April 6 Observations

North Korea

News sources has stated there will be 2 South Korean AEGIS ships, between 3 and 4 Japanese AEGIS ships, and between 4 and 5 US AEGIS ships monitoring the upcoming North Korean rocket launch. US and Japanese warships are suspected of carrying SM-3 anti-ballistic missile interceptors. As long as the rocket does not deviate from the announced trajectory, it is highly doubtful there will be any kind of shootdown. With the Rocket expected to fly over the Yaeyama Islands, which will likely feature either a US or Japanese warship in that area, things could get interesting. It is unclear if South Korea can shoot down a ballistic missile launched from North Korea even if they wanted to.

The North Koreans reportedly have 3-4 mini-submarines that have recently deployed from an East Sea base in North Korea. It is training season for North Korean submarines, but it was also training season for North Korean submarines when the Cheonan was sunk in March of 2010. The rocket launch is taking place from a base on the other side of North Korea.

With the frenzy of activity taking place related to North Korea, it has become more and more clear that Japan and South Korea are looking to send some punishment in the direction of North Korea. North Korea is being provocative, but that doesn't necessarily mean they have intent to escalate. China and the US appear to be working overtime to restrain everyone in the region, and of all the kinds of cooperation one could see in the 21st century from China and United States, it strikes me this is the most important kind.

Iran

From the New York Times:

A major Chinese ship insurer will halt indemnity coverage for tankers carrying Iranian oil, beginning in July, two of the insurer’s officials said Thursday, amid tightening Western sanctions against Iran and after similar action in Japan.

The decision by the insurer, the China P&I Club, is the first sign that refiners in China, Iran’s top customer for crude oil, may struggle to obtain the shipping and insurance to keep importing from Iran. Iran’s other top customers — India, Japan and South Korea — are running into similar problems, raising questions on how Tehran will be able to continue to export the bulk of its oil.

The price of Brent crude oil is up 16 percent since the start of this year on concerns that Iranian supply may be disrupted because of Western sanctions.

The China P&I Club, whose members include shipping companies like Sinotrans and Cosco Group, is the first Chinese maritime insurer to confirm that it will halt business with tankers operating in Iran.

China doesn't say no to money without a good reason, particularly when they have a monopoly. It is unclear if this is a result of sanctions working as intended, or the State Department working overtime - but either way this is quietly a significant victory against the Iran regime as part of the Obama administrations policy of diplomacy in dealing with the Iranian nuclear program. There is, of course, a disturbing flip side to this. Insuring the flow of oil to China would, in theory, be a major political consideration by Iran that would usually discourage the Iranians from closing the Strait of Hormuz during hostilities. This development is a double edged sword, on one side this applies tremendous economic pressure on the energy sector of the Iranian economy, but on the other side it removes a key incentive that would normally dissuade Iran from closing the Strait of Hormuz during hostilities.

Saudi Arabia

Based on latest figures from the Department of Energy (FTP), the US imports a daily average of 1,470,000 barrels of oil, which averages out to about 44.7 million barrels per month. We have already discussed Saudi Arabia chartering 11 VLCCs and sending that oil to the United States, and each of those VLCCs is expected to bring about 2 million barrels per vessel. It appears that was just the beginning, and Saudi Arabian state owned Vela has chartered 3 additional VLCCs for the same purpose. 14 VLCCs each carrying 2 million barrels means the United States is expected to import at least 28 million additional barrels of oil from Saudi Arabia over the next two months. That is slightly more than a 30% increase in US oil imports from Saudi Arabia for April and May.

All news reports on this activity are quoting analysts who believe this is the beginning of a major program. This seems very odd to me. Saudi Arabia recently ramped up production by 1.5 million barrels a day, but that ramp up was primarily done to compensate for oil expected to be lost from market due to sanctions from Iran, who was last known to export around 1 million barrels a day. That increase in production also takes time, and can't simply be turned and off like a light switch. It is also worth noting that Saudi Arabia has not decreased export of oil to any other nation, meaning this is all additional oil on the market. For Saudi Arabia to ship out 28 million barrels in a massive VLCC charter program in such a short period of time, they would have to draw that oil from standing stock. If this program is simply ramping up to something bigger, and more VLCC charters are expected, that means Saudi Arabia has begun a program that essentially transfers their existing standing stockpile of oil to other nations.

