US-Europe tensions rise over arms deals, exports

* Britain’s Mandelson disappointed by tanker deal collapse

* State Department studying BAE judgment

LONDON, March 10 (Reuters) - The United States and Europe face growing tensions over restrictions on export deals involving BAE Systems BAES.L while European politicians protest the collapse of efforts to sell aerial tankers to the United States.

The U.S. State Department said on Tuesday it would delay action on any new export license requests by BAE Systems BAES.L after the British military contractor pleaded guilty to violating several U.S. laws.

“We understand that there has been no change to existing export licenses and agreements, and that export activities may continue under existing authorisations,” BAE said in a statement, but added that it did not know when the State Department would issue any new licenses.

The UK has also expressed its concern at the United States's handling of a military tanker contract, after EADS's U.S. partner Northrop Grumman NOC.N dropped out of the race to build a tanker, leaving U.S. rival Boeing BA.N as the sole bidder. [ID:nN08190077]

“Given the open market to U.S. producers we have in Europe, it is very disappointing that a U.S.-led European consortium feels that the revised tanker procurement process is now so biased against them that it is not even worth making a bid,” Britain’s business secretary Peter Mandelson said in a statement on Wednesday.

France’s Prime Minister Francois Fillon echoed Mandleson’s comments during a visit to Berlin’s Humboldt University.

“I think the attitude of the U.S. government on the matter of the air tankers is a serious breach of the rules, which are those of fair competition between our economies,” said Fillon.

“The American government, I am saying it, has obliged EADS to quit the competition for the American army’s air tankers.”


BAE Systems earlier this month pleaded guilty to conspiring to make false statements in connection with foreign arms contracts and agreed to pay a $400 million fine to settle a long-standing inquiry into its business practices. [ID:nN01102718]

State Department spokesman P.J. Crowley said the department was studying the judgment entered in federal court in the District of Columbia and would not move forward on any export license approvals for now.

“This may have an effect where U.S. licenses are required to sell UK products into export markets that require International Trade and Arms Regulation licenses, which the U.S. has been reluctant to give out,” said Evolution analyst Nick Cunningham.

The potential row with BAE, which is seen as the most successful European company in penetrating the world’s largest defence market, due to Britain’s close ties to the United States, comes after a spat between the two allies over sensitive software codes for the F-35 fighter jet.

The Pentagon recently said it would keep to itself the software code that controls Lockheed Martin Corp’s new radar-evading F-35, despite requests from co-development partners -- Britain, Italy, the Netherlands, Turkey, Canada, Australia, Denmark and Norway.

BAE has increasingly turned its back on its European roots to foster closer business ties with the U.S and itself sold a 20 percent stake in Airbus in 2007.

BAE last week said it had sold half of its 20.5 percent stake in Saab SAABb.ST, the Swedish aerospace company, and also plans to offload the rest of its investment through a market placing. [ID:nLDE6240BR] (Additional reporting by Tim Hepher; Editing by Rupert Winchester)