The Middle East Balancing Act.

The Coalition cease-fire of 1991 left the Middle East still driven by territorial disputes, jealousies over natural assets (oil and water) and fear of ballistic missiles and weapons of mass destruction. If the region is to achieve a lasting peace, each nation must acquire the military means and make the diplomatic alliances necessary to protect itself.

That the Middle East remains at the top of the list (alongside Korea) as the world's most likely venue for the next major war is basically due its unique mix of countries and uneven distribution of valuable assets.

Israel is virtually a de-facto US state, and well up to European standards in terms of technological development. The Arab nations cover a broad spectrum, from the oil-rich Saudi Arabia and the Gulf states to the poor and vulnerable Jordan (which is receiving pre-used Lockheed Martin F-16A/Bs and Vickers Challenger 1 tanks) and Lebanon. In between these extremes are the large and populous Egypt and the fundamentalist-Islamic but non-Arab Iran, since 1979 a terrorist-linked pariah state. It remains the natural rival to Iraq (which has one-third of the population and yet only one-tenth of the per-capita income) as the dominant regional power. Iran is also a potential threat to the Gulf Co-operation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE), the members of which have over ten times the oil reserves of Iran.

Iran, Iraq and Syria will doubtless all buy new defence equipment as soon as their finances allow. The UN restriction on Iraqi oil exports may have been lifted by the time these words are published.

The events of the Gulf War brought home to Israel that its regional military superiority has ended. Having the nuclear-tipped Israel Aircraft Industries (IAI) Jericho 2 ballistic missile is not a dependable deterrent for a leader such as Saddam Hussein. Israel now sees the need for its own reconnaissance satellites (the Offeq series), two types of stealthy long-endurance UAVs (Unmanned Aerial Vehicles), one with all-weather sensors and the other with missiles to destroy ballistic missile launchers, and two layers of ABM missiles. These layers will be provided by the Raytheon Patriot point-defence system with the Lockheed Martin Pac-3 missile, and the indigenous area-defence IAI Arrow 2 (see "Where Does ABM Defence Stand?" elsewhere in this issue).

Israel

Israel still attaches considerable importance to maintaining a strong force of strike aircraft. Although in 1999 the Lockheed Martin F-16I was chosen (with 50 under contract and 60 more on option) in preference to a follow-on buy of Boeing F-15Is, reports suggest there may yet be an attrition batch of the latter type. Israel has recently received Congressional approval to buy eight Boeing AH-64D Apache Longbows, and may have up to twelve AH-64As (out of around 40) upgraded to that standard.

Israel reportedly wants to acquire high-speed long-range cruise missiles to destroy mobile Scud launchers. After reports last year that it had tested a cruise missile over the Indian Ocean, Israel gave assurances that its German-designed submarines had not been converted for this purpose.

The United States provides Israel with $1.8 billion annually (scheduled to grow to $ 2.4 billion by 2004) in the form of military grant aid, with the understanding that 74 per cent is used to purchase products built in the United States. The remainder can be used to purchase any Israeli-built military equipment that cannot be supplied by American companies.

It follows that there is little prospect of other countries selling to Israel. On the other hand, all is not well for Israeli manufacturers, since the nation's own budgetary contribution to its defence has been cut back. In addition, there is an Israeli Government trend toward buying from America equipment that was originally developed in Israel, and to subcontract work on Israeli systems to low-cost US producers. Examples in the former category include the Rafael Popeye air-surface missile and the Israel Military Industries Tavor semiautomatic weapon.

Furthermore, Israeli arms exports are restricted by America's insistence on approving any sale to China, India, Pakistan and Russia. This power of veto has already led to the cancellation of the sale to China of IAI-modified II-76s with Elta Phalcon early warning radars (as carried on Israeli 707s). The current situation is encouraging Israeli companies to act as subcontractors to foreign firms, and to seek overseas work in the upgrade sector (in which IAI, Elbit and Elta are already heavily involved).

