How France’s Rafale Lost Morocco Sale
By PIERRE TRAN
Defense News – 15/10/2007
PARIS — The knives are out, as French industry contemplates an astounding defeat in efforts to sell Dassault Aviation’s Rafale fighter jet to Morocco, leaving the door open to the U.S. F-16.
If Lockheed Martin completes the sale, it will mark a retreat in French diplomatic and military influence in francophone North Africa. Morocco was a protectorate under French colonial rule until independence in 1956, but it maintained close relations — until recently.
Dassault Chief Executive Charles Edelstenne and Eric Trappier, the company’s head of military aircraft, are said to be livid as the prospect of a sale of the twin-engine Rafale recedes.
“This was not even a tender,” an industry executive said. “This was a bilateral deal. Who knows when the next opportunity will come?”
There are no words harsh enough for the Délégation Géné-rale pour l’Armament (DGA) among Dassault executives, who privately blame the arms agency, particularly the international development department, for what they see as fatal miscalculations in the export campaign.
“The lesson of Morocco is France is incapable of exporting arms,” the industry executive said.
A DGA official vehemently denies the accusations.
“It’s calumny,” he said. “You have to ask yourself, who benefits from these accusations? Has industry nothing to reproach itself?”
The consequences of failure are far-reaching for industry. The Rafale is a French symbol of military aeronautical excellence and is a sales platform for Thales, Snecma and the Safran group’s Sagem, and a host of other French equipment suppliers.
The Rafale’s latest defeat — the Netherlands, Singapore and South Korea all passed on it for U.S. aircraft — raises fundamental questions for the future of the fourth-generation fighter and France’s sway in the Arab world, said Robbin Laird of consulting firm ICSA, based here and in Washington.
Officially, until a Moroccan order is announced, the French Defense Ministry maintains the Rafale is still in the running. But Defense Minister Hervé Morin implicitly accepts a checkmate by the Americans.
Asked for his view of why France failed in Morocco, Morin said Oct. 8, “When the time comes, I will give you my explanation.”
Bungled Bundle?
France completed technical and commercial negotiations with the Moroccan authorities in the spring, the industry executive said. Edelstenne said in June, just before the 46th Paris Airshow, that the Rafale offer was being handled on “a government-to-government” level.
France proposed 18 Rafales for 2.3 billion euros ($3.2 billion), according to French press reports.
Unofficially, Dassault executives fault the DGA, which bundled the aircraft into a large arms package that included helicopters and frigates. That package approach sabotaged the deal, the industry executive believes.
The DGA official said Morocco has long-standing needs for fighter aircraft, helicopters and warships, and the French offer was made in response to those requirements.
“We have supplied price and technical information to the government,” a Eurocopter spokeswoman said. “The information is part of a global package being negotiated at a government-to-government level, and we do not know the details of the negotiations.”
A spokeswoman for naval company DCNS said, “There is an informal exchange of information.” DCNS had previously offered the FREMM multimission frigate, but Morocco is looking for something bigger than the Gowind corvette and smaller than the FREMM. “We would offer something that meets their needs,” she said.
The French civil service has a tradition of equality of treatment, in which public officials resist selecting one offer above another to avoid the appearance of favoritism for one contractor, a defense analyst said. An arms package fits that principle.
Moroccan officials were not available for comment.
Another grievance Dassault harbors is an apparent discrepancy in Rafale prices, with the DGA accused of submitting a figure said to be 20 percent lower than Dassault’s.
The DGA official insists the blame is unfair. The DGA did not get involved in commercial talks. “There is no government-to-government contract,” he said. “We don’t have a Foreign Military Sales procedure.”
Commercial negotiations are an industry responsibility, the DGA official said. DGA’s role is to provide technical support, including evaluation services if needed, he said.
The inconsistency in price seems to have arisen from a DGA official’s reference to Rafale’s 50 million euro ($70 million) unit price for the French Air Force during a meeting with Moroccan officials in October 2006.
“It was probably a mistake,” said a person familiar with the talks. “It was outside his competence.”
That was not a commercial offer, but it was a figure of which the Moroccans took note.
Export aircraft can be more expensive than domestic orders when they come with newer equipment such as laser target designators or infrared search-and-track sensors. A letter of acceptance for a foreign sale of the F-16 may tag each plane at up to $45 million, compared with the $35 million list price at the U.S. Department of Defense.
But Dassault executives suspect the DGA of undercutting Rafale’s price to help sell French frigates, using the aircraft as a loss leader item much as a retailer might do.
