the South American giant chose Swedish company Saab instead. The rejection came after 10 years of fraught negotiations.

Sweden beats France to $4.5b fighter jet deal
French hopes of landing a multi-billion dollar deal to supply Brazil with fighter jets were shot down by Sweden. File photo: Karim Sahib/AFP

Sweden's Saab edged out French and US rivals to win a multi-billion-dollar contract to supply Brazil's air force with 36 new fighter jets, Defense Minister Celso Amorim said Wednesday.

Saab's Gripen NG was in competition with the Rafale made by France's Dassault company and US aviation giant Boeing's F/A-18 fighter for the long-deferred FX-2 air force replacement program

"After analyzing all the facts, President Dilma Rousseff directed me to inform that the winner of the contract for the acquisition of the 36 fighter jets for the Brazilian Air Force is the Swedish Gripen NG," Amorim told a press conference.

He put the actual value of the contract, earlier estimated at $5 billion, at $4.5 billion as Saab offered the cheapest price.

"We are a peaceful country, but we will not remain defenseless," Rousseff said on the presidential palace's blog.

"It is important to realize that a country the size of Brazil must be ready to protect its citizens, its resources, its sovereignty.(…) We must be ready to deal with any threat," she added,

The announcement came after more than 10 years of discussions and repeated delays due to budgetary constraints.

It came as a surprise, as experts were forecasting a Dassault-Boeing duel.

Amorim said the Gripen, a state-of-the-art, multi-role fighter, got the nod based on performance, assurances of full technology transfer and overall costs.

The Swedish aircraft, which was favored by the air force brass, is capable of performing an extensive range of air-to-air, air-to-surface and reconnaissance missions.

It can carry up to 6.5 tons of armament and equipment.

Munitions include various missiles, laser-guided bombs, and a single 27 mm Mauser BK-27 cannon.

The Gripen is in use in the air forces of Britain, South Africa, the Czech Republic, Thailand and Hungary.

Rousseff had postponed a decision on the FX-2 replacement contract in early 2011 for budgetary reasons but air force chiefs made it clear that it was an urgent matter

The air force said the new fighter aircraft were needed to maintain an adequate air defense as it is to retire its 12 Mirage jets in late December.

Brazil bought the refurbished Mirage 2000 C/Bs from France in 2005 for $80 million to fly for five years.

A key requirement for the sale was technology transfers so that the planes can be assembled in this country and give a boost to the domestic defense industry.

Amorim said negotiations with Saab would take 10-12 months, with the signing of the contract expected at the end of next year and delivery of the first aircraft 48 months later.

The defense minister said Brazil's top plane maker Embraer "will benefit greatly" from the deal.

The G1 news website quoted Air Force spokesman Marcelo Damasceno as saying the Gripen jets "will meet the operational needs of the Air Force for the next 30 years."

Wednesday's announcement was a major blow for Dassault which has so far failed to export the Rafale.

French President François Hollande personally lobbied for Dassault's plane during a state visit to Brazil last week.

Brazilian press reports said Rousseff was leaning toward the F/A-18 but recent disclosures of extensive US cyberspying on Brazil dashed Boeing's hopes.

In 2009, then president Luiz Inacio Lula da Silva had expressed a preference for the Rafale but later backtracked and left the choice to his successor Dilma Rousseff.

A source close to Dassault in Paris said the Rafale was the most expensive among the three aircraft in contention.

"There is a prototype of the Gripen NG, which already has 300 hours of flight," said Brazilian Air Force Commander Juniti Saito.

"We are going to develop the plant jointly with Sweden. with Saab, to have 100 percent of the plane's intellectual property," he added.

"Within the Air Force, the Gripen was always seen as the favorite because, even though it has many US-made components, it is a project that will be developed jointly with Brazil," the daily O Estado de Sao Paulo said.