Saudi Arabia

Saudi Arabia has traditionally been a major buyer of US equipment, turning elsewhere only when there was no American option, either for technical or political reasons. In the surface-to-surface weapon field, Saudi Arabia bought Brazil's Avibras Astros II artillery rocket (as did Qatar and Iraq) and China's CSS-8 intermediate-range missile.

Following the Gulf War, Saudi Arabia has made serious efforts to reward the principal Western members of the Coalition by means of a wider spread of arms buys. Coming on top of massive payments to recompense the West for its wartime expenditure (the GCC nations are believed to have provided around $ 60 billion), these purchases led to economic problems. In 1995 Saudi Arabia was forced to call a temporary halt to new orders.

Post-war purchases have included 315 General Dynamics Land Systems M1A2 Abrams tanks and 400 M2 Bradley infantry fighting vehicles, and Seven frigates from France. Each Frigate carries a Eurocopter AS 565N Panther helicopter, which can be armed with Aerospatiale Matra Missiles AS.15TT anti-ship guided weapons. The Royal Saudi Navy has 24 of these Panthers and twelve Exocet-capable AS 532SC Cougars.

The Royal Saudi Air Force (RSAF) has purchased 40 Agusta-Bell AB-412s and twelve AS 532A2 Cougar IIs for Csar (combat search and rescue). The RSAF is in many respects the best equipped in the Middle East, its inventory including five Boeing E-3 Sentry Awacs, approximately 90 Panavia Tornado strike/reconnaissance aircraft, 115 Boeing F-15C/Ds and 72 F-15S strike fighters (some of which are yet to be delivered). The F-15S is equipped with the Lockheed Martin Lantirn and Sharpshooter navigation and targeting pods. There have been reports that its Tornado ADVs will be traded in against twelve Eurofighter Typhoons and twelve more Hawks.

There are also reports that the RSAF hopes to order 25 more F-15S, a batch of Boeing 767 tanker/transports, up to five 767-based Awacs and possibly as many as 70 Lockheed Martin C-130J Hercules. However, the largest single buy is expected to be a 100-aircraft batch of Lockheed Martin F-16C/Ds to replace the F-5E/F series and the RF-5E. The Royal Saudi Land Forces (which purchased the 155 mm Denel G6 self-propelled gun) are expected to have their twelve AH-64As remanufactured to AH-64D standard.

The Saudi re-equipment plan will clearly have to be spread over many years (and in some respects scaled down), but the current high price of oil will boost marketing prospects.

One of the most difficult aspects of selling arms to the Middle East is arranging offsets, since there is little manufacturing industry in the region. Saudi Arabia has historically been easy to deal with in this respect: the Al Yamamah inter-government memorandum of understanding (MoU) simply requires Britain to make its best endeavours to achieve 25 per cent offsets. However, the Saudi attitude is hardening: France's Al Sawari I contract contained no offset demand, but Al Sawari II specified 35 per cent. Offsets in Saudi Arabia normally take the form of investments, oil barter (as in Al Yamamah) and technology transfer.

The first French contract covered four DCN-built F2000S Madina class frigates and two refuelling ships. The second covered three DCN F3000S stealth frigates derived from the French Navy's La Fayette class. The lead vessel, Al Riyadh, was launched at Lorient in August, and will be the first frigate equipped with the Arabel/Aster air defence system.

Gulf Co-operation Council

One anticipated regional trend is toward a greater degree of co-operation between the states of the Gulf Cooperation Council. For example, there are discussions of a joint GCC effort on an early warning radar system to detect both aircraft and ballistic missiles.

It might also make sense for the GCC nations to form a joint flight training school, since Kuwait, Oman and Saudi Arabia already have the BAE Systems Hawk, and Bahrain and Qatar are both likely customers.