It is very difficult to imagine that Saudi Arabia would ship their standing stockpile of crude overseas without a damn good reason - a much more important reason than some Presidential election in the United States. Indeed, if one was to start listing all the plausible reasons why Saudi Arabian leadership would give up the very commodity that gives them their political power and influence globally, the only reason that makes any sense at all is that the Saudi Arabian leadership must believe those standing stockpiles of oil are facing legitimate risk.

While I am aware that Saudi Arabia holds offshore stockpiles of around 10 million barrels in Rotterdam, Sidi Kerir, and Okinawa; does anyone know how big the stockpile of oil is in Saudi Arabia?

If we continue to see the VLCC program expand and more oil continues to be shipped out at a rate greater than the rate of accumulation, the most plausible scenario is that the Saudi's must believe war is about to break out over the Middle East, and for some reason the rest of us can only speculate about, Saudi Arabia believes they will be a target in such a war.

More Tea Leaves

The Navy is moving a substantial amount of equipment to the Persian Gulf that if used, would be done specific in combat against the capabilities fielded by Iran. I am simply highlighting that fact about the MIW shift to the Gulf or other recent military orders reported in media this week; not trying to start a conspiracy theory.

So maybe this other relevant activity is just a coincidence, but even as a coincidence it is very interesting. Lets start with China.

The government on Tuesday raised retail prices for gasoline and diesel fuel for the second time in less than six weeks in an attempt to keep pace with soaring crude oil prices.

Chinese motorists are now paying $4.43 a gallon for 90-octane fuel — nearly equal to the $4.45-a-gallon average for mid-grade fuel in California, according to AAA.

The reason provided is found later in the article.

The increase should ease pressure on China's two main refiners, the state-owned China Petroleum & Chemical Corp. and PetroChina Co., which are not allowed to pass costs on to consumers. The two have reported losing billions of dollars already because of soaring crude prices.

In other words, China is not having a supply or a demand problem right now, what they are having is a 'losing money' problem because of the current high costs - and because China price fixes their fuel, they must price fix it relative to the global market.

Long term I think everyone recognizes that China's demand is going to go up, but right now supply and demand isn't the issue - there are no supply problems with China even with Iranian sanctions. Raising the cost of gas and diesel will insure that supply will go up because by any measurement - this is a fairly significant cost increase for fuel for the average Chinese citizen. Also worth noting, China has not cut back any orders for fuel from any of their import sources, so despite less demand in the near term China will be stockpiling rather than reducing supply.

So if China is reducing demand, why is Saudi Arabia ramping up supply?

Saudi Arabia’s state shipping company, Vela, is set to send 11 supertankers, totalling up 22 million barrels of crude oil, to the U.S. this month and next, an abnormally high number, shipbrokers and analysts said Friday.

“This is the first time in several years for Vela to hit the market with such volume-and in such a short timeframe,” Omar Nokta, managing director at Dahlman Rose & Co., told Dow Jones Newswires. “In 2011, Vela fixed 1 VLCC to the U.S. every other month.”

Vela wasn’t immediately available to comment.

According to the International Energy Agency, Saudi Arabia’s oil production rose to 10 million barrels a day in February, its highest in 30 years. The Kingdom is expected to continue to increase output in the coming months, the IEA said in its monthly oil market report published Wednesday.

I know what you are thinking... this is an effort to bring fuel prices down and pick up the slack for Iranian oil cut off by sanctions and problems in South Sudan, but that simply isn't true. OPEC data shows that those problems were previously absorbed with other measures and they consistently claim the price for crude is artificially high. A lot of analysts continue to say that as well, and Bryan Walsh mentioned that specific point in his TIME column the other day.

