UK concern over German arms sale ban

A German ban on arms exports to Saudi Arabia imposed after the murder of journalist Jamal Khashoggi has caused growing diplomatic tensions between Berlin and London. UK’s BAE Systems is the first casualty of the arms sale ban instituted by Germany in October 2018. 

Background 

BAE Systems plc is a British multinational defence, security, and aerospace company. Its headquarters are in London, with operations worldwide. It is the largest defence contractor in Europe and among the world's largest defence companies; it was ranked as the third-largest based on applicable 2017 revenues. Its largest operations are in the United Kingdom and the United States, where its BAE Systems Inc. subsidiary is one of the six largest suppliers to the US Department of Defence.

BAE Systems is involved in several major defence projects, including the Lockheed Martin F-35 Lightning II, the Eurofighter Typhoon, the Astute-class submarine and the Queen Elizabeth-class aircraft carriers.

On 20 October 2018, the German Chancellor announced that the country would be halting weapons sales to Saudi Arabia. The chancellor said the Saudi explanation for Khashoggi's death was insufficient, and that those responsible for the killing "must be held accountable.” Merkel said Germany would discuss further "reactions" to the case with its international partners.

Analysis 

The UK says that Germany’s post-Khashoggi measure to stop arms sales to Saudi Arabia has hit BAE Aerospace’s ability to honour the Eurofighter Typhoon contract. 

Britain’s biggest defence company is the lead industrial partner for the pan-European Eurofighter consortium in Saudi Arabia and, as such, is responsible for ensuring the maintenance and support of the kingdom’s Typhoon jets. The move by Berlin to stop exports to Riyadh has hurt supply lines and caused consternation within the consortium. “We’ll soon get to the point where the Saudis can’t fly their planes any more,” said a person with direct knowledge of the problems. “Someone’s going to have to pay — this is causing millions of pounds-worth of damage.” 

British sources briefed on the situation confirmed that the UK government was working with BAE Systems to resolve the issue. Although the Royal Saudi Air Force still has access to a significant number of spare parts in the kingdom to service its 72 jets, if the situation persists it could have an impact on the operational readiness of the fleet.

The problem has highlighted how a lack of unanimity in Europe on rules for arms exports is playing havoc with some of the continent’s key trading relationships. It also risks undermining recent efforts to deepen defence industry co-operation in Europe, which both Angela Merkel and Emmanuel Macron have identified as a key objective. 

Ms. Merkel hinted at the problem during her speech to the Munich Security Conference on Saturday, saying that without a “common arms export culture”, Europe would “struggle to develop joint weapons systems”. 

The issue in question is the German government’s unilateral decision to suspend arms sales to Saudi Arabia, its second-biggest customer for weapons after Algeria. The ban caused frustration among many of its allies, in particular France, because it covers all weapons that include parts made in Germany. Germany’s partners have long complained about Berlin’s restrictive policies, with the latest broadside coming from Tom Enders, chief executive of Airbus. The problem for BAE Systems concerns 72 Eurofighter Typhoons that the Saudi government agreed to purchase in 2007 under a government-to-government contract with Britain.

The decision by Berlin to block export licences for German military equipment to Riyadh has therefore raised questions over BAE’s ability to meet its contractual obligations as the lead partner. The UK government signed a memorandum of intent last March to sell another 48 Typhoons to Riyadh, in addition to the 72 it has already sold the kingdom. Although the size of the contract was not disclosed, the order could be worth more than £5bn.

Assessment 

Our assessment is that the fallout of stopping arms sales to EU’s largest consumer is starting to show on the key companies which constitute the unified European defence industry. We believe that Europe needs a new common framework for arms sales if it wants to pursue deeper defence cooperation. 

Image Courtesy: kogo (https://commons.wikimedia.org/wiki/File:0199_Eurofighter_Typhoon_98+03.jpg), „0199 Eurofighter Typhoon 98+03“, https://creativecommons.org/licenses/by-sa/3.0/de/legalcode

Read More:

1) Germany Stops Arms Exports to Saudi Arabia