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INDIA

French fighter jet deal: India ‘a school of patience’

The less-than-supersonic sale of French Rafale fighter jets to India has highlighted the obstacles facing foreign arms firms seeking to do business with the world's biggest weapons importer.

French fighter jet deal: India 'a school of patience'
Rafale jets at an assembly hanger in Merignac, southwestern France. Photo: Jean-Pierre Muller/AFP
India has signed a series of key defence deals under Prime Minister Narendra Modi as part of a $100 billion upgrade of its Soviet-era military hardware, making it an attractive proposition for arms exporters.
   
But a series of corruption scandals have made India a challenging environment, with huge delays and a tough negotiation process.
   
After nearly a decade of discussions and setbacks India signed a deal Friday to acquire 36 Rafale fighter jets for 7.9 billion euros ($8.8 billion) as it seeks to bolster its military against an increasingly assertive China.
   
Defence experts say the aircraft, manufactured by France's Dassault, will provide a much needed boost to India's air force. But the final windfall was much less than had been hoped for by the French.
   
“The Indians always conduct very tough negotiations. They are known for it,” said Isabelle Saint-Mezard, a specialist in South Asian strategic issues at the University of Paris.
   
“They have all the major weapons suppliers knocking at their door, so they are well positioned to do so.”
   
Eric Trappier, CEO of Dassault Aviation, has gained experience of India's bargaining tactics in recent years. “India is a school of patience,” he said.
   
The country ranks 130 out of 189 on the World Bank's Ease of Doing Business index — the worst of all G20 countries — and regulations vary capriciously across its 29 states, where even the same law can be interpreted in bafflingly different ways.
 
Fear of corruption
   
Allegations of corruption have scuppered Indian defence deals as far back as 1987, when then-prime minister Rajiv Gandhi's government collapsed over charges of kickbacks paid to Indian officials by the Swedish group Bofors to clinch a $1.3-billion artillery deal.
   
Fears of further corruption meant that “the modernisation of the armed forces stalled,” said Gulshan Luthra of the Institute for Defence Studies and Analyses in New Delhi.
   
To erect safeguards against graft India ramped up its army of bureaucrats dealing with weapons sales, with contracts becoming trapped in a paper maze.
   
The smallest comment on an arms deal required from a government department can delay a case for several months.
   
“In recent years, the authorities have tried to clamp down on graft. As a result, officials in charge of issuing contracts fear exposing themselves to suspicion of corruption and are reluctant to engage,” said St. Mezard. For a contract to succeed, “it usually takes strong political will at the highest level of the state,” she added.
   
But all these precautions do not prevent old demons resurfacing. In 2013 the government scrapped a $748 million contract with AgustaWestland helicopters following allegations it was won through kickbacks.
   
Technology transfer
   
Deals are also complicated because India is determined to achieve its goal of being less dependent on foreign trade for its military equipment. Its tenders are accompanied by significant technology transfer requests.
   
For example, one mooted deal was to have seen Dassault assemble 108 out of 126 fighter jets on Indian soil.
   
But the French refused to assume responsibility for all the planes that were to be built in India.
   
“The Indians insist on such deals, but without always having the means or the expertise to carry them out. As a result, suppliers are reluctant to embark on this sort of agreement,” said St. Mezard.
   
Faced with an urgent need to modernise its military, Modi's government finally opted for the direct sale of 36 ready-to-fly Rafale jets, which will be manufactured in France.
   
But Dassault will be contractually bound to reinvest nearly half of the value of the deal in India, an obligation known as the offset clause.
   
“The offset rules are very complicated and opaque,” said Rahul Bedi, a Jane's Defence Weekly analyst. “We are talking high-tech and the Indian industry does not have the sophistication to absorb such offsets.”
   
India has signed several big-ticket deals since Hindu nationalist Modi took power in 2014.
   
The increasing assertiveness of its giant neighbour China as well as its simmering rivalry with Pakistan have increased its need to upgrade its military. That signals many potential contracts for foreign arms suppliers — despite the obstacles.
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