There was also hesitation by the Finance Ministry in underwriting financial guarantees with Coface, the French export credit agency, the executive said. The uncertainty was because of the presidential election, as Finance Ministry officials had to wait to see whether Socialist Ségolène Royal or Conservative Nicolas Sarkozy won the ballot.
For Dassault, the package approach, confusion over prices and dithering in financial support led to disenchantment in Morocco and an invitation to the United States to pitch its aircraft.
An official at the presidential office said Sarkozy will visit Morocco Oct. 22-24t. He declined comment on the Rafale.
Many Reasons for Failure
Dassault’s rage against the DGA may be misdirected. The Rafale was probably doomed to failure for technological, financial and geopolitical reasons, analysts said.
“The Rafale was too sophisticated for the Moroccan authorities,” said Loic Tribot La Spiere, chief executive of think tank Centre d’Etude et Prospective Stratégique. “The Mirage 2000 would have been more appropriate in technology, cost and maintenance terms.”
But Dassault recently closed the Mirage production line after delivering the last plane to Greece. A chance to sell Mirages faded when India last year dropped bilateral talks for a buy of 126 combat aircraft and launched an international tender.
An upgraded Mirage 2000 is seen as an internal competitor to Rafale, and while reopening the line would be possible if there were a customer, there would be a cost.
Financially, Saudi Arabia’s buy of 72 Eurofighter Typhoon aircraft was a double whammy. Riyadh might have financed a Moroccan purchase, but when the Saudis signed for the Eurofighter, funds were no longer available for the Rafale buy.
“The Saudi buy is significant,” Laird said.
Riyadh’s purchase boosts the credibility of Eurofighter and maker EADS in world markets. “It gives the aircraft global legs,” Laird said. Electronics and weapon makers provide support to aircraft that sell, such as the F-16, which makes them more upgradeable.
While capable as a deep strike aircraft, the Rafale is probably too much aircraft for ground attack in the counterinsurgency role, Laird said.
Morocco has a long-running conflict in the Western Sahara with the Polisario Front independence movement, which wants a referendum for autonomy or limited independence. Morocco has offered limited autonomy to the Western Sahara under Moroccan sovereignty.
Morocco’s relations with neighboring Algeria are also tense. Algeria has bought Sukhoi aircraft. Between 1975-88, Morocco bought 20 U.S.-built F-5 fighters and six OV-10 counterinsurgency aircraft, according to the International Institute for Strategic Studies’ Military Balance. The mainstay of the Royal Moroccan Air Force is the Mirage F1 fighter/attack aircraft, of which 27 are undergoing a modernization program with the French joint venture company Astrac.
In world markets, the counterinsurgency mission is a big one, and the Rafale is too costly for that role, Laird said. Demand for a top-class combat aircraft like the Rafale is limited.
In political terms, the context was not the best, Tribot la Spiere said. Morocco’s King Mohammed VI was close to former French President Jacques Chirac, and the apparent lack of a personal relationship with Sarkozy acted as a brake on a Rafale deal. Sarkozy visited Algeria, Tunisia and Libya in the summer but is visiting only Morocco later this month. His official visit is unlikely to reverse the pick of the F-16.
The package approach was also a bad idea, Laird said. A trend of the last few years in Arab countries has been a rising sophistication, with purchases of specific capabilities rather than bundled arms packages.
The push for a French package, which would make for a bigger splash than separate deals, came from a diplomatic adviser to Chirac, analysts said. That tied arms even more closely to political standing.
In geostrategic terms, Paris was out of its league. The Iraq war has been a military negative for the United States and Britain, but for conservative Arab states, the engagement of these two Western countries showed a commitment to the region, Laird said.
France needs to build its standing in the region, particularly in the Arabian Gulf, where security concerns over Iran are high.
One French defense expert said the Rafale may not have suited Morocco, but the F-16 selection was really a political choice: “The U.S. offered their umbrella.”
The Rafale’s future looks uncertain.
Laird said, “The absence of export sales presents stark choices.” France can radically cut the 294-aircraft program, maintain or increase the numbers, or take the capability and create a “global aircraft,” by partnering with someone else.
One option might be to take the Mirage 2000-9 sold to the United Arab Emirates and develop that into an export product, in cooperation with Lockheed Martin. The United Arab Emirates also flies the F-16. But given the competitive reality on the ground, there is no chance of cooperation.
The Sarkozy government in March will publish a defense white paper that will set foundations for the new multiyear military budget law. That will decide the near-term future for national Rafale orders. But for the longer term, the export outlook is dim.
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