The Ministry of Defence expects to sign a £20 billion contract with Saudi Arabia to supply 72 Eurofighter Typhoons within the next four weeks, The Times has learnt. Negotiators are understood to be working towards an agreement before the month of Ramadan starts in mid-September and the deal could be completed as early as the end of this month.
The fighter jets will be built and supplied by BAE Systems, Europe’s largest defence company, as part of a government-to-government contract called al-Salam, or “Peace”.
Despite the importance of the deal to both the British and Saudi Governments, it is unlikely that there will be a ceremony to announce it. Saudi officials had thought that the Typhoon contract could be signed during a state visit to Britain by King Abdullah bin Abdul Aziz, the Saudi ruler, in late October, but this has been scrapped to prevent embarrassing questions being raised about the involvement of the Saudi Royal Family in previous defence contracts with BAE.
Prince Bandar bin Sultan, the son of the Saudi Defence Minister, has been alleged to have received payments from BAE as part of the al-Yamamah Tornado contract. Both BAE and the Prince have denied that any payments were improper, but Saudi and British authorities are thought to want to keep al-Salam low-profile.
Britain shut down a Serious Fraud Office (SFO) investigation into allegations of corruption in al-Yamamah last December, but a US Department of Justice investigation is continuing. As a result, al-Salam, one of the most important export orders to be won by a British company, will be announced quietly in a few weeks’ time.
The al-Salam deal is expected to break down into £5 billion for delivery of the Typhoons, about two thirds of which will be assembled in Saudi Arabia. A further £5 billion will be spent on weaponary, while the lifetime maintenance contract for the jets will be worth a further £10 billion. The Typhoons will replace the Tornados bought by Saudi Arabia as part of the al-Yamamah oil-for-arms deal. This was arranged by Margaret Thatcher in 1984 and has been worth £43 billion to BAE since then.
The Typhoon is the most advanced fighter in the world after the F22 Raptor, which is not available outside the United States. The Typhoon was originally designed to dogfight with Soviet MiG fighters over Central Europe, but it is being adapted for wider use.
BAE said yesterday that it was delivering the first multirole Typhoon to the Royal Air Force. It is capable of bombing raids as well as air-to-air combat.
However, it will be armoured vehicles and not fighter jets that are expected to have propelled BAE’s revenues in the first half of this year. The company, which employs 88,000 people worldwide, is forecast to announce operating profits up 14 per cent to £614 million today.
Analysts expect revenues to be up about 7 per cent to £6.81 billion, thanks to a number of large contracts to build mine-resistant vehicles for the US Army. Another key win for BAE in the first half was a $400 million (£196.3 million) contract to upgrade and refurbish Bradley Fighting Vehicles.
BAE will also confirm today that its $4.5 billion takeover of the Florida-based Armor Holdings, which makes armour panels for vehicles, has been approved by authorities in the United States. The deal would make BAE the sixth-largest supplier to the US Defence Department.
