Quid Pro Quo

It didn't get a lot of play in this country, but the Brits have cancelled their investigation into the alleged bribery of Saudi officials, to allow Riyadh's planned purchase of Eurofighter jets to go through.

Defense Industry Daily had an excellent summary of the scandal--and its apparent cover-up--in this article, which was published last week. U.K. investigators were looking into an apparent "slush fund" that was sent up by British Aerospace (BAE) in the mid-1990s for senior Saudi officials. The fund was apparently established in support of another British military sale to the Saudis. According to the British press, Saudi Arabia threatened to halt its planned $ 12 billion purchase of Eurofighters, unless the bribery probe was quashed.

Compliantly, Britain's Serious Fraud Office (SFO) announced last week that the bribery probe would be closed.

Of course, there is more than a hint of irony (and hypocrisy) in all of this. The Saudi deal has become critical for the Eurofighter consortium, which has been largely shut out of the export market so far. A number of European countries--including Italy, Norway, the Netherlands and even the U.K.--have committed to the F-35 Joint Strike Fighter, limiting potential buys for the Eurofighter, while other potential Typhoon customers (notably the United Arab Emirates) have opted for upgraded versions of the U.S. F-16.

And, if the Saudis had their druthers, they'd rather buy the F-22 or JSF. Both are vastly superior to the Eurofighter, which offers slightly improved performance/capabilities over late-model F-15s and F-16s. But the U.S. has nixed the idea of F-22 exports to anyone, including such allies as Israel and Japan. The JSF has been approved for export, but so far participation in the program (and projected sales) have been limited to NATO allies and Australia. Faced with a need to replace its aging Tornado fleet--and with state-of-the-art U.S. jets unavailable, the Saudis opted for the Typhoon.

Anxious to maintain a toe-hold in the fighter export business, the Eurofighter consortium was apparently willing to do anything to preserve the Saudi deal. So, the investigation was quashed, the Saudis get to keep their cash, the Typhoon assembly lines will stay open a bit longer, and BAE shareholders will be a bit happier.

It's how the game is often played in the world of defense contracting, and believe me, American firms are no strangers to such tactics.