Right now much of the recent price spike is due to tensions with Iran, a major oil producer. War with Iran is a real possibility, albeit an uncertain one, and if the missiles were to fly, we could easily see a price spike of $50 a barrel or more. So traders and major oil consumers are stockpiling crude now as a hedge against that very situation, which in turn drives the price up now by artificially inflating demand.

Emphasis mine. There is no supply problem. Because while margins are legitimately tight (they always are these days), it has been noted in several places including the Financial Times that there is a lot of hoarding of crude right now taking place globally, in particular Europe. Now we are seeing a "wall of ships" heading for the United States. It is being said that this is part of an Obama administration plan to bring the price of oil down, but that is hard to believe, because the Obama administration knows that isn't going to work. Shipping in more crude to the US isn't for the purpose of increasing supply on the market - rather increasing the supply in reserve.

Why does the Obama know that won't work? Because for the last few weeks politicians have had more than a few open discussions with experts on the topic and it has been specifically asked whether more crude in the US would reduce prices - and every expert has agreed it would not. The problem in the US isn't the supply of crude, it is the capacity of refineries.

With the East Coast poised to lose 50 percent of its oil refining capacity, three members of Congress on Monday worried that while the country is producing more of its own crude oil, it might grow more dependent on other countries for gasoline and diesel fuel.

Pennsylvania Congressman Pat Meehan hosted a panel of energy experts for a field meeting in Aston, Pennsylvania, of the Committee on Homeland Security.

Meehan and two other legislators, Congressmen John Carney from neighboring Delaware and Mike Fitzpatrick from Bucks County, Pennsylvania, peppered the experts with questions about fuel prices and logistics as well as national security.

Two refineries in the Philadelphia area have closed in recent years, and a third is scheduled to close this summer.

A massive delivery of crude from Saudi Arabia to the US - which is about to happen - is not going to impact fuel prices at all. All it does is add increased supply as a reserve, because refinery capacity is full and cannot actually use all this extra crude coming to the US. Said another way, we are hoarding supply, not for use to bring prices down (which is impossible without more refineries), rather to have in case of delivery disruption.

Then you have the rumors that the Obama administration is going to release from the Strategic Petroleum Reserve to help address fuel prices. I don't believe it, rather I think the idea is being floated to calm investors. Every time they are asked, the International Energy Agency (IEA) says there is not need to release stockpiles because there is no supply crunch.

So why are the big energy importers in Asia, Europe, and the US hoarding crude supply? Why is the US suddenly shifting naval resources to the Persian Gulf specific to capabilities of Iran? Isn't a massive delivery of Saudi Arabian supertankers to the US at a time we lack the refinery capacity to actually use all that crude quickly exactly what stockpiling for war looks like?

I think it is a frightening thought what is going on, only because of what I believe these events are telling me as an observer. The sanctions on Iranian oil are in place. It will take a bit of time, likely 3-6 months, to get a feel whether they are working or not. During that 3-6 months period, it is extremely unlikely anything is going to happen, except that production is going to get very high and everyone is going to stockpile around the world.

So tell me this. What is the intelligence assessment of major oil importers telling those nations political leaders in the US, China, and Europe about what Israel is likely to do if it becomes clear the oil sanctions against Iran - said to be the most potent type of sanctions - aren't working?

I don't care what the folks in Tehran are saying publicly, there is no way they are oblivious to what the tea leaves are suggesting is going on. The Obama administrations diplomatic moves have begun ahead of negotiations with Iran, because the precautionary actions the US would need to take ahead of war with Iran are being taken and written daily in plain sight of major newspapers for all of us to see.

The media can claim this is the Obama administrations grand plan to bring down gas prices, but since the Obama folks know they can't actually saturate the market due to lack of refinery capacity - I reject the popular media rhetoric that this is just Obama administration politics. At no point in the last 3+ years has the Obama administration demonstrated their plans are stupid and are designed knowing that failure is the result. If the Obama administration is involved in hoarding supply on supertankers from Saudi Arabia, it is being done so they are damn sure they have that stockpile when they need it.

