The Weekly Wire: For Your Situational Awareness

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Egypt flag

Egypt

Mere months ago, the two Mistral-class amphibious assault ships which France had produced for Russia were dangerously close to becoming yet another casualty of the crisis in Ukraine.  The political uproar in the West over Russia’s incursion into Ukrainian territory eventually spilled into business discussions, and the Mistral deal – which was all-but-sealed at the time – was scrapped.  Following the announcement that the ships would not be delivered as promised, the French began looking for alternate buyers, though the prospect of finding an interested party with immediately-available funding and a penchant for ships built to Russian specifications was slim at best.

Surprisingly enough, the UAE and Egypt appeared very eager to purchase the Mistrals, and by September 23rd the Egyptians had committed approximately $1.06b to seal the deal.  The sale is particularly significant for three reasons: first, it means the French will have narrowly avoided a $1.2b loss (though they will reportedly lose $279m on the deal when all is said and done); second, it openly signals that the UAE is pursuing a significant naval buildup (something that Avascent Analytics correctly predicted a year ago); and third, that Russia may still stand to benefit from the sale.  Exactly how is up to speculation, but Russia and Egypt have warming relations and the Mistrals will remain in Russian configuration.

India flag

India

On September 28, the Indian Ministry of Defense and Boeing Co. finalized the terms of a $3 billion contract for 22 AH-64E Apache attack helicopters and 15 CH-47F Chinook utility helicopters. The deal concludes three years of foot-dragging from the Indian Ministry of Defense, which had first agreed to purchase the helicopters for the Indian Air Force (IAF) in October 2012. The program has morphed many times since and included several rounds of wrangling between the Indian Army and Indian Air Force over which service would receive the rotorcraft. On three separate occasions, the Indian Ministry of Defense requested and received “extensions” with “original price guarantees” from Boeing Co., the latest of which was granted on 1 April 2015 and expired on 30 June 2015. The contract signed in New Delhi stipulates that deliveries will begin in September 2018 and conclude in September 2019. Both helicopters will be delivered to the IAF in fly-away condition, according to the terms of the contract.

However, while the 15 CH-47E Chinook utility helicopters will be purchased entirely through the direct commercial sales (DCS) channel, the weaponry, engines, radars, and electro-optical sensors of the 22 AH-64E Apache attack helicopters are being purchased separately through a foreign military sales (FMS) contract. Also according to the contract, Boeing Co. has agreed to a 30 percent offset liability and will scout for indigenous partners in the coming months. Because the deal was concluded through the DCS and FMS channels, Boeing Co. appears to have circumvented the 49 percent offset regulation that has generally been required for all foreign defense suppliers seeking to sell military hardware to India – a policy introduced by Prime Minister Narendra Modi in 2014 under his “Make in India” program.

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