Saudi Typhoon buy could herald wave of big arms deals in Middle East

The announcement on 17 September of the purchase of 72 Eurofighter Typhoon by the Kingdom of Saudi Arabia looks set to start a wave of multibillion-dollar defence deals in the Middle East thanks to surging global crude oil prices.

The long-trailed Saudi contract is the culmination of more than a decade's work by BAE Systems and the UK government's Defence Export Service Organisation to export the fourth-generation fighter to the UK's biggest defence equipment customer.

The deal, which the Saudi Ministry of Defence and Aviation said is initially worth GBP4.43 billion (USD8.9 billion), could eventually be worth more than GBP30 billion over the next 25 years to BAE Systems and its partners in the Eurofighter consortium.

Dubbed 'Project Salam', the deal is more than just an arms export contract. It involves the establishment of a Typhoon assembly line in Saudi Arabia and an unprecedented degree of defence technology transfer to a Middle Eastern country.

"This new defence co-operation programme builds on a long and successful relationship between the UK and Saudi Arabian governments and their armed forces," the UK Ministry of Defence announced on Monday. "Saudi Arabia continues to be an important strategic ally for the UK in the Middle East, playing a moderating leadership role in promoting regional stability. This agreement will be supported by substantial logistical and training packages."

'Project Salam' reportedly involves a series of multilayered contracts and diplomatic agreements. According to the Saudi Press Agency, the deal was finally signed on 29 August and the unit "price of one [Typhoon] is similar to the price when it is sold to the [UK] Royal Air Force [RAF]".

BAE Systems said the agreement was expected "to become effective in due course" and the company welcomed the news as an "important milestone in its strategy to continue to develop Saudi Arabia as a key home market with substantial employment and investment in future in-kingdom industrial capability".

Unlike the previous Al Yamamah deal that used an 'arms-for-oil' payment mechanism, the new deal will be a cash arrangement, Jane's has been told. Jane's understands that the heart of the deal will involve substantial investment by BAE Systems in a number of Saudi companies, including the Riyadh-based Alsalam Aircraft Company, which will also be contracted to assemble the aircraft. A Typhoon assembly facility is expected to be built in the town of Taif in southwest Saudi Arabia. Press reports in Saudi Arabia suggest some 15,000 jobs are to be created in the kingdom as a result of the project. An industry source close to the project told Jane's: "The Saudi government would never have gone for this deal unless BAE Systems could prove it was going to create thousands of high-value jobs for its people."