November 20, 2008 / 4:00 PM / 9 years ago

UPDATE 4-Norway picks U.S. combat jet over Swedish rival

* Deal for 48 planes worth around $2.54 bln

* Chose Lockheed Martin's F-35 Joint Strike Fighter

* Rejected Saab's Gripen

* Deal biggest defence investment in Norway's history

* Lockheed stock up 1.2 pct, Saab closes down 12 pct

(Adds details, comments from news conference)

By Aasa Christine Stoltz and John Acher

OSLO, Nov 20 (Reuters) - Norway will buy 48 of Lockheed Martin's (LMT.N) F-35 Joint Strike Fighters, in a deal worth about $2.54 billion, instead of Swedish Saab's (SAABb.ST) Gripen to replace its ageing F-16 warplanes.

The deal is the biggest defence investment in NATO member Norway's history, and the government said that total costs over the lifetime of the aircraft are estimated at 145 billion Norwegian crowns ($20.43 billion).

Norway says that it needs new-generation jets partly to monitor its large northern seaboard, where Russia has boosted military activities in recent years.

"Combat aircraft is a crucial capability for Norway's defence," Prime Minister Jens Stoltenberg said in a statement on Thursday.

"The Joint Strike Fighter is clearly best at fulfilling the requirements we have set, and in addition (it) is the cheapest plane," Stoltenberg told a news conference.

Norway said the U.S. planes would cost 18 billion Norwegian crowns ($2.54 billion), which it said was 6 billion crowns cheaper than the Gripens. Defence officials said that stealth technology was one feature that put the F-35 ahead of others.

The defence ministry said total costs of owning the Gripen plane over a 30-year lifetime were estimated at 20-30 billion crowns higher than the JSF lifetime costs.

Norway has participated in the development of the JSF with other NATO allies, while also running a competitive tender where the Gripen has been the only other jet considered, after the Eurofighter dropped out of the competition.

Defence officials have recommended that the F-16s be phased out and replaced by the new F-35s in 2016-2020.

The selection of the JSF, also known as the "F-35 Lightning II", continues decades of U.S.-Norwegian cooperation in defence aircraft procurement.

Buying the Swedish alternative would have been a new departure that some politicians, especially on the left, had hoped would herald the start of a new era in Scandinavian defence cooperation.

Defence Minister Anne-Grethe Stroem-Erichsen said that although much work had been done to land offset contracts for Norwegian industry, the government needed to continue its work on this.

"But already now, there are significant contracts to several companies," she said. "There is technology here that Norway is good at."

TENSION IN THE COALITION?

The choice of the American plane could cause tensions within the Labour-led tripartite coalition government with less than a year to go to a general election as the Socialist Left (SV) party, a junior partner, had supported the Swedish jet.

"Now that we have to buy new combat jets, many had hoped that it could be possible to choice a Swedish solution," SV party leader Kristin Halvorsen said in a statement. "That could also have given new, important security policy signals."

"Nordic defence and security cooperation will proceed independently of the procurement of new combat aircraft and will receive our continued support," the government said.

"The government underlines that from a Norwegian security policy viewpoint, both candidates have been fully acceptable," it said.

Saab shares slid on the news and closed down 12 percent at 60.25 crowns in Stockholm. Lockheed Martin shares were up 1.2 percent at $70.16 in New York at 1817 GMT.

Additional reporting by Terje Solsvik; writing by John Acher; Editing by David Cowell

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