By Avascent Analytics team
A quick look at the biggest stories of the week
UK • Singapore • Canada • India • Indonesia
Avascent Analytics introduced a segment to the Weekly Wire called “Beyond the Headlines.” Each week, we will provide an in-depth look on various defense topics, ranging from country-specific defense news to emerging technologies impacting defense.
The FC-31’s Journey from Technology Project to Potential 5th Generation Naval Fighter
Aaron Lin, Senior Market Analyst
About a month ago, the Shenyang Aircraft Design Institute (also known as the 601 Aircraft Design Institute), released request for tender for various fighter aircraft subsystems. Among them was a request for a stealthy aircraft compatible electro-optical targeting system, with a laser range-finding capability for ground and maritime targets, and a humidity monitoring capability. Many China-watchers took this as a definitive sign that China plans to turn the FC-31 stealth fighter prototype into a carrier-borne fighter. Due to the secrecy of the FC-31 and the nature of defense news coming out of China, it is necessary to examine such information with a degree of skepticism, though the rumors can still be useful.
The FC-31 was developed by the Shenyang Aerospace Corporation (SAC) and was first flown in 2012. The FC-31 was largely a self-funded project by SAC in order to keep up with rival Chengdu Aerospace Corporation (CAC) in the development of fifth generation fighters. CAC already had government backing for its J-20 stealth fighter. The People’s Liberation Army (PLA) did not appear to show a whole lot of interest in adopting the FC-31, and speculation turned towards the FC-31 becoming a cheaper competitor to the F-35 on the export market. The idea of a carrier-borne FC-31 was also floated. In 2016 and 2017, the J-15 carrier-borne fighter, built by SAC, suffered crashes that brought to light the PLA Navy’s growing dissatisfaction with the J-15, particularly with the flight control system. Additionally, the J-15’s large size and heavy weight resulted in a low weapons payload capacity when launched from STOBAR carriers. Late 2016 saw the FC-31’s second prototype fly for the first time. It incorporated twin-wheel nose gear, further suggesting carrier use.
The FC-31 certainly presents an attractive option for the PLA Navy for a new carrier-borne fighter. Despite the problems with the J-15, it gave SAC some experience in developing carrier-based aircraft. Whether SAC will face the same flight control problems on the FC-31 as they did with the J-15 remains to be seen. The FC-31 is smaller than the large J-20, which would save space on a carrier. Even though the PLA Navy will be operating CATOBAR and STOBAR carriers simultaneously, Boeing’s Super Hornet pitch to India suggests that a fighter designed to be launched from a catapult should not have too much trouble taking off from a ramp on a STOBAR carrier. Like the J-20, the FC-31 is fitted with engines that are weaker than what the PLA hopes for. A more powerful WS-19 engine is under development for the FC-31, and progress on the WS-19 will strongly affect if/when the FC-31 reaches full operational capability. The tender released by SAC doesn’t explicitly require carrier-based operations, and it is entirely possible that the PLA Navy will operate the FC-31 as a land-based fighter.
The other rumor about Chinese carrier-borne aircraft is related to the J-20. Recently, Chinese tabloid publication Global Times quoted a Chinese defense analyst, saying that a J-20 could be modified to operate from a carrier. Although Global Times is an unreliable information source, even among Chinese sources, the quote will undoubtedly attract attention. More interestingly is a paper published in May 2018 in Acta Aeronautica et Astronautica Sinica, a scholarly journal of Beihang University (formerly known as Beijing University of Aeronautics and Astronautics), addressing the effects of ground ejection of a carrier-based aircraft. Three of the five authors of the paper are affiliated with CAC. While any defense information coming from China must be taken with a degree of skepticism, these rumors will spark broader discussions about that the Chinese defense industry is up to.
Interim President Juan Guaidó Formally Recognized
Shane Mason, Senior Market Analyst
On January 23, the United States and twelve other countries in the Western Hemisphere formally recognized the president of Venezuela’s National Assembly, Juan Guaidó, as interim president of the country, setting up a showdown with President Nicholas Maduro. In response, Maduro has severed diplomatic ties with Washington, giving American diplomats 72 hours to leave the country. The State Department has rejected Maduro’s authority to break relations and maintained that US diplomats will remain. President Trump insisted that he would not rule out of the use of the military to protect US interests.
