* Dassault proposal described as uncompetitive
* French source says talks ongoing, UAE negotiating price
* UAE spoke to Eurofighter, Boeing over fighter jets
By Reed Stevenson and Praveen Menon
DUBAI, Nov 16 (Reuters) - A long-awaited French deal for Dassault to sell at least 60 Rafale fighter jets worth an estimated $10 billion to the United Arab Emirates hit a new snag on Wednesday when it said proposed terms were “uncompetitive and unworkable.”
The deal, which has been in the works since 2008, was thrown into doubt earlier this week when it became clear that the world’s fourth-largest oil exporter had asked for details of a rival aircraft, the Typhoon built by the Eurofighter consortium.
A French source close to the deal said the negotiations were ongoing.
“There is no failure,” the source said. “It is part of the negotiating process ... the UAE is trying to include the Eurofighter to negotiate the price.”
Earlier on Wednesday, Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed, deputy of the country’s armed forces, said in a statement the French President’s Nicolas Sarkozy’s personal intervention had kept Dassault at the forefront of considerations and that “he could not have done more diplomatically or politically to secure the Rafale deal.”
“Regrettably Dassault seem unaware that all the diplomatic and political will in the world cannot overcome uncompetitive and unworkable commercial terms,” he said.
Officials at Dassault Aviation, which builds the Rafale, declined to comment. Dassault shares closed about 7 percent down on the news.
A UAE government source close to the deal blamed the current impasse on the “arrogance” of the planemaker, despite French military officials saying they were confident about securing a deal and hopes of finalising the sale at the Dubai Air Show.
“There is a shared frustration in both the UAE and French leaderships at the apparent arrogance of Dassault,” the source said.
“Rather than using the strength of the bilateral relationship to close the deal out they are attempting to use it to hold out on pricing and a deal structure that hasn’t changed in more than a year and that has been significantly bettered by all competitors.”
Speaking to reporters on Wednesday ahead of the UAE statement, French Defence Minister Gerard Longuet, who had just returned from the Dubai Air Show, said he was still confident Paris would secure the deal.
“The Rafale is not more expensive than the Eurofighter, and it’s less expensive than American products, so I think Rafales will be sold,” he said, reaffirming talks were in the final phase, but declining to give a date for their conclusion.
The United Arab Emirates and its Gulf neighbours share the West’s concerns that Iran is using its nuclear energy programme to develop weapons, a charge Tehran has denied. Saudi Arabia inked a deal for U.S. arms worth nearly $60 billion a year ago.
The UAE is also in talks to buy Lockheed Martin’s Terminal High Altitude Area Defense, or THAAD, an advanced missile defence system.
Dassault has still not found a foreign buyer for its multi-role Rafale, billed to be one of the most effective fighter jets in the world, but also one of the most expensive.
The aircraft has received a great deal more interest since it was deployed in the NATO mission in Libya this year, its first ever combat operation and negotiations are also ongoing with Brazil and Switzerland to sell the jet.
French air force chief General Jean-Paul Palomeros told Reuters in Dubai the Emirates air force was “very keen with Rafale”.
Yet after news of Eurofighter’s pitch emerged, the deal appeared to be blown open to greater competition, including from Boeing’s fighter jets.
The company said it had briefed UAE officials recently on its F-15 and F-18 combat planes.
“We have not responded to a detailed set of requirements or anything like that. We have been asked for information on both platforms (F-15 and F-18),” Paul Oliver, its vice-president for Middle East & Africa, International business development, Defence, Space & Security, told Reuters in an interview.
“We have provided, through the U.S. government, information on these platforms. We have been providing information off and on for over a year.”
Discussions between the UAE and Dassault were nearly derailed a year ago when Boeing was first asked for technical information on its warplanes.
The UAE has pressed for the aircraft’s engines to be upgraded with extra thrust and for better radar, industry sources have said, but Palomeros said UAE officials are satisfied with the plane.
The Eurofighter is built by Britain’s BAE Systems, Finmeccanica of Italy and European aerospace group EADS on behalf of Germany and Spain.
Boeing, however, said there was increasing local interest in its combat jets.
“There has been interest in the region. We have a couple of other customers who have expressed interest in the F-18 (apart from UAE),” said Boeing’s Oliver. “They don’t talk to me about competitors... but it is the big news of the airshow. I believe the UAE is looking at all their options.”