09 February 2015 defenceWeb (Reuters)
Egypt is moving closer to a five billion euro arms deal with France for 24 Dassault Rafale fighters and one DCNS FREMM frigate, with a tentative agreement apparently reached on financing.
French Defence Minister Jean-Yves le Drian said on Sunday that "advanced" talks with Egypt were being conducted over the potential Rafale sale. "There are actually pretty advanced discussions with Egypt, but they're not over," Le Drian told television station iTele.
Le Drian's comments confirmed what was told to Reuters by two sources close to the matter on Saturday -- that Egypt was discussing the purchase of 24 Rafale jets and a FREMM frigate in a deal estimated at 5 billion euros.
Also on Saturday, Dassault's CEO, Eric Trappier, told Le Figaro daily the company was close to signing its first Rafale export contract, without specifying a country. There were "still several steps to cross" regarding a sale to Egypt, Trappier said separately.
On February 5, daily Les Echos reported that French export credit bank Coface would guarantee 50% of the deal’s value, down from the initial 80-90% requested by Egypt, and financing would be provided by a number of French banks, headed by Credit Agricole, and possibly Saudi Arabia. Egypt has reportedly agreed to make a down payment of 500 million euros, split between Egypt and the pool of banks, according to La Tribune.
La Tribune reported that the after the financing portion of the deal was ironed out, the Egyptian delegation visiting France went back home to present the deal to President Abdel Fattah al Sisi. The paper reported that the deal calls for the delivery of six Rafales by mid-year and 18 to follow later. The initial Rafales would come from French Air Force stocks. Regarding the frigate, this would come from the French Navy and would be the vessel Normandie, currently undergoing sea trials.
Egypt apparently expressed interest in up to 24 Rafales in September last year during a visit by Le Drian. The country had originally shown interest in the Rafale in 2011 during the Arab Spring.
Paris and Cairo have enjoyed close economic ties in the past but turmoil in the north African state since president Hosni Mubarak was overthrown in 2011 left Western governments wary of signing contracts, especially in the defence sector.
With the recent rise to power of al Sisi, ties have improved and both sides are concerned by the rise of jihadist groups in Libya and Egypt.
France secured its first major military contract in Egypt in about 20 years in 2014 with a 1 billion-euro deal to sell four Gowind 2500 corvettes. France will deliver one and build the remaining three in Egypt.
Senior French officials have repeatedly travelled to Egypt over the last year and Sisi in November undertook a state visit to Paris, where discussions were held about replacing Egypt's fleet of 18 Dassault-made Mirage 2000 jets. Egypt was the first foreign buyer of the Mirage 2000 in 1981.
Dassault is under increasing pressure to sell the Rafale overseas. The French government said last year it would slow the pace at which it takes delivery of Rafale jets, taking just 26 over the next five years instead of 11 a year.
A French delegation in January visited New Delhi to salvage an agreement to supply 126 Rafale fighters to the Indian Air Force which has hit a snag over the local assembly of the planes. France has been negotiating with India for three years over the Rafale purchase.
As a result of the US suspension of some of its $1.3 billion in annual military aid following the ouster of President Mohamed Mursi by the military in July 2013, Egypt has looked elsewhere to meet its military needs, notably Russia. In September, Alexander Fomin, Russia’s chief of Federal Service for Military-Technical Cooperation, said Egypt had agreed to a $3.5 billion arms deal that includes fighter jets, surface-to-air missiles, submarines and other equipment. Egypt and Russia will hold high level diplomatic talks later this week.