CAATnews Oct/Nov 2005 - Arms Trade Shorts

Payback time from BAE Systems' takeover of United Defense

BAE Systems is to make £1.9 billion from repairing US armoured vehicles returning from Afghanistan and Iraq. Much of the work will be done on Bradley fighting vehicles, which are made by United Defense, the US-based company acquired by BAE Systems in June this year. Approximately 37 per cent of BAE Systems's revenues now come from the US as a result of its takeover of United Defense. The company's chairman Dick Olver has said he would like to raise this percentage to the "high forties", prompting speculation that BAE Systems may sell its 20 per cent stake in Airbus to finance the deal.
INDEPENDENT ON SUNDAY 11/9/05; INDEPENDENT 8/9/05

The purchase of United Defense has also made BAE Systems more confident about selling arms to eastern Europe. The eastern European countries that joined NATO in 2004 and in 1999 are committed to spending on average two per cent of GDP per year to upgrade and replace military technology. BAE Systems describes this as "new opportunities" that it is now in a position to consider "in light of the acquisition of United Defense".
JANE'S DEFENCE INDUSTRY, AUGUST 2005

Joint Strike Fighter

Sources briefed on internal US defense department discussions have suggested that the Pentagon is considering proposals to cut the £141 billion Joint Strike Fighter programme by at least 70 per cent. The proposals form part of a US review of weapons systems. A report in the Financial Times said that none of the international partners on the programme had been consulted, despite the scale of the possible changes.
FINANCIAL TIMES, 29/7/05

BAE faces investigation over links to Pinochet

BAE Systems faces yet more investigations after the Guardian alleged US banking records showing that the company secretly paid more than £1million to the former Chilean dictator Augusto Pinochet. Some of the money was listed as being paid through a front company in the British Virgin Islands that BAE Systems has used to channel commissions on arms deals. The payments were made when General Pinochet was no longer in power, with the latest payments recorded as recently as last year. The news comes alongside the ongoing investigation by the Serious Fraud Office into alleged money laundering and false accounting by BAE Systems in deals with Saudi Arabia.
THE GUARDIAN, 15/9/05; FT, 16/9/05

DESO visits Baghdad

Officials from the UK's Defence Export Services Organisation (DESO) have made a first visit to Baghdad as part of a long-term plan to position the UK as a provider of support and advice to Iraq. DESO wants to take a leading role in this, viewing ad hoc visits to Iraq by individual companies as "highly unlikely to be productive", and bordering "on the risky from a personal security perspective".
DEFENCE MANUFACTURERS ASSOCIATION NEWS, SEPTEMBER 2005

Iraqi military money squandered or disappeared

This September, the Independent reported that the amount of money siphoned off from Iraq's defence ministry may be as much as $1 billion. Iraq's Finance Minister Ali Allawi described the situation as "one of the largest thefts in history". In July, Knight Ridder newspapers reported that money intended for training and equipping the Iraqi army had disappeared or been spent on faulty equipment. The paper quoted the example of a shipment of MP5 machine guns costing about $3,500 apiece that are now believed to be Egyptian-made imitations costing $200 each. Knight Ridder laid the blame on a "web of corruption that flourished under American-appointed supervisors". A report from the Iraqi Board of Supreme Audit to the country's government says that US-appointed Iraqi officials in the defence ministry allegedly presided over many of the transactions.
INDEPENDENT, 19/9/05; KNIGHT RIDDER NEWSPAPERS, 14/7/05

Possibility of civil war puts break on arms to Iraq?

US army staff have raised the possibility that logistics around delivery may not be the only factor currently limiting the supply of heavy arms of Iraq. Some officers have suggested that US military suppliers are holding back for fear that weapons may end up being used against them if civil war breaks out in the country. While Iraqi commanders have complained about their soldiers' lack of weaponry, Peter Galbraith, a former US ambassador to Croatia who is now in Iraq, suggested that "we may be arming people that may be at best only temporarily our friends".
NEW YORK TIMES, 28/8/05

Israeli arms company on market

The Israeli government has put its oldest arms company, the state- owned military manufacturer Israel Military Industries (IMI), up for sale. The company has had severe financial problems, despite receiving £1.2 billion of public funds over the past decade, and securing a deal in August to sell ammunition to the US army. Majority control of IMI would remain in Israeli hands.
FINANCIAL TIMES, 21/9/05

Norwegian oil fund disinvests from arms firms

Norway's oil fund has disinvested from arms companies including Thales and Lockheed Martin citing a Norwegian government ruling that oil funds can only be invested in companies that fulfil the ethical requirements determined by the government. These requirements ban investment in certain types of weapons manufacturers.
AFP, 2/9/05