Western arms makers eye lucrative Mideast market

By on Tuesday, February 22nd, 2011

Western arms makers, squeezed by budget cuts at home, jostled to ink deals at the biggest arms fair in the Middle East as crackdowns on anti-regime protesters claimed hundreds of lives in the region.

Shiny fighter jets and armored vehicles were showcased at the Sunday opening of the 10th International Defense Exhibition and Conference in Abu Dhabi amid reports of a bloodbath in Libya, the latest country in the region gripped by a sweeping pro-democracy uprising and ensuing violence.

“The post-financial crisis reality is that today it is clearly the Middle East that is seeing the biggest growth,” said Herve Guillou, president of Cassidian Systems, a subsidiary of European aviation defense group EADS.

Cassidian is in talks with a local company on computerizing the defense systems of the United Arab Emirates army.

IDEX, which will run until Thursday, hosts more than 1,000 exhibitors with over 30 pavilions mostly belonging to the UAE, the United States, Britain, France and Germany. Nearly 50,000 visitors are expected from around the world.

A naval defense industries exhibition, Navdex, is also being organized for the first time this year.

The fair is taking place as the Arab world witnesses a wave of unprecedented revolts that have toppled veteran leaders in Tunisia and Egypt since the start of the year. Some governments have responded with violent repression.

In Libya, rights groups put the death toll at between 200 and 400 in the space of a few days. Yemen, Bahrain, Morocco and Algeria have also faced deadly unrest demanding an end to their decades-old regimes.

That has not stopped contractors from rushing to showcase their wares to Gulf states, whose defense expenditures are set to rise over fears of Iran increased spending power due to high oil prices.

The six Gulf Cooperation Council countries — Saudi Arabia, Bahrain, UAE, Oman, Qatar, Kuwait — along with Jordan are set to spend $68 billion (49.6 billion euros) on defense in 2011, according to research firm Frost & Sullivan. Their spending is expected to reach nearly $80 billion in 2015.

“Undeniably, in the Gulf there are very big budgets that we don’t have in Europe,” said Christian Mons, president of French Land Defense Manufacturers Association (GICAT).

The dynamic market is a godsend for Western contractors as defence budgets at home are being curbed, particularly in the United States and in Western Europe. But they are faced with increasing competition from emerging economies. The Chinese, Ukrainian and South African stalls at the event expanded the most this year.

Nevertheless, negotiations are also long and difficult in the region due to demanding clients.

France has been in talks with the UAE since 2008 of 60 Rafale fighter jets designed by Dassault Aviation, but Abu Dhabi is demanding a revamped version of the aircraft with a more powerful engine and an improved radar.

The topic of sharing the costs of touching up the jets is part of the negotiations.

“A negotiation always takes several years,” said Eric Trappier, who oversees the international operations of Dassault Aviation.

The new question mark is what long-term effects will the recent waves of revolts have on Arab defense policies.

Some say that the level of expenditures on equipment, which are spread out over years, would not be affected. “I don’t think there would be a significant impact on budget,” said GICAT’s Mons.

On the other hand, European companies that manufacture law enforcement arms often no longer have the permission of their governments to export to certain crisis zones material that could be used against citizens.

French group Lacroix, which produces tear-gas or stun grenades, said exports of the products to the Middle East have been blocked, its international operations director Jean-Marc Puech said.

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