Egypt deal shores up French arms industry

Egypt deal shores up French arms industry
Egypt is to spend almost $6 billion on two dozen French fighter jets and a frigate, but analysts say the contract is more about diplomacy than it is about security.
4 min read
16 February, 2015
Finally, the Rafale finds an international buyer - as France's diplomacy bears fruit [Getty]
Egypt has signed a $5.9 billion arms deal that finalises the first foreign order for Rafale fighter jets. 

The plane's manufacturers, Dassault, have failed for more than 20 years to find a buyer other than the French government - so the contract represents a major coup for the French arms industry.

Egypt comes as a surprise first customer, considering the cash-strapped nation already has Africa's largest airforce with more than 200 F1 jets.
     France has been much more active in that whole region and is now reaping the results

A couple of dozen Rafales are unlikely to make much of a difference in the campaigns Egypt is fighting against land-based insurgencies at home and in Libya. 

The deal does however serve as a reminder to the US that Egypt can shop elsewhere for its military hardware, while also building ties with a European ally who has been aggressively supporting the regional policies of Egypt's backers in the Gulf.  

"For the French this keeps the Rafale production line alive, and for Egypt and its backers it pokes Uncle Sam in the eye... but not too aggressively," said Professor Robert Springborg, non-resident Research Fellow of the Italian Institute of International Affairs.

Only last week, President Sisi welcomed Russia's Vladimir Putin to much fanfare and agreed to a joint plan to develop Egypt's first civilian nuclear power plant. 

Relations between Washington and Cairo have been strained since the military overthrow of President Morsi's Muslim Brotherhood-led government, with military aid temporarily suspended.

Egypt is traditionally one of Washington's most reliable arms customers, due to the roughly $1 billion of US aid that flows annually to Cairo - most of which must then be spent with US arms companies. 

Egypt's military is almost completely built upon US hardware and is therefore dependent on US components, training and logistics.

The country remains heavily dependent on US military aid but the Rafale deal, along with President Putin's visit, serve to remind the US that there are other major powers vying for influence with whom they can do business. 

Deep pockets

The Gulf is the largest arms market in the world and the buying powers of the wealthy Sunni states stretch beyond their own borders.

France and Lebanon signed a Saudi-funded $3 billion deal in November for the French to provide weapons and military equipment to the Lebanese army. 

Diplomats told Reuters that the talks on the Rafale deal significantly advanced on the sidelines of the inauguration of Saudi King Salman last month, where Sisi told Hollande he wanted to move ahead quickly.

Half of the funding for the deal will reportedly be financed by French banks, while the remainder will be paid from the Egyptian side.

However, Egypt is facing chronic economic problems and is heavily dependent on outside support.

Inflation is running away at above ten percent, more than one in four Egyptians are living in poverty and the foreign currency reserves fall short of covering even three months of imports.

"The funding of this has been carefully disguised but it is inconceivable that it has been agreed without the support of Egypt's regional backers. Egypt doesn't have a penny to spend on this," said Professor Springborg. 

Since the Egyptian military overthrew President Morsi in 2013, several Gulf states, most notably Saudi Arabia and the UAE, have provided substantial financial aid to shore up the embattled economy. 
     On the nuclear file France is tougher than the US and this is something that pleases Saudi Arabia.
- Joseph Bahout

France has also been pursuing a number of regional policies that allign closely with Saudi Arabia, most notably regarding Iran and Syria. 

"On the nuclear file France is tougher than the US and this is something that pleases Saudi Arabia," said Joseph Bahout, visiting scholar in Carnegie's Middle East Program, on Radio France International earlier this month.

In Syria, similarly, France has taken a tougher line against the government of President Bashar al-Assad while promoting the arming of rebels. 

President Obama's reluctance to strike in Syria or give more concrete support to the opposition has soured relations not only in Riyadh but also in Doha, Abu Dhabi and Ankara.

Francis Tusa from Defence Analysis told Al Araby: "France has been much more active in that whole region and is now reaping the results." 

Still in the game

Had France failed to secure Egypt's custom for the Rafale fighter jet, it could have signalled the end to the long-maligned project. 

Brazil, Libya, Morocco and Switzerland have all courted the idea of buying the jet from the French but pen was never put to to paper on the deals. 

Qatar and India have also reportedly been in long-running negotiations over a potential contract. 

"Rafale has been on the parking lot for the past 20 odd years. If the Indian deal fell through then it would essentially mark the end of the project," said Professor Springborg. 

Two dozen planes in itself is no game changer, especially considering they are likely to have been sold at a major discount, but it will keep the production line rolling. The potential contract with India could see Delhi buying more than 120 of the Rafale jets - but the deal has repeatedly failed to take off. 

The French will be hoping this most recent deal will breathe some life into this potentially much more lucrative sale.