The Week in Perspective : Feb. 12-19, 1999
Compiled by our staff from wire service dispatches and other sources
European Consolidation Update :

-Dasa chief executive Manfred Bischoff met U.S. defense officials and industry executives this week, Reuters reported Feb. 18. However, Dasa declined to comment on whether Bischoff had visited the United States, although it acknowledged the company has been in friendly contact" with several American firms since the beginning of the year.

-Because defense mergers may have repercussions on the civil market, the European Commission will probably become more involved in their approval, EU Commissioner Karel Van Miert said Feb. 18. Vetting defense mergers "certainly remains a privilege of the national authorities, but because of 'dual-use' activities...gradually competition policy may become more and more involved," he said during a speech in London.

-The French government approved Feb. 15 the merger of state-owned Aerospatiale with Matra Hautes Technologies, a unit of Lagardere Group. The new company, which also will control 45.76 percent of Dassault Aviation, will be the world's fifth largest, and Europe's second-largest, civil and military aerospace group with annual sales of more than 86 billion francs (14.7 billion dollars).

-The French government will keep a 48 percent stake in the new company, of which Lagardere will own up to 33 percent ; 2 percent will be offered to employees and 17 percent (down from the expected 20 percent) will be floated on the Paris stock exchange by the end of June, "market conditions permitting".

-Reducing the French government stake to less than half is not enough for France's European partners. "Complete privatization of the French company is the most important precondition for restructuring the European aerospace industry," Dasa spokesman Christian Poppe said Feb. 15.

-German defense and engineering group Rheinmetall AG wants to buy British Aerospace's Royal Ordnance munitions unit, chief executive Hans Brauner told a Feb. 11 news conference in Munich. Brauner also said there are prospects for closer cooperation between Rheinmetall and the German defense group formed last year by Krauss-Maffei and Wegmann.

-British Aerospace said Feb. 12 that it has no plans to sell Royal Ordnance to Rheinmetall, although the two companies have long been discussing forming a joint venture in the field of munitions. However, BAe has few alternatives : it will close its Bishopton plant by the end of 2000, and has warned would start shutting RO's other 12 British factories unless a rescue plan can be worked out with the British Ministry of Defence.

The Week's Other News :

-General Chi Haotian, vice chairman of China's Central Military Commission, was due to arrive in Islamabad Feb. 19 for several days of meetings with President Rafiq Tarar, Prime Minister Nawaz Sharif, Foreign Minister Sartaj Aziz and three Pakistani armed forces chiefs.

-General Dynamics made a .36 billion unsolicited cash takeover offer for Newport News Shipbuilding, offering 38.50 dollars per share, a 35 percent premium above the shipyard's Feb. 18 closing stock price. The bid was made Feb. 10 but was made public Feb. 18.

-Russia has no intention of holding talks with the United States on changing the 1972 ABM treaty, Colonel-General Leonid Ivashov, head of international cooperation at the Russian defense ministry, said Feb. 18. U.S. attempts to change the ABM treaty will give other countries, in particular China, India and some West European countries, grounds for developing missile technologies and anti-missile systems, Ivashov said.

-The European Union and the Western European Union should merge to give Europe "a common will in the field of security," German Defense Minister Rudolf Scharping said in an interview published Feb. 18 by Le Figaro.

-NATO will open a liaison office in Moscow within weeks ; it will be headed by Danish Major-General Karsten Moeller.

-British Aerospace denied Feb. 18 reports from Dubai suggesting that Saudi Arabia had temporarily suspended the Al-Yamamah arms-for-oil contract because of a budget shortfall.

-Russia and Cyprus finalized Feb. 18 a 420 million dollar deal covering the sale of S-300 air-defense missiles which will be deployed in Crete.

-Syria will proceed with a large arms procurement deal with Russia despite US pressure, Syrian Foreign Minister Farouk ak-Sharaa said in Moscow Feb. 17. The deal covers anti-tank missiles as well as other, unidentified weapons.

-French aerospace exports totaled 111 billion French francs in 1998, and defense exports amounted to another 50 billion francs, according to a Feb. 17 report to the Cabinet by the Finance Ministry.

-Russia has pulled out of scheduled naval exercises with Britain to protest London's involvement in December's bombing of Iraq, The Times reported Feb. 17.

-Canada on Feb. 17 grounded its fleet of elderly Sea King helicopters, after a series of engine failures and incidents. Acquisition of EH-101s to replace the Sea Kings was canceled by the Liberal government when it came to power, and no new tender has yet been issued.

-The U.S. Army said Feb. 16 it would form a rapid intervention force of 3,000 to 5,000 men by year-end. The unit will be based at Fort Polk (Louisiana) , and is intended to bridge a perceived capability gap between the Army's light divisions and mechanized divisions.

-The South African government is looking for a strategic equity partner to buy 20 percent of Denel Aerospace by May, Minister of Public Enterprises Stella Sigcau told Parliament Feb. 16.

-The Canadian government understated by as much as 597 million Canadian dollars the real cost of procuring Upholder-class diesel-electric submarines from Britain, according to a Feb. 16 report published by the National Post. Official cost figures for the deal omitted planned expenses on new torpedoes, escape and rescue technology, while a major refit planned for 2006 (including the installation of Air-Independent Propulsion systems) could cost as much as 680 million Canadian dollars.

-Croatia has awarded Israel's Elbit a contract to upgrade MiG-21Bis fighters operated by its air force. Valued at about 100 million dollars, the contract was signed Feb. 15 in Jerusalem by Israeli Defense Minister Moshe Arens and his Croatian counterpart, Pavao Miljavac.

-The Moscow-based Mil helicopter factory will be added to the list of protected defense contractors by May, Itar-Tass reported from Moscow Feb. 12, thereby capping foreign ownership to 25 percent of equity.

-Because of a 1.5 billion dollar cash shortfall, the Greek Cabinet on Feb. 12 indefinitely postponed a plan to buy up to 60 new fighter aircraft costing up to 3 billion dollars. The F-15H, F-16 Block50, Mirage 2000-5 and Eurofighter were competing for this order.
However, Defense Minister Akis Tsotazopolous said that Greece would seek to join in the production of the Eurofighter, and would consider buying 60-80 of the fighters after 2005. This would be in addition to the 60 or so fighters currently being sought.

-China has improved the capabilities of missiles aimed at Taiwan but has not increased their numbers for five or six years, the Pentagon said Feb. 11. Navy Capt. Michael Doubleday, a Pentagon spokesman, said "we acknowledge that China has been modernizing its armed forces and has been increasing its capabilities on a variety of fronts [but it is incorrect] that the missile threat developed in the last several months."

-South Korea announced Feb. 12 a five-year plan that earmarks 69.3 billion US dollars for defense spending, financed by annual increases to the defense budget of four to six percent every year between 2000 and 2004. For next year, the ministry will request a budget increase of 5.5 percent, to 14.5 trillion won. The plan requires Parliamentary approval.
Major planned procurement programs include a new air-defense missile (2 trillion won, year 2000), diesel-electric submarines (starting this year), modern attack helicopters (2.1 trillion won, 2002), three Aegis destroyers (3 trillion won, by 2010), 60 new-generation fighter aircraft (3 to 6 trillion won, from 2001), unmanned aerial vehicles (100 billion won, 2002), and in-flight refueling aircraft (2004). Procurement of AWACS aircraft will be postponed from 2001 to 2004.


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