Keep in mind, the only legitimate reasons the US would need that extra supply is if the economy suddenly shoots off like a rocket over the next 6 months (very unlikely) thus demand increases significantly, or if the supply chain is disrupted. Which do you think is more likely?

If I'm off base here, I'm very happy to be wrong. Hard to ignore what's happening though.

Money is the End Game With Iran and Saudi Arabia

By now everyone is familiar with and has likely read many discussions regarding the remarkable claims made this week regarding the Iranian Quds Force assassination plot to kill the Saudi Arabian ambassador to the United States on US soil. If you aren't in part skeptical, you may not be very well informed.

I truly believe everyone should be very skeptical but not quite dismissive of the claims being made by the US government.

My short take is that the US government appears to have been initially skeptical like the public is today, but when they got a better sense of who the backers from Iran were, red flags went up. My thoughts on this are also that the US government must have accumulated some very credible evidence for the President to be this vocal in support of the Justice Departments case. Politically, the President's own base is more likely to be the most skeptical of the claims being made because the case fits almost perfectly into one of former UN ambassador John Bolton's wild conspiracy theories - which is nothing short of the most politically ironic turn of events in foreign policy I've witnessed in awhile. Honestly, isn't this scenario akin to the political equivalent of Dick Chaney joining Code Pink?

With the case now in the hands of the US Justice Department, presumably there will eventually be evidence made public. I'd like to reserve the right to be skeptical until I see this evidence.

The best media source covering this story, in my opinion, has been the New York Times. The NYT Lede Blog, for example, is part of the NYTs award winning coverage to completely own this story, and I found their coverage of Gary Sick's The Gulf/2000 Project messageboard traffic to be very useful in seeing what the experts were saying. I want to highlight one point made by Kenneth Katzman, a very brilliant Middle East analyst at the Congressional Research Service, who made one comment that has been repeated many times that I'm not quite sure really works anymore.

There is simply no precedent — or even reasonable rationale — for Iran working any plot, no matter where located, through a non-Muslim proxy such as Mexican drug gangs. No one high up in the Quds, the I.R.G.C. command, the Supreme National Security Committee, or anywhere else in the Iranian chain of command would possibly trust that such a plot could be kept secret or carried out properly by the Mexican drug people. They absolutely would not trust such a thing to them, given Iran’s undoubted assumption that the Mexicans are penetrated by the D.E.A. and F.B.I. and A.T.F., etc — and indeed this plot was revealed by just such a U.S. informant.

Ten or so years ago, I think this would be 100% accurate, but I'm not sure that is true anymore, or maybe I would suggest this may not be 100% accurate anymore. I don't want to give the impression that Kenneth Katzman is inaccurate, only that he (and others) might be overstating the IRGC precedent a bit.

I note that the US government now says that the IRGC is the primary government agent for Iran in developing Iran's nuclear technology and other military technology like ballistic missiles, which is business done with non-Muslim nations. We also know the Quds Force has developed ties globally - including in South America - through their illegal smuggling (arms trafficking, etc) operations with non-Muslim organizations. That doesn't make me less skeptical, but the trend lines for the Quds Force point towards working more and more with non-Muslim groups over the last decade in virtually every other area of responsibility for the organization - and this has in part been due to necessity to circumvent economic sanctions. If assassination was reinstated as an IRGC policy option recently as some monitoring sources have suggested, using a non-Muslim proxy inside the US might be the preferred way to take action as to misdirect accusations away from Iran. After all, if the plot had succeeded as outlined in the accusations, would anyone believe any US President who claimed the Iranian Quds Force was the agent behind the a bombing that would be specifically linked to a Mexican drug cartel? I think that would be a very difficult story to believe as well.

