BAE Systems

BAE Systems is the world's third largest arms producer. Its portfolio includes fighter aircraft, warships, tanks, armoured vehicles, artillery, missiles and small arms ammunition.

BAE howitzer at Farnborough International 2010

BAE's deals

BAE's arms are sold indiscriminately around the world. The company has military customers in over 100 countries and around 95% of its sales are military (SIPRI).

A notorious recent deal was the sale of 200 Tactica armoured vehicles to Saudi Arabia. These vehicles were used by Saudi troops helping to suppress pro-democracy protests in Bahrain in March 2011 (Jane's Defence Weekly, 23.3.2011).

BAE has 5,900 employees in Saudi Arabia and provides operational support to the armed forces including the Saudi air force, which bombed Yemen in 2009, and the Tactica armoured vehicles.

The Economist Intelligence Unit publishes a "democracy index". The 2012 index saw Saudi Arabia ranked 163rd out of 167 countries. It was assessed as more authoritarian than Burma, Iran, and Turkmenistan. In fact, only Syria, Chad, Guinea-Bissau and North Korea were assessed as worse.

BAE's strategy

BAE targets wherever it thinks it can make profit. The repressive Saudi Arabian regime and the UK Ministry of Defence are long-term customers.

In the mid-2000s, BAE's drive to profit from the conflicts in Afghanistan and Iraq led it to purchase two major US armoured vehicle producers.

However, with the peak of US intervention in Iraq and Afghanistan passing, BAE has been on the look out for the next big opportunity. "Cyber and intelligence" looks to be it, and BAE has purchased a raft of cyber security companies across its "home markets".

Corruption investigations

In 2004, following compelling evidence in the media, the UK's Serious Fraud Office began investigating BAE deals with numerous countries including Saudi Arabia, South Africa, Tanzania and the Czech Republic. However, the pivotal Saudi strand was stopped in 2006 following political intervention by Tony Blair (which in turn resulted from pressure by the Saudi government and BAE). A US Department of Justice investigation continued.

In 2010, the Department of Justice agreed a plea bargain with BAE. The company was sentenced

to pay a $400 million criminal fine, one of the largest criminal fines in the history of DOJ's ongoing effort to combat overseas corruption in international business and enforce U.S. export control laws., 1 March 2010

The fine covered corruption on arms deals with Saudi Arabia, the Czech Republic and Hungary, although BAE only had to admit to making false statements in regulatory filings.

The longer-run UK Serious Fraud Office investigation was left with, as Private Eye put it, "the crumbs of a £30m settlement over BAE's corrupt Tanzanian radar system contract." In this instance, BAE only had to admit to false accounting.

More information on the investigations and plea bargains is available here. Links to a number of the key legal documents are available here.

A 'UK' company?

BAE is an international company with five "home markets" and arms production in several others. The largest of the home markets is the US, followed by the UK and then Saudi Arabia. The others are Australia and India.

Similarly, it has most employees in the US (34,500), followed by the UK (32,800) and Saudi Arabia (5,900) (BAE Annual Report 2012).

Page updated 30 April 2013
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