Tensions spur rise in arms deals for navies

The increasing demand for enhanced security is expected to push the global market for naval defence up from its current value of $40bn a year,
The French defence firm ECA specialises in drones such as the IT180, above, which detect and destroy mines. Colin Randall for The National
The French defence firm ECA specialises in drones such as the IT180, above, which detect and destroy mines. Colin Randall for The National

Paris// Amid a global clamour for enhanced security driven by growing threats from terrorism and regional tensions, delegates and exhibitors from almost 100 countries will gather in Paris next month for one of the world’s biggest naval defence events.

The steady growth of Euronaval, which runs for five days from October 17, is reflected in a market worth up to US$40 billion (Dh147bn) a year for new products alone, with a current order book standing at $150bn.

“Export markets are consequently growing too,” says Patrick Boissier, the president of Euronaval and of Gican, an umbrella group for France’s naval industry.

“From the Asia-Pacific zone, the American continent and the Middle East through to Africa, order prospects are very strong, from heavily armed large warships to small fast patrol boats, covering the whole range of surface and submarine naval capacities as well as maritime surveillance.”

According to the US department of commerce 2016 Defence Markets report, UAE defence expenditure in 2016 is expected to increase by 7.4 per cent to reach about $23.5bn, from $21.8bn in 2015, with a number of large weapons and systems contracts pending.

The biggest needs for the UAE include high-tech naval, air power and surveillance, and missile products and systems. The Air Force traditionally receives the lion’s share of the UAE’s total defence procurement with land forces second, followed by Special Operations and the Navy. The Critical Infrastructure & Coastal Protection Authority is also expanding rapidly and is tasked with protecting key infrastructure, such as water desalination plants, oil and gas platforms, pipelines, and the Barakah nuclear site, the report says.

The exhibition brings together buyers and sellers of ships and naval aircraft, weapons and a range of products and services from drones and anti-cyber attack systems to the training of military personnel. Middle Eastern countries including the UAE will be strongly represented at the exhibition.

One stand at the Paris show will alert visitors to the Navdex and Idex exhibitions due to be held at the Abu Dhabi National Exhibition Centre (Adnec) from February 19 to 23 next year.

Navdex, the leading naval defence and maritime security event in the Middle East and North Africa, is the defence and maritime security section of Idex, which bills itself as the only international defence exhibition and conference in the Mena region.

Adnec says it is participating at Euronaval “to promote the sales of our shows and gain potential clients”.

Another stand at Euronaval has been booked by Prininvest, owned by the French-Lebanese brothers Iskandar and Akram Safa. The group, with split headquarters in Abu Dhabi and Beirut, has a wide-ranging portfolio of interests including shipyards and yacht-building.

Although the French event does not see itself as a showcase for the announcement of huge new deals, defence contractors expect interest in the products they display to translate into contracts stretching years into the future.

In one striking example of deals that take root at Euronaval, the saga of the two Mistral amphibious assault ships, sold by France to Russia for €1.37 billion (Dh5.6bn) only for the order to be cancelled as Europe reacted sharply to Russian involvement in the Ukraine conflict, had its origins at the event. France’s first announcement of plans to build such warships, which can also carry helicopters, tanks and hundreds of troops, was at the 1998 exhibition. The two ships have been now sold to Egypt, a prominent Middle East buyer of French military equipment.

The slowdown in the Chinese economy and the impact of falling oil prices have led to some shrinkage in orders for French naval equipment from Beijing and parts of the Middle East.

But the French president François Hollande, while deeply unpopular among voters, is credited with success as an ambassador for French military exports, notably to Saudi Arabia, Qatar, Egypt and India.

The Stockholm International Peace Research Institute and the Institute for Strategic Research both put US expenditure at $597bn and agree on the top 10 spending countries (US, China, Saudi Arabia, Russia, Britain, India, France, Japan, Germany and South Korea).

Despite low oil prices, the UAE is forecast to increase its defence budget over the next few years and is expected to reach $41bn by 2025, as the country continues to diversify, says the commerce department report.

It is expected to be one of the world’s largest defence spenders and has consistently ranked in the 14 top defence global spenders for the past three years (based on SIPRI data), the report adds.

Military naval construction is “not doing too badly” despite continuing economic crises in other sectors, including civil construction, according to Mr Boissier. Gican’s 160 member companies employ more than 40,000 people and its subsidiary Sogena organises Euronaval.

“At a time when the risk of terrorism is added to regional tensions and territorial and economic [disputes] at sea, a number of maritime countries are legitimately choosing to strengthen their navies’ equipment,” says Mr Boissier.

He describes the US market as stable, the country remaining the biggest naval spender with an annual outlay of US$12bn matching the combined investment of a group of regions including the Middle East, India and Australia.

European nations have also maintained spending levels, with purchases totalling $10bn to $11bn a year.

The broadly stable market, with China a notable exception, has also led to increases in the number and exhibitors at Euronaval – 10 per cent up on the 2014 edition of the biennial event – and the range of nationalities taking part. Japan and Denmark are sending exhibitors next month for the first time since the exhibition began in 1968.

Much interest at Euronaval is likely to focus on the new developments from leading French contractors,

The major French contractors vying for attention – and business – at Euronaval include Thales and four other majors commonly known by their acronyms ECA, MBDA, CNIM and DCNS. The French state has a 62 per cent stake in DCNS, with a 35 per cent holding owned by the aerospace specialist Thales.

ECA, based in Toulon, already helps to equip nine of the world’s largest 10 armies among customers in 80 countries. Owned by the Gorge Group, it specialises in unmanned and autonomous equipment for mine detection and destruction, designing drones for use on and under water and on land. ECA is also developing a research programme to improve the capacity and performance of a range of robotic products with a variety of uses from harbour and underwater coastal surveillance to wreck inspection.

MBDA, which works with 90 nations including some in the Arabian Gulf, produces Exocet, Sea Venom, Marte anti-ship missiles and VL Mica anti-air missiles.

Some of these will arm four new Gowind corvettes supplied by DCNS to Egypt. The first was floated in the French shipyard of Lorient this month and the others are being built in the Egyptian port of Alexandria.

MBDA executives insist that friendly nations are entitled to French know-how and products in order to protect themselves against possible aggressors. “But the government is very careful about who France does business with,” says Stefano Bertuzzi, the head of the company’s naval exports.

A senior colleague stressed the key element of using deadly armaments to deter enemies rather than firing them, adding: “Of more than 40 MBDA products, only a handful have actually been used in anger.”


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Published: September 29, 2016 04:00 AM


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