None of this makes me less skeptical though, only that I note both Gary Sick and Kenneth Katzman have both previously noted other IRGC operations with non-Muslim proxies - in particular the illegal smuggling activities, so it is a bit of a stretch to suggest there is "no precedent" regarding IRGC activities involving non-Muslim proxies. No non-Muslim proxies for assassination plots? Absolutely right, but the development of a nuclear weapons program is to me a much more serious plot than an assassination plot on an ambassador, and even the hesitant UN people claim Iran has been supposedly getting help from non-Muslims for that activity.

I'd also note that shadowy government organizations like the IRGC don't have a track record of applying "reasonable rationale" for the actions and plots they hatch. Seriously... organizations like the CIA and Mossad, or the KGB during the cold war... many of the ideas these organizations float and sometimes act on do not always apply "rational" thinking in the way you or I might apply the term. We know, for example, Iranian nuclear scientists keep getting killed. Are you more or less skeptical of Iranian government claims that the CIA or Mossad is behind those killings than you are of this US government claim? Uh...

With all of that said, I'm still skeptical of the US governments claims, because despite all the suggestions for actions that could be taken against Iran in response to this alleged plot, I believe it is fairly clear where this is really going.

We have been hearing for months now about the impending gigantic defense deal between the US and Saudi Arabia that is supposedly close to being finalized. Latest reports put the defense deal at somewhere in the neighborhood of $90 billion. A $90 billion defense export sale by the Obama administration to Saudi Arabia is going to shatter all previous peacetime defense export sales records in size, scope, and money.

For context comparison, that agreement will be worth ~75% of the entire nation of China's total military budget for 2010, and Saudi Arabia intends to spend that money buying US military equipment and the training to use that equipment. Most of the equipment that has been discussed in media for that defense deal that Saudi Arabia wants to buy, like AEGIS, is very high end military equipment. This deal, if it happens, is not just a big deal - it's shaping up to be the single biggest US military defense deal since the Lend-Lease Act.

If you are President Barack Obama, and you don't want to urinate all over one's own political base who is exhausted with US wars in the Middle East and frustrated with US foreign policy in the Middle East (that always seems to lead with combat boots), it is good politics to have high tensions between the buyer (Saudi Arabia) and a useful scapegoat like Iran if one is going to sell that much military hardware to a single country and avoid political blow back.

With all of this rhetoric that includes phrases like "Act of War" as a backdrop, including the implied threat of military action against Iran as a response, I think the US action in this case is going to be the impending US-Saudi Arabian defense deal. This plot accusation is not exactly 90 billion reasons why we are selling top US military kit to Saudi Arabia, but at least the justification for the sale will have some positive political spin potential with this plot part of the background noise. Also, for the record, if half of that $90 billion goes directly towards building 'stuff' like ships, planes, and vehicles - that is going to be a legitimate economic stimulus directly from a government export deal that the administration can take full credit for.

Saudi Arabia Wants a US Built Fleet

There is a sense this deal is getting closer and closer.

Saudi Arabia plans to raise its arms purchases from the United States to $90bn from the $60bn announced last year, as the kingdom seeks to upgrade it navy, diplomats in the Gulf said this week. Last year, US officials said Riyadh planned to buy $ 60bn worth of military aircraft, including upgrades to existing fleets.

Some additional notes.

“There is a plan for Saudi to spend an extra $ 30bn to upgrade its navy fleet,” said a Western diplomat in the Gulf. “This extra amount also includes maintenance and training for the forces,” another Gulf-based diplomat said. A Saudi government adviser said he expected the deal to upgrade the navy fleet would be completed soon. “The chances this deal won’t be finalised are very remote. The money will basically be used to update the eastern fleet,” he said, adding the upgrade was part of a separate programme to the $60bn plan announced last year. US officials said last year the $60bn programme would be complete in 15 to 20 years. It was not clear over how many years the $30bn addition would last.

We have heard everything from Burke destroyers to variants of the Littoral Combat Ship. I'm not going to speculate, although I have heard that up to $30 billion of this money is for building ships. That amount of money spent on US shipbuilding from Saudi Arabia would be enormous for the shipbuilding industry.

