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Will Exit Clause Doom ‘Super’ Gripen?

Sep. 30, 2012 - 12:44PM   |  
By GERARD O’DWYER   |   Comments
A Swiss Air Force pilot flies a Gripen E/F test aircraft in Sweden. An exit clause in Sweden's agreement to share development costs could mean trouble for the "super" Gripen if the Swiss deal fails.
A Swiss Air Force pilot flies a Gripen E/F test aircraft in Sweden. An exit clause in Sweden's agreement to share development costs could mean trouble for the "super" Gripen if the Swiss deal fails. (Saab)
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STOCKHOLM — A pending deal for Sweden and Switzerland to acquire Gripen-NG fighters is on shaky ground after Sweden said that if Switzerland pulls out of the deal — and no other international partner can be found to take its place — Sweden will no longer fund the project either.

The move prompted French firm Dassault to resubmit an offer to sell its Rafale fighter jets to the Swiss in lieu of the Gripens.

Switzerland had planned to acquire 22 aircraft from Saab, while the Swedish government was on board to buy 60 to 80 aircraft from the company as part of an agreed fighter development and cost-sharing partnership arrangement.

But the Swedish government last month confirmed the existence of an “exit clause” that gives it the right to halt funding to the “super” JAS Gripen-NG E/F program if Switzerland withdraws from the project and an alternative foreign partner cannot be found to share development and production costs.

The revelation, which dilutes the government’s original position and commitment to the project, is contained in the Defense Ministry’s Defense Budget Proposition for 2013, which was presented to the Swedish parliament Sept. 22.

The budget proposition for the first time establishes a clear and direct link between the need to find a formal international partner for the Gripen-NG and a government commitment to fund the project.

Defense Minister Karin Enström confirmed that the government has added a clause to the preliminary partnership agreement with Switzerland. This, she said, gives the government the right to cancel the purchase of 60 to 80 Gripen-NG aircraft for the Swedish Air Force in 2014 if Switzerland rescinds its order and no replacement partner is found.

The clause adds further pressure on securing a legally binding partnership agreement covering development of the Gripen-NG with Switzerland, said Peter Rådberg, the Green Party’s representative on the Parliamentary Committee on Defense (PCD).

“On the one hand, the government states in the budget proposition that the JAS Gripen is an essential requirement if we want to have a strong defense capability, while on the other hand, it says the project will be canceled if Switzerland withdraws as a partner and leaves no other foreign backer. This leaves the project out on a limb,” Rådberg said.

He added that Sweden’s security policy, and the future of its defense capability, must not rely on funding when it comes to financing fundamental military programs.

“The global reality demands that Sweden [have] a defense capability and readiness that has the capacity to both protect its sovereign territories and participate in international operations,” Rådberg said. “The next-generation Gripen project, as it stands, would collapse if Switzerland says no. This is double-dealing by the government, and it’s a serious matter.”

Sweden’s preliminary partnership agreement with Switzerland covers the delivery of 22 JAS Gripen E/F aircraft to Switzerland, valued at 3.1 billion euros ($3.9 billion).

However, the planned purchase remains controversial in Switzerland. Opposition parties that have been vocal in their criticism of the choice of aircraft and the price agreed with Sweden are calling for a referendum on the issue to be held by the end of 2014.

An Opening for Dassault? The controversy has provided an opportunity for Dassault, which has resubmitted an offer comprising four separate price options based on the delivery of 12 to 22 Rafale fighters.

“We have received an offer communication from Dassault, and it is being circulated according to our normal procedures,” Swiss government spokesman Andre Simonazzi said.

Dassault resubmitted its offer when a report covering the cost segment of the preliminary agreement with Sweden was presented to the Swiss federal parliament on Aug. 28.

“After learning of the Swiss parliamentary report, the Rafale team sent to the Swiss political authorities proposals in conformity with the competition,” Eric Trappier, Dassault senior vice president, said in a statement.

A Dassault spokesman declined to confirm pricing for four Rafale offers reported in a Swiss paper, Le Dimanche Matin, Sept. 23.

The report said Dassault had written a Sept. 17 letter to the Swiss federal council offering:

• 22 Rafales for $3.3 billion.

• 18 aircraft for $3.1 billion, including all capabilities requested by Switzerland.

• 18 Rafales, excluding air-ground and reconnaissance capability, and simulators.

• 12 aircraft for $2.34 billion, offering full capabilities and simulators with an operational efficiency that Dassault claims is comparable to 22 Gripen aircraft.

The resubmitted deal is another thorn in the side of Sweden as it pursues a final contract settlement against a backdrop of the running political controversy and opposition to the deal, said Ulf Frings, an industry analyst in Berlin.

In August, the Swedish government said funding would be made available to acquire 60 to 80 JAS Gripen E/F multirole aircraft to replace the Air Force’s existing JAS C/Ds, which are due to reach the end of their lifespan by 2025, said Cecilia Widegren, a ruling Moderate Party MP and deputy chairperson of the PCD.

“The premise for the government’s thinking is that a new JAS Gripen-NG project should be run with a strategic international partner,” she said. “This is a view shared by the military. The clause in the agreement clarifies the overall position. The project needs a strategic partner to share costs. It can be Switzerland or another party.”

The government’s decision to add the “get-out” clause reflects sound economic sense, Enström said. “We want to run this project with at least one other country.”

The defense minister said the government has a rising expectation that other countries will show an interest in the Gripen-NG.

Saab echoed the MoD’s confidence. Eddy de la Motte, the company’s export manager for JAS Gripen, said Sept. 26 that there are growing indications Brazil will choose the Gripen over other candidate aircraft.

“I believe it will happen,” de la Motte said, according to Reuters. “We have the best price, both in terms of purchase cost and operating costs.”

However, Saab’s confidence in securing the estimated $4 billion contract to deliver 36 aircraft to Brazil is grossly premature, Frings said.

“It would be difficult to be confident about picking favorites at this stage, especially since the decision has been delayed by the Brazilian government, again, to 2013,” Frings said. “There is more evidence to suggest that Dassault’s Rafale or the Boeing-Embraer partnership group’s EMB 314 Super Tucano fighter offering are more highly thought of than Gripen.”

Saab has stayed out of the political wrangling in Sweden and Switzerland. The group’s CEO, Håkan Buskhe, insists that the company has set its sights on an ambitious mass-production program that anticipates the export of up to 300 E/F Gripen-NGs.

Moreover, Buskhe said Saab believes it can recoup its costs and return a profit on a minimum production-scale of 80 aircraft.

“One must accept that it can sometimes take a long time to obtain political decisions,” Buskhe said in a statement.

Dassault’s revised offer, he said, has not interfered with the company’s relationship with Switzerland.

The Swedish government’s apparent diluting of its commitment to the Gripen-NG project could be a temporary and unconvincing device to protect political interests should the Swiss say “no,” Frings said.

“The history behind the development of the Gripen has had less to do with the politics of defense and more to do with the needs of the country’s industrial base. It is improbable that any Swedish government, present or future, would allow the ‘super’ Gripen project to fail just on the simple basis that it lacked a foreign partner,” Frings said.

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