The Weekly Wire: Week of 6/26/15
On May 12, 2015 Australia released its defense budget for fiscal year 2016. Spending on personnel dropped slightly and spending on O&M increased slightly, but there were minimal overall changes through 2019 from last year’s budget. Australia’s out-year investment spending plans continue to be ambitious. From 2019-2025 Australia will likely be buying both F-35’s and new long-range submarines. The two programs combined will likely consume 30%-50% of the investment topline. The Australian Department of Defence will likely announce any change to these long-term strategic procurement plans in its August white paper. Please follow the link below to access a pdf for a full analysis: Click here to access Avascent’s complete analysis of the Australian Defense Budget
During a visit to France, Saudi Arabian Prince Mohammed bin Salman agreed to 10 contracts worth nearly $12 billion with his French counterparts. Of that figure, $1 billion will be used for direct defense procurement, including 23 Airbus H145 (EC145) helicopters for $500 million. The H145 is a light, twin-engine helicopter often used for civilian purposes, but Saudi Arabia will likely use it for border patrol. Avascent projects that a large portion of the remaining $500 million allocated for procurement will go towards the Saudi purchase of about 15 patrol boats built by DCNS. Saudi foreign minister Adel Al-Jubeir has announced that he was discussing the price point for the boats, but the estimated quantity or price range has not been released. Based on an early 2015 Letter of Request (LoR) from Saudi Arabia to the United States for 24 maritime patrol craft modeled at nearly $480 million, combined with the assumption that the remaining $500 million is allocated for defense procurement, Avascent has assumed about 15 patrol boats worth over $450 million will be purchased by Saudi Arabia in the near term future.
South Korea’s Ministry of National Defense (MND) announced on June 17 a 7.2 percent annual increase in its 2016 defense budget request. The proposed increase would bring the defense budget up to a record $36.21 billion (KRW 40.14 trillion), up from $35.4 billion allocated for the current fiscal year. Approximately 30.8 percent of the requested budget ($11.16 billion) is apportioned for armed forces’ modernization programs, including the “Kill Chain” pre-emptive strike system and the indigenous Korean Air and Missile Defense system under development. Also included in this portion of the budget is funding for the procurement of four Northrop Grumman RQ-4B Global Hawk unmanned aerial vehicles (ordered on 17 December 2014) and Raytheons PAC-3 Patriot air and missile defense system (ordered on 31 March 2014). The remaining 69.2 percent ($25.04 billion) will go toward operating and personnel expenses. The 7.2 percent year-on-year increase is in line with the Mid-Term Defense Plan published on 20 April by the MND, which calls for an aggressive seven-percent increase in defense spending each year through 2020. The request still requires approval from the National Assembly, which only increased the 2015 defense budget 4.9 percent from the 2014 budget when the MND had requested a 5.2 percent increase.
The Canadian Armed Forces accepted six CH-148 Cyclone maritime patrol helicopters on June 19. Two more helicopters are scheduled to arrive this December, and the full fleet of 28 Cyclones will be in place by 2021. The Cyclones were originally going to be delivered in 2008, with deliveries of all 28 helicopters completed by early 2011. The total acquisition cost also tripled over the last decade due to programmatic delays. The program was estimated at $2.8 billion in 2000, which escalated to $3.1 billion in 2003. Currently, the total value of the Cyclone acquisition is about $7.6 billion, including $1.9 billion for development and production of 28 helicopters and $5.7 billion over 20 years for in-service maintenance support. This is a major milestone in the long and repeatedly-delayed program to replace the current CH-124 Sea King helicopters that have been in service since 1963. Approximately 10% faster than the Sea King and with the ability to fly in most weather conditions in temperatures ranging from -51 Celsius to +49 Celsius, the CH-148 Cyclone will be capable of a full range of anti-submarine, anti-surface warfare, and search and rescue and utility missions.
Egypt received two more Ambassador-class Fast Missile Craft on June 17, bringing the total to four ships in the Egyptian Navy. Stemming from a $1.1b deal signed with VT Halter Marine (owned by ST Engineering) back in 2005, the recent deliveries double the existing fleet size and will be deployed immediately following inspection in Alexandria. The ships will be used for traditional naval security, with a particular focus on ensuring safe navigation of the Suez Canal. The transfer of the ship marks the conclusion of a contract, and underscores the continued cooperation between the US and Egypt in the region.