More importantly, this the single biggest shipbuilding contract since when? I stopped after going back half a century. I wonder what role Ray Mabus has had in getting a deal this large done, if any?

Burkes For Saudi Arabia

I thought this was just a rumor, but maybe there is more to it?

Saudi Arabia, which has long considered the purchase of American littoral combat ships (LCS) with a lightweight Aegis combat system, is contemplating the acquisition of new DDG 51 Arleigh Burke-class Aegis destroyers that could be fitted with ballistic missile defense (BMD) capability.

The U.S. Navy briefed Saudi officials in late May on the capabilities of the destroyers, which would be far more powerful than any ship currently in the kingdom's service.

The U.S. Navy would not confirm whether the brief included BMD options, but sources did not deny that it was part of the presentation.

Saudi Arabia has been looking at Aegis-equipped LCS designs from both Lockheed Martin and Austal USA since mid-2008. Those designs, which range in size from 3,000 to about 4,000 tons, would be equipped with SPY-1F lightweight Aegis radars similar to those fitted on Norwegian frigates. But the SPY-1F lacks the fidelity and software to perform the BMD mission, and the ships probably wouldn't have the electrical capacity to power a BMD radar.

The U.S. Navy's 9,100-ton DDG 51s are the heart of the fleet's BMD force. About 20 U.S. cruisers and destroyers have had their SPY-1D Aegis systems upgraded to perform the BMD mission, and more are being backfitted. Future DDG 51s will be built with the BMD capability.

Read the rest at Defense News.

Both versions of the Littoral Combat Ship version of the AEGIS surface combatant have been thoroughly criticized. I find that interesting, because I hear from both Austal and Lockheed Martin that the hull design for both variants of the AEGIS version is heavily modified, although no details are ever offered to explain exactly what about the hulls are heavily modified. The choice of DDG-51s instead of LCS would be a significant change, because it implies a much smaller purchase of naval vessels from the US than the 8-12 often cited for the AEGIS version of the LCS. The Defense News article mentions a potential mix that includes 2 DDG-51 Flight IIAs w/ BMD.

From an industrial perspective, this would allow the US Navy to build 2 destroyers per year - one at each yard over the next several years - as the Navy moves toward the DDG-51 Flight III, which is having other issues we'll discuss later.

The trade-offs here would apparently be quantity vs quality, as crew sizes and cost would ultimately run about the same. There will be other issues though, political concerns like selling top tier military equipment to Saudi Arabia. The sale would also ignore how survivability isn't so much a technical issue - rather a crewing issue in most cases - meaning the big Burkes are not likely to be more survivable with Saudi crews than the LCS AEGIS ships would be, not unless Saudi Navy crews have become a lot better in the last few years.

The Saudi Navy surface warship deal is reportedly worth between $20-$25 billion, depending upon your source. Keep in mind a lot of that money is for infrastructure. Also worth noting a high-low BMD mix that uses the new DDG-51 Flight IIAs and smaller AEGIS LCS 'shooters' fits a distributed CEC model for BMD often discussed for the way the Navy should do BMD in the future. Under that model, there are radars of various types, both on ships and on shore, for tracking/targeting data that gets fed forward in the network of smaller vessel "shooters" which in this scenario would be the little LCS AEGIS ships. While those smaller AEGIS LCS with the SPY-F radar could not independently track and kill ballistic missiles, leveraging the data from the network and with the AEGIS combat system, those ships act as forward missile launchers with VLS. A similar model was once promoted as a way to field a high end AMDR from a modern ship hull like DDG-1000, before it was decided a smaller AMDR would be fielded on every DDG-51 Flight III destroyer.

There is another possibility... some of the Flight I Burkes are in very poor condition, and it could be the US sells those to Saudi Arabia for much less and the money is used to repair/refit those ships. Most, if not all, of those older Flight I Burkes are BMD capable.

Interesting stuff, but the Saudi's do not appear to be in a hurry to buy their new warships, so it is unclear if any of this will ever happen.

