The Weekly Wire: For Your Situational Awareness 10/9/20
On October 6, the Greek New Democracy Party-led government unveiled a draft government budget that shows reduced overall spending by €4.6 billion ($5.4 billion), but sharply increased the defense budget. This draft budget raises the procurement budget to €2.5 billion ($2.9 billion). Last year, the procurement budget was only about €520 million ($613 million). This dramatic proposed increase follows talks between Greece and France for the sale of 18 Rafales to Greece. Such spending figures are being put forward in response to Greek-Turkish tensions that have been spiraling upwards, culminating in opposing fighters engaging in aggressive maneuvers and warships colliding with each other.
Of particular concern to Greece is Turkey’s plan to expand drilling for oil and gas in the Eastern Mediterranean off the coast of Greece’s eastern islands, as well as Cyprus. These waters are hotly disputed with overlapping claims between Greece, Turkey, Cyprus, Egypt, and the largely unrecognized Northern Cyprus. Though an increase in defense spending following such heightened tensions is not surprising, Greece’s economic situation casts some doubt over how sustainable such dramatic defense spending increases are. The country is still saddled with heavy debt and is in the midst of a second COVID-19 wave. The vital tourism sector, which accounts for 18% of GDP and employs one fifth of the Greek workforce, was gutted this past summer in the wake of COVID-19.
Following-up on the deal with Greece to purchase 18 Rafales for more than $1 billion, France is considering acquiring up to 20 new Rafale fighter jets as well. Due to urgent operational requirements, the Greek order entails 12 Rafale F3R that will be taken out of the French Air Force fleet and six newly built aircraft. The newly built Rafales for Greece are expected to be delivered between 2022 and 2024 and taken from the Air Force production quota. Consequently, the French Air Force could end up with 18 aircraft less in 2022 than initially planned.
Besides being a gap filler, this new order for the French Air Force would enable Dassault to sustain its production line until the Rafale Tranche 5 production kicks off in 2027 and spread out sustained activity in the long run. With Rafale exports to India and Qatar between 2020 and 2021, and now the Greek export contract between 2020 and 2024, the Rafale production line needs some adjustments to meet its initial targets to the French Air Force and any potential future export clients.
Dassault was initially anticipating facing a 30-month gap between 2024 and 2027 and this new order would help bridge this production gap. Potentially benefitting from the post-COVID 19 recovery plan, this order is said to worth more than $1.5 billion for the French Air Force and could occur before the end of 2020, with the new fighters expected to be delivered from 2022 onwards. For the record, Dassault delivered 13 Rafales in 2020, against 26 in 2019 and witnessed in the first half of the fiscal year an operating profit of €87 million ($102.5 million) down from €286 million ($337.1 million) during the first half of 2019 as per the company half year report.
Georgia has signed a contract with Rafael for a new air defense system. While details about the purchase are scarce, it would supplement Georgia’s previous acquisitions of a Spyder Air Defense system from Rafael in 2008, Mistral SHORAD system in 2017, and a mix of Ukrainian and French air defense radars. Georgia has focused on air defense as a critical gap in its armed forces in the wake of the 2008 Georgian-Russia conflict where its legacy Soviet systems were overwhelmed and destroyed within days. The effort is part of an overall long-term $9 billion Georgian modernization program that seeks to bring the country’s armed forces in line with NATO standards
The State Department has approved a possible Foreign Military Sale to Egypt of a Maritime Domain Awareness System (MDA) worth roughly $417 million. The MDA itself will comprise multi-site acquisition radars, EO/IR sensors, radio communications suites, hybrid power generation systems, power and data distribution units, an automatic identification system, and related surveillance and communications systems. In addition to the MDA, the contract finances 74 communication towers, nine naval operations centers, six harbor protection systems, 12 vertical take and landing (VTOL) UAVs, 14 mobile maritime surveillance vehicles, and three Aerostat ISR Integrated Platforms. The McLean, VA-based Advanced Technology Systems Company (ATSC) will serve as the primary contractor and will perform delivery, support, technical reviews, and oversight over a five-year period. The State Department hopes that the incoming MDA will enhance Egypt’s ability to safeguard its maritime boundaries, natural resources, and ports at a time of escalating tensions and volatility in the Eastern Mediterranean.
On October 5, the Bulgarian Ministry of Defense announced that General Dynamics European Land Systems’ Piranha V and Patria’s AMV have been down-selected for the next phase of its Infantry Fighting Vehicle program, with final testing and negotiations around the two bids now to take place. Bulgaria has set a budget of approximately $870 million to procure 150 8×8 IFVs however there have been reports that both winning bids were $300 million over this amount. Therefore, it is probable that the program scope will either be reduced or potentially cancelled. Four companies were invited to submit bids in July 2019 with Artec and Nexter also entering bids with the Boxer and VBCI respectively.
On October 7, the British Army awarded Rheinmetall-BAE Systems Land (RBSL) a GBP16 million ($20.67 million) contract to upgrade and sustain its fleet of nine Fuchs 1 CBRN reconnaissance vehicles. The 6×6 vehicles first entered service in the UK in 1990 and, having initially been withdrawn from service in 2012, were returned to an operational role in 2016. At this time there are no known plans to replace the army’s armored CBRN reconnaissance capability and this contract reinforces the fact that the vehicles will remain in service for the foreseeable future.