German halt in Saudi arms sales causing serious problems: Airbus

MUNICH/BERLIN (Reuters) - Germany’s halt in exports to Saudi Arabia is preventing Britain from completing the sale of 48 Eurofighter Typhoon warplanes to Riyadh, and has delayed potential sales of other weapons such as the A400M military transport, a top Airbus official said Friday.

Germany in November said it would reject future export licenses to Saudi Arabia after the killing of journalist Jamal Khashoggi. It has not formally banned previously approved deals, which would entitle companies to compensation, but has urged industry to refrain from such shipments for now.

Airbus Defence and Space chief Dirk Hoke told Reuters that uncertainty about the issue had undermined Germany’s credibility, and could threaten future Franco-German defense projects, including a planned Eurodrone that was heading for an initial contract by the end of the year.

“This is a serious problem,” Hoke said in an interview on the sidelines of the Munich Security Conference. “We’re facing constraints in many projects, and many problems have been put on ice,” including what he called discussions about a sale of A400M military transports to Saudi Arabia.

Germany accounts for just under 2 percent of total Saudi arms imports, a small percentage internationally compared with the United States and Britain, but it makes components for other countries’ export contracts. That includes a proposed 10-billion-pound ($12.82 billion) agreement by Riyadh to buy 48 new Eurofighter Typhoon fighter jets from Britain.

The deal, in the making for nearly four years, was finalised late last year, but has been held up for months due to the German position, triggering “massive, emotional reactions” from Britain and BAE Systems, Hoke said.

Eurofighter is built by a consortium of four founding countries - Germany, Britain, Italy and Spain - represented by Airbus, Britain’s BAE Systems and Italy’s Leonardo.

Hoke said the current situation was difficult to explain to customers since there was no formal embargo. Top Airbus executives had appealed to the Foreign Ministry and the Economy Ministry to allow the Eurofighter deal to proceed, he said.

He said Germany’s politically driven stance could also have negative consequences for future Franco-German projects, including the Eurodrone project.

Germany and France have made progress in recent months on a bilateral agreement, but Berlin is resisting making it legally binding, according to French sources familiar with the matter.

“It will pose lasting damage to the German relationship with France if no serious, long-term solutions can be found,” he said. “Germany is simply viewed as unreliable on this issue at the moment.”

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Reporting by Sabine Siebold in Munich and Andrea Shalal in Berlin; editing by Louise Heavens