Saudi Arabia Seeks Quote for AEGIS LCS

In the wake of current events I've been wondering about the status of previously discussed defense deals with Saudi Arabia, and it does appear Saudi Arabia is still moving forward with their naval buildup.

Saudi Arabia has asked the United States for prices for surface warships with integrated air and missile defenses, helicopters, patrol craft and shore infrastructure, the U.S. Navy said on Friday.

The Navy is preparing a rough cost estimate that would be delivered possibly as soon as May, Navy spokeswoman Captain Cate Mueller told Reuters.

Saudi Arabia is the biggest U.S. arms buyer and is expected to remain so despite political upheaval in the Middle East.

The request for medium surface combat ships and the rest of the hardware was received by the Navy in July through the Saudi Ministry of Defense and Aviation, Mueller said.

Earlier on Friday, Lockheed Martin Corp executives said the first phase of the so-called Saudi Naval Expansion Program-II could be worth $20 billion, attributing the estimate to U.S. Navy officials. The company would likely vie for any such orders.

It is unclear how current events not named Iran taking place in the Middle East are impacting this deal, but the project has been in the works for several years. Saudi Arabia has spent a great deal of money over the last several years on tanks, helicopters, aircraft, and numerous other weapons - but the expected spending on naval power never came.

It is expected there will be two phases to the naval purchases. The first is for a corvette or small frigate that has long suspected of being one of the Littoral Combat Ship hulls. It is almost a certainty that Lockheed Martin will win the competition over Austal, simply because Lockheed Martin has a long standing working relationship with Saudi Arabia. The decision will not reflect a genuine relative comparison of the two multi-mission platforms competed.

What I'll be waiting to see is to what extent Saudi Arabia attempts to integrate air and missile defense of their new ships with land based air and missile defense assets. It has long been suggested Saudi Arabia is looking to purchase 12 ships, which has me wondering what other services are being looked at to meet the $20 billion total.

It is also important to remember, there are two phases to Saudi Arabia's naval buildup. The corvette - small frigate piece is part one. Saudi Arabia is also in the market for conventional submarines.

It would be very easy to get caught up in the military nature of the contract, but a 12 ship export deal for the United States to Saudi Arabia would be one of the largest export contracts for manufacturing and the shipbuilding industrial sector of the United States in several decades. If and when this contract goes through, expect a lot of political reaction because quite frankly, it will be a very big deal.

Middle East Naval Blockade

The next flash point in the Middle East is starting to heat up. When Saudi Arabia gets to the point they are willing to use military power outside of their own country, the situation must be a lot worse than the daily news suggests. See this YouTube video for a pretty good update on the situation in Yemen.

This is the latest significant development.

Saudi Arabia has imposed a naval blockade along the Red Sea coast of northern Yemen in an attempt to cut off supplies to Houthi fighters along its border with Yemen.

The kingdom's warships were ordered on Tuesday to search any ship suspected of carrying weapons or fighters near the Yemeni coast, a government adviser said, as Riyadh vowed to continue its offensive against the rebels until they pull back from the border area.

Despite a warning by Iran to keep out of Yemen's affairs, Prince Khaled bin Sultan, the Saudi deputy defence minister, pledged to keep up the military offensive against the Houthis on Tuesday, as he visited Saudi troops in the kingdom's southwest Jizan province.

This could be the beginning of the active, open use of military force in the political standoff between Saudi Arabia and Iran that has been simmering for years. I also wonder if this will have any effect on the human smuggling that takes place between Somalia and Yemen?

The continued growth of Islamic militant movements in the Horn of Africa region cannot be ignored in the Afghanistan calculations. It does the US and allies no good to throw resources into Afghanistan if the violence that threatens global economic instability is spilling out into one of the busiest economic highways in the world (Gulf of Aden).

How does the active engagement of Saudi military forces in the south influence the calculations of Israel in dealing with Iran? Also, keep an eye on the Saudi Air Force, the best trained of the Saudi military forces. The level of their engagement is a measuring stick for how serious the situation is from the Saudi Arabian perspective.

