Dispute over article freezes France-UAE arms talks: source

PARIS Fri Oct 1, 2010 2:53pm EDT

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PARIS (Reuters) - A row over a French newspaper article is behind the breakdown of talks for a sale of French warplanes to the United Arab Emirates worth $5-6 billion, a senior French government source said on Friday.

UAE officials were angry about a June 26 article in Le Figaro, owned by conservative politician Serge Dassault, whose family-controlled Dassault Aviation made the Rafale, government officials said.

The newspaper said the UAE used Israeli technology to help secure its borders. Business with Israel remains a sensitive subject in the Gulf where most countries including the UAE have no relations with the Jewish state.

"We understood that it (the suspension) was for several months and we hope the talks will resume," the senior government source said.

A spokesman for Dassault Aviation declined comment.

Officials in Abu Dhabi could not be reached for comment on Friday, which is the local weekend.

The article appeared days after French Defense Minister Herve Morin said a sale of 60 Rafale aircraft to the UAE was near completion in what would be the plane's first export deal.

Asked on Friday on the television Parliamentary Channel if talks over arms sales to foreign countries including Brazil and Abu Dhabi had been derailed, he said: "Nothing is messed up."

Word that talks over the sale of Rafales could be in trouble surfaced last month when specialist publication Defense News reported that Abu Dhabi had expressed interest in the Boeing F/A-18, a U.S.-built competitor to the Rafale.

Sources familiar with the issue confirmed to Reuters in Washington this week that UAE had asked for technical information about the F/A-18 Super Hornet, puncturing exclusive talks with France on the Rafale.

Talks over the deal have already taken some time as the UAE pressed for changes to the Rafale including better radar and a more powerful engine to cope more quickly with heavy armament loads given the UAE's proximity to its main regional rival Iran.

The Rafale was originally designed to protect France against threats waged over longer distances during the Cold War.

The UAE wanted France to boost the thrust on the Rafale's Snecma M88 engines to 9 metric tons from 7.5 metric tons. But there have been protracted negotiations over who should pay for the enhancements, defense industry executives said recently.

(Writing by Tim Hepher; Additional reporting by John Irish; Editing by Louise Ireland)

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