Kuwait

Kuwait is an example of a small country (population under two million) with some very advanced equipment. The list includes the Raytheon Patriot, the M1A2 Abrams tank and eight CMN-built Combattante I-type fast attack craft, armed with Matra BAe Dynamics Sea Skua anti-ship missiles. Kuwait funded the development of the General Electric F404-GE-402 Enhanced Performance Engine in ordering 40 Boeing F/A-18C/Ds. At time of this writing Kuwait was awaiting US Congressional approval to buy Boeing AH-64Ds.

Since 1995, Kuwait has demanded 30 per cent offsets, normally in investments that will assist in job creation.

Bahrain

Further down the Gulf, Bahrain (with a population of half a million) has proportionally smaller defences. The fighter element is provided by 22 Lockheed Martin F-16C/Ds, with ten more being delivered, and the Raytheon AIM-120 Amraam due from 2002. The ground forces already have the Lockheed Martin MLRS (Multiple-Launch Rocket System), and Bahrain is hoping to finalise the purchase of same company's Atacms (Army Tactical Missile System) Block I. This would be the first sale of Atacms to the Gulf, although it has been released to Turkey. It is understood that, if the sale of Atacms to Bahrain is approved, the launch codes would be known only to US officials and the US would have permanent video surveillance of the facility.

Qatar

Qatar is of a similar size in population terms, and largely uses European equipment, which includes twelve Dassault Mirage 2000-5s, three Combattante III-class attack craft, four Vosper Thornycroft Barzan class attack craft and 18 BAE Systems Hawk 100s.

United Arab Emirates 

In per-capita income terms, the United Arab Emirates are by far the richest states in the region. The UAE is also a leader in defence equipment, with Giat Leclerc tanks, Matra BAe Dynamics Sadral and Atlas Sams, Dassault Mirage 2000-9s, Alenia Marconi Systems PGM air-surface weapons and the Boeing AH-64As (to be upgraded to AH-64Ds), joined soon by 80 Lockheed Martin F-16C/D Block 60s, which will be more advanced than any USAF F-16.

The two years (plus) spent between selection of the F-16 and the final go-ahead was one of several recent manifestations of America's reluctance to transfer technology, a reluctance that may in the future work in Europe's favour.

The UAE is also a regional leader in offset requirements, having since 1991 demanded 60 per cent of the value of any sale over $10 million. Offsets in the form of investments are preferred.

Oman

Whereas the UAE has special links with France, Oman (population two million) has similar links with Britain. The Royal Air Force of Oman employs both the Sepecat Jaguar and the single-seat BAE Systems Hawk 203 in the ground attack role. The Jaguar is being upgraded to keep it in service for several years. Later in the decade it may be replaced by the Saab Gripen or Lockheed Martin F-16. Oman also has Vickers Challenger 2 tanks and two Vosper Thornycroft corvettes.

Egypt

Egypt has a population of more than 60 million, and a multi-national collection of defence equipment, although recent purchases have mostly been from the US. Examples include M1A1 tanks, two leased Knox class frigates, Northrop Grumman E-2C Hawkeyes (now being upgraded), Boeing AH-64As (35 of which are to be remanufactured to AH-64Ds), United Defense SPH-122 self-propelled howitzers (the Russian D-30 gun on a Bradley chassis), and six batches of Lockheed Martin F-16s that total 196 aircraft. Purchases from Europe include Dassault Mirage 2000s and Aero Vodochody L-59Es. Egypt is considering basic and advanced jet trainer purchases, the principal candidates being the Aermacchi S.211, Catic K-8, Aero L-139/159 and the BAE Systems Hawk. An upgrade for 30 F-4E Phantoms is being discussed with Dasa. Egypt appears to have no fixed percentage requirement for offsets.

In short

* "Israeli imports are largely tied to America. Few prospects exist for European manufacturers"

* "Saudi Arabia has been experiencing funding problems, but the high price of oil should improve the chances for its ambitious plans"

* "The seriously wealthy UAE is setting the pace in both advanced purchases and offset requirements"

* "America's twin policies of avoiding a regional arms race and restricting technology transfer may cause a backlash."