Anti-government protests continued through the day as Venezuela descended further into chaos. The economy has contracted every year since 2013, losing half its value. At the same time, hyperinflation—expected to exceed 10 million percent in 2019—has wiped out personal savings and created shortages of food and medicine. The result has created a refugee crisis with over 3 million Venezuelans, close to 10 percent of the population, having fled in recent years. Colombia is home to the largest number of refugees, over one million Venezuelan emigrants, with close to 10,000 more arriving daily.
The recognition of Guaidó as interim president represents a major diplomatic escalation and has increased the risk of military conflict between Caracas and its neighbors. While the use of military force remains unlikely, the Venezuelan crisis has become a national security risk for Colombia, America’s closest military ally in the region. On January 18, the National Liberation Army (ELN) guerrilla group claimed responsibility for bombing a police station in Bogotá that left 20 dead. The ELN, long active in remote border areas, has used the recent chaos and alleged acquiescence of Nicholas Maduro—who remains unable or unwilling to confront the anti-Colombian group—to gain control of territory and border checkpoints.
The diplomatic confrontation will almost certainly generate increased defense investment in the region, particularly in Colombia and Brazil. Colombia’s inventory of military rotorcraft almost exclusively consists of Lockheed-Sikorsky’s UH-60 Black Hawks and Bell utility helicopters, while the military has received billions of dollars in US military aid in the past decade. Avascent has already forecast that Bogota’s procurement and R&D spending will increase over 9 percent a year through 2023 and expects that number may increase. Although Brazil’s military budget has been constrained since 2014 by recession and a currency crisis, the election of Bolsonaro—a former Army captain—and tensions with Venezuela may be the impetus for a budget increase. Emergency funding related to Venezuela could force São Paulo to make tough choices about its major, ongoing procurement programs for Gripen fighter aircraft and Scorpene-class submarines.
Additional attacks from Venezuelan territory would be the most likely scenario to trigger a military response by Colombia’s conservative President Ivan Duque. Such a move would almost certainly depend on approval and support from the United States and Brazil, the region’s two largest powers. The leaders of both countries, Donald Trump and Jair Bolsonaro, are right-wing populists with hardline approaches both to Venezuela and immigration, making the use of force more likely than it would have been historically. Intervention, were it to occur, would be the first inter-state conflict in Latin America for decades, when a border dispute in 1995 between Ecuador and Peru led to the Cenepa War, which left hundreds killed and wounded.
On January 21, Rheinmetall announced that it will acquire a 55 percent stake in BAE Systems’ UK combat vehicle business to form a new joint venture Rheinmetall BAE Systems Land (RBSL). BAE Systems will hold the remaining 45 percent of the company. The 55 percent stake is reported to be worth £28.6 million ($36.9 million). The move provides further consolidation of the European armored vehicle industry with Rheinmetall gaining access to BAE’s armored vehicle facility at Telford, UK, as well as three other sites in the UK. The site will become the focus for manufacturing the Boxer 8×8 platform for the UK under the Mechanized Infantry Vehicle (MIV) program. The two companies were already in partnership to offer Boxer to the UK.
What is less clear is what will happen with the planned upgrade to the UK’s Challenger 2 main battle tank fleet. The two companies had been heading up rival bids for the program and this merger means that both solutions are now offered by the same entity. However, while each bid will have the same prime contractor, there are different teaming arrangements in place with Thales UK and Supacat supporting the design submitted by Rheinmetall while General Dynamics, QinetiQ, Leonardo, and Safran were part of the BAE Systems bid.
Work at the Telford plant is focused on engineering support activities for the UK’s armored vehicle fleet, under a £50 million ($77.5 million) five year contract awarded in 2015, with BAE Systems closing its other major facility in Newcastle in 2013 following the completion of the Terrier Combat Engineer Vehicle. This facility was taken over by Pearson Engineering who are still expected to have a role in the MIV program. For Rheinmetall, the move further increases its presence in the European armored vehicle market. This position will be enhanced even further if the planned indirect acquisition of Krauss Maffei Wegmann (via its stake in KNDS) takes place, consolidating the German armored vehicle industry. However, even with the creation of RBSL and the potential acquisition of KMW, the European armored vehicle sector remains highly competitive with Nexter, General Dynamics European Land Systems, BAE Systems Hagglunds, and Iveco-Oto Melara remaining as major suppliers in Western Europe. BAE Systems retains a part of its land business in the UK with its munitions and weapons facilities not part of the deal.
