13-Dec-2007 19:53

"Africa: The Next Defense Market Opportunity?" discussed Forecast International's look at some very specific opportunities in that continent – one of which was Libya. Libyan ruler Muammar Gadaffi has shifted his country from rogue state status in the 1970s and 1980s, to a policy that completely disclosed the surprising progress of their weapons of mass destruction programs and sought normalized relations with the western world. In 2004 the European Union lifted a 1986 arms embargo against Libya, and in 2006 the USA restored full diplomatic relations. Many credit in part the influence of his son Saif al-Islam [BBC interview | TIME article], whose graduate degrees the University of Vienna and the London School of Economics reportedly included work studying transitions from rentier states and dictatorships to free market societies; he is currently working with Michael Porter to this end.

Libya's military has traditionally been Soviet supplied, alongside some equipment from France. The demise of the Soviet Union, the 1990s drop in oil prices, and Libya's pariah status all combined to choke military modernization – but Libya's new political direction, and the rise in oil prices, are changing that. Unsurprisingly, there have been widespread reports in recent days that France and Libya have signed a Memorandum of Understanding covering arms deals worth up to EUR 4.5 billion, including the first foreign sale of the Rafale fighter. Has France learned the lessons of Morocco and Saudi Arabia? Can the Rafale find an export home at last? Will the deals come to fruition? DID reports.

Defense Aerospace reports that the MoU covers: 14 Dassault Aviation Rafale combat aircraft and associated weapons, modernization of some of Libya's Mirage F-1C fighters, a mix of Eurocopter Tiger, EC725 and AS550 Fennec helicopters, Ceasar truck-mounted 155mm howitzers, a mix of VAB, Sagaie, and VBL wheeled armored vehicles, fast patrol boats, and air defense radars. Other coverage gas included Agence-France Presse, Thomson Financial, Haaretz, et. al.

Reuters reports Dassault CEO Charles Edelstenne as saying that:

"The governments signed a memorandum of understanding and that includes the opening of negotiations about the Libyan government buying 14 Rafale planes. That has been approved by Muammar Gadaffi…. There is now a period for negotiations, we have set ourselves a deadline of the early July, late June to arrive at an agreement. The number of 14 is fixed, now we need to negotiate the price … the contract clauses, the payment conditions…."

On the other hand, Le Figaro pointedly withdrew its story concerning the Rafale purchase:

"The paper said it had wrongly interpreted information and would not publish the report in later editions…. There will be no substitute story."

What does seem clear is that Libya is interested in military modernization, and that it has expressed genuine interest in French equipment. Negotiations do not mean a final sale, however, and other countries will be looking for opportunities to elbow in and fill these needs. Russia is always a potential competitor, for instance, and a removal from the USA's blacklists could introduce the same dynamic of buying cheaper used F-16s that proved fatal in Morocco.

A French sale offers distinct political advantages over Russian options, as it represents a visible sign of Libya's increasing international acceptance that a sale from Russia cannot match. It also restores a set of relationships that were already in place, which is always easier to do than beginning new ones. All the same, the next 6-9 months must feature no sales gaffes of the type that killed the Moroccan Rafale deal, and no over-bundling of equipment of the type that helped kill the Saudi Rafale deal. That effort will be the first test of new President Sarkozy's recent moves to streamline French arms exports – and real political prestige will be on the line if it fails.

www.defenseindustrydaily.com/the-french-connection-libya-seeking-arms-deals-04417/

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