Asia Looks to Europe for Arms Sales


The announcement that India has shortlisted two European models for its upcoming jet fighter procurement contract – at the expense of U.S. bidders – has once again thrown international competition for military aircraft wide open. With the decision, European firms have proven to be equally viable when it comes to supplying sophisticated military equipment in South East Asia, a growing market traditionally dominated by U.S. companies.

The proposed purchase of 126 multi-role aircraft by India is estimated to be worth $12 billion, making it the largest defense contract ever tendered on the open market in Asia. U.S. defence giants Lockheed Martin and Boeing were both lining up to compete, hoping to cash in on the Indian foreign policy attention and lobbying recently granted by the Obama administration.

Yet contrary to expectations, European industry has cornered the market. New Delhi has now shortlisted French company Dassault Aviation’s Rafale and the Eurofighter Typhoon for the final stages of competition.

The concluding procurement decision is due in March 2012, but whoever secures the order, European industry has gained a much-needed boost. Faced with continent-wide defense budget cuts and the reduction in orders for legacy programmes such as the Eurofighter and A400M strategic lift aircraft, it has been a tough couple of years for European sales.

Conversely, U.S. defense aviation seemed to be going from strength to strength. Just a few months ago, Boeing walked away triumphant with a contract to supply up to 179 air-to-air refuelling tankers to the U.S. Air Force. Worth an estimated $35 billion, it was the biggest defense deal ever. The prime European contender, EADS of the Netherlands, after years of competition, was finally forced to accept defeat.

Yet now it is Boeing, and by proxy U.S. defense industry interests, that are out in the cold. What went wrong? American commentators have been quick to suggest there are some underhand politics behind this "snub." It is certainly true that politics and procurement tend to go hand in hand, especially in deals of this magnitude.

Then again, the European companies may simply have made a stronger bid. More practically, they may have promised a larger percentage of the aircraft will be manufactured in India, thus securing the high-tech jobs New Delhi’s emaciated defense industry sorely needs. We won’t know for sure until the final decision is made public, but I would certainly be inclined to presume such pragmatic incentives over political duplicity.

The point is: defense consumers worldwide (and in the coveted BRIC markets in particular) may not be as deferential/preferential towards U.S. manufacturing bids as in previous years. India now accounts for 9% of all global arms transfers. This upward trend is likely to continue, and whether Washington likes it or not, New Delhi seems intent on using its growing influence to seek out the best value for its rupee in defense.

So, just when the U.S. aviation primes seemed to have every major contract sewn up, an unexpected decision by a rising power reminds us that in these times of economic uncertainty, the contest for defense sales is far from over. 

Photo Credit: Wikimedia Commons