Singapore’s Minister of Defense Ng Eng Hen announced that the country formally selected Lockheed Martin’s F-35 as at least a partial replacement for its F-16 Fighting Falcons. While the 60 Falcons are currently being upgraded from their Block 52 standard to a modern F-16V standard through augmentation with an active electronically scanned radar, the government expects that the fleet will need to retire by the early 2030s. Singapore joined the Joint Strike Fighter (JSF) Program in 2003 as a security cooperation partner, a level of partnership also shared by Israel, in 2003, and began openly disclosing its interest in procuring the F-35 in 2013. It is uncertain whether Singapore will replace the F-16s with the Conventional F-35A or continue to show interest in the STOVL F-35B.
That distinction could be one of several reasons that the Ministry of Defense has been very cautious about its formal acquisition plan, as it has only announced that it has chosen the F-35 as “the most suitable replacement” for the F-16, and it will procure “a small number of F-35 JSFs for a full evaluation of their capabilities and suitability before deciding on a full fleet.” While those negotiations are expected to take “9 to 12 months,” the debate over the choice of acquisition strategy in the analyst community will likely rage for much longer. Some will argue that it represents a lack of full confidence in the F-35 by the Ministry of Defense, while others will counter that most countries have received aircraft for Developmental Test and Evaluation and Flight Training at Luke Air Force Base well in advance of any operational deliveries. It is also possible that Singapore will use the initial batch of aircraft to weigh the capabilities of the F-35 variants against each other in order to determine the final composition of its order. It should also be noted that Singapore is traditionally very secretive regarding its Air Force’s capabilities both for operational security and for regional stability. The best known example of this is its F-15SG fleet, whose final inventory of approximately 40 aircraft neither Singapore nor Boeing have confirmed (with defense analysts relying upon changes in the FAA civil register to track the delivery of the final eight aircraft in 2017) and of which a significant portion of the fleet is stationed far from Singapore as a training detachment at Mountain Home AFB, Idaho.
The Royal Canadian Navy (RCN) is moving forward with extending the service life of its fleet of Victoria-class submarines instead of replacing them. The RCN acquired the submarines secondhand from the UK in 1998, undergoing numerous upgrades over the last two decades. The submarines are currently being upgraded to replace its mast system with the L3 Calzoni Universal Modular Mast system worth $443 million. The work is expected to be completed by 2026, though news sources suggest the fleet will undergo a more extensive service life extension in the early- to mid-2020s with costs expecting to reach approximately $1.5 billion. Without these modifications, the submarines could be retired by 2027. The RCN’s decision to continue upgrading its Victoria-class submarines will keep them operational into the 2030s.
Indian press is reporting that the Army has plans to buy 3,000 Milan 2T anti-tank guided missiles (ATGM) worth $140 million. If the order goes through—it has not yet been approved by the defense ministry—the new systems would complement the country’s existing inventory of Milan 2Ts procured in 2009. The Indian Army faces an urgent requirement for ATGMs, particularly after the surprise cancellation of a long-negotiated deal for 8,000 Israeli-built Spike missiles in January 2018. The Milan 2T, designed by Europe’s MBDA, would be licensed-produced by Bharat Dynamics Ltd., a government-owned firm that also produces the Akash surface-to-air missiles. The news seems to confirm speculation that the Spike order was cancelled in part to support India’s local defense industry.
On January 17, Bell Helicopters announced that it signed an agreement with the Indonesian government for nine Bell 412EPI helicopters. Specifically, Bell will deliver the helicopters to Indonesia, and then PT Dirgantara Indonesia (PTDI) will customize them for the Indonesian Army. However, the contract’s value was not disclosed. The Indonesian military currently operates approximately 60 Bell 412 helicopters and uses them in both attack and mobility roles. These new helicopters will likely be used to supplement this existing fleet.
For more information about this Weekly Wire, contact email@example.com.
Analytics Users: If you’d like to see the markets discussed in any of these articles in greater depth, please visit avascentanalytics.com.