UPDATE 1-Germany stops numerous arms exports, risks compensation fees -report

Sat May 24, 2014 2:07pm EDT

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(Adds background, Airbus interview)

BERLIN May 24 (Reuters) - Germany's national security council declined two-thirds of applications for arms export licences at its most recent sitting three weeks ago, German news weekly Spiegel said on Saturday.

The economy ministry had prevented a licence application to export to Saudi Arabia 500 million euros worth of sight devices for armoured personnel carrier guns from even being discussed in the council, it said.

Spiegel said the sights were made by a unit of Airbus . A spokesman for Airbus said: "We have no information about any government decision. We hope however for a swift and positive decision."

Such a move by the economy ministry could place Berlin on a direct collision course with Airbus Group after its chief executive Tom Enders warned of increased job cuts and factory closures over arms export curbs in an interview with Reuters on Friday.

"I am concerned about the increasingly restrictive arms export policy of Germany. This might trigger additional layoffs in Germany, beyond our current reduction plans," Enders said.

An economy ministry spokesman declined to comment on the Spiegel report and said all aspects of the security council's meetings were confidential.

According to the report, the government risks demands for compensation by the affected firms. Projects in late stages were among those declined.

German Economy Minister Sigmar Gabriel, a Social Democrat (SPD), has promised a much more cautious approach to licensing arms exports, unnerving the sizeable defence industry and signalling a change in approach from the previous coalition government.

The ministry was run until December 2013 by the Free Democrats (FDP), Chancellor Angela Merkel's previous coalition partners, before the SPD.

German arms exports have come under scrutiny in recent years because of the increasing sums involved and because a greater number of arms are heading to non-European Union or NATO partners, and potentially unstable regions.

Earlier this month German media reported Gabriel wanted to block two deals to sell arms to Qatar and Saudi Arabia worth billions of euros.

Germany's national security council, which includes Merkel and the ministers of economy, defence, development and foreign affairs, has to approve licences.

According to the Stockholm International Peace Research Institute, Germany was the world's third largest arms exporter from 2008-2012, behind the United States and Russia. (Additional reporting by Christoph Steitz in Frankfurt, Reporting by Alexandra Hudson; Editing by Lynne O'Donnell and David Evans)

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