France seals $8.1 billion deal with Indonesia to sell 42 Rafale jets

European Union countries' Defence Ministers meet in Brest
French Defence Minister Florence Parly speaks during a joint news conference with High Representative of the European Union for Foreign Affairs and Security Policy Josep Borrell (not seen) in Brest, western France, January 13, 2022. REUTERS/Stephane Mahe
  • Indonesia says deals made on munitions, subs, satellite
  • Six jets will be shipped in next months, 36 to come later
  • France seeks to build Indo-Pacific ties after AUKUS snub
  • Dassault shares rally on Indonesia Rafale deal news

JAKARTA, Feb 10 (Reuters) - Indonesia will order 42 Rafale fighter jets in a $8.1 billion deal, France's defence ministry said on Thursday, as part of a series of agreements also including submarine development and ammunition, making Jakarta the biggest French arms client in the region.

The deal comes as Paris, which views itself as a global maritime power, seeks to expand geopolitical ties in the Indo-Pacific after the United States, Britain and Australia created a new strategic alliance last year called AUKUS.

"We're planning to acquire 42 Rafale," said Indonesian Defence Minister Prabowo Subianto as he met with his French counterpart, Florence Parly.

"Our strategic partnership will benefit from the deepening of our defence relations," said France's Minister of the Armed Forces Parly.

The order would make Indonesia the second state in the Indo-Pacific region after India to rely on the jet produced by Dassault Aviation , Parly said.

A French defence ministry official told journalists in a briefing that the jet deal, which will boost production at Dassault Aviation, Safran (SAF.PA) and Thales , is worth $8.1 billion.

A first phase of the deal, over six Rafale jets, will be executed over the next months, while the remaining 36 will be delivered at a later stage, either late this year or next year, he added.

Dassault Aviation said the deal marked the start of a long-term partnership and would allow it to rapidly step up its presence in Indonesia. Its shares climbed around 4% on news of the agreement.

Thursday's agreement will make Indonesia -- currently ranking second after Singapore -- France's biggest military procurement client in the Southeast Asia region, the defence ministry official said.

In addition to the fighter jets, Indonesia has also signed a memorandum to cooperate on the development of submarines which is set to result in an order of two Scorpene vessels, produced by Naval Group, the French defence ministry said.

The issue is sensitive for France following Australia's cancellation of a multi-billion dollar submarine deal last year with Paris, which accused its allies of backstabbing.

Asked by journalists whether the developments surrounding the AUKUS alliance and the failed Australian submarine purchase influenced negotiations with Indonesia, a French defence ministry spokesperson said: "I don't think so, neither in one way nor the other."

"We have an Indo-Pacific strategy, we have the determination to maintain our defence industry and thus to export," he said.

Indonesia too has expressed concern about AUKUS, wary the use of the nuclear-powered submarines could add to geopolitical tensions in Southeast Asia, a region where China has considerable clout. Indonesia's defence minister, however, has said he understood why the alliance was formed.

The country has been seeking to overhaul its ageing air fleet for a while, which up until today includes U.S.-made F-16 and Russian Sukhoi Su-27 and Su-30 jets.

Indonesian President Joko Widodo met Parly on Thursday and welcomed the signing of deals on submarine development, satellite procurement, and ammunition production.

"I hope that defence partnerships aren't just focused on munition purchases, but also keeping in mind the development and joint production, technological transfer, and investment in defence industries," Jokowi, as the president is known, said in the statement.

Reporting by Tassilo Hummel in Paris and Stanley Widianto in Jakarta; Editing by Sudip Kar-Gupta, Martin Petty and David Evans

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Tassilo is a trained lawyer who first joined Reuters in Berlin, then re-joined in Paris. He covers French politics and business, EU institutions and NATO.