LCS-1 Navy Trials and LCS Export

We don't often hear about the Saudi Arabian interest in the Littoral Combat Ship, but Saudi Arabia does want the LCS. Like Israel, Saudi Arabia is looking for a modified version of the LCS. It is unclear exactly what technologies would be made available with a Saudi Arabian version of the Littoral Combat Ship, but rumors abound regarding the requirements. We have heard a mine warfare command station is part of the requirement, and AEGIS is desired. We won't know until the final design, but we do have new information regarding when the decision will be made.

The last few paragraphs of this article give the entire story.

Moosally said he expected Israel to sign a deal for LCS ships sometime next year. Saudi Arabia had also expressed interest, but it appeared to be waiting for the Navy's next contract before finalizing its choice of the LCS design.

Moosally said the Lockheed team was "tweaking" certain features ahead of four days of Navy sea trials in Lake Michigan next week, but no significant issues had arisen during the company-run tests over the past two weeks.

Captain Moosally is president of Lockheed Martin Maritime Systems & Sensors, responsible for delivery of Freedom (LCS-1), and is also responsible for the C4ISR systems on board the first National Security Cutter. Yes, that Capt. Moosally.

Given the impossible task of building the LCS with an immature design and while NVR changes were taking place during construction, we give Capt. Moosally a lot of credit for getting the ship to this point. The US needs to be exporting the LCS, and Lockheed Martin's impending deal with Israel is a good first step. We won't be surprised when General Dynamics wins the Saudi Arabian contract.

The article goes on to complain about the fixed cost cap. We don't think it will matter beyond the next one or two ships, so we don't plan on spending much time thinking about it. At the end of the day, based on everything we have seen, the Navy will build 5 Flight 0 Littoral Combat Ships and do some "tweaking" to the design itself before building the next 50. It will be interesting to see what the Navy 'tweaks,' but considering the high cost and low return for super speed, we may see that requirement get dropped as the ship looks to become more survivable.

You never know, maybe the Navy will come to their senses and build a real frigate. One only hopes...

The Post NIE Strategy Continues to Unfold

From the Russian papers. Russian version here.

Russia’s President Vladimir Putin met with Saudi Foreign Minister Prince Saud Al-Faisal yesterday, February 14, 2008. In Riyadh, they are strongly concerned about the large-scale cooperation of Russia and Iran, particularly the nuclear one.

Saudi Foreign Minister Prince Saud Al-Faisal stayed in Moscow only for a few hours yesterday, and the meeting with President Vladimir Putin took most of his visit. The prince delivered to Putin a personal letter of Saudi Arabia's King Abdullah, who initiated negotiations.

The sources say the letter describes Riyadh’s evaluation of the Middle East situation. But Saud Al-Faisal evidently passed the most vital message by word of mouth. In Saudi Arabia, they are sure that Iran’s policy will shatter the region in future and the helping hand of Moscow is needed to prevent it.

Riyadh elaborated a plan to save the region from the so-called Iranian threat, where it is to play the key role in tandem with Moscow. So, the Saudi guest endeavored to persuade the Kremlin that stronger Iran would disbalance the Middle East. In return to winding up Russia’s-Iranian contracts, Riyadh promised to buy Russia’s weapons at large, replacing Iran as its partner in military and technical field.

Saudi Arabia won’t confine to the military deals. The minister urged Moscow to conclude a big agreement of bilateral cooperation, fueling mutual turnover and investments to $50 billion in the nearest five years.

Interesting times. The thing about Saudi Arabia, they can afford to buy Iran's business partners and put Iran out of business. The Saudi's understand market power means soft power while all that Iranian rhetoric has become the sign of the absence of power.

Saudi Arabia Wants a Littoral Combat Ship Fleet

In July I pointed out that Saudi Arabia was interested in the purchasing the Littoral Combat Ship, specifically the General Dynamics version. Saudi Arabia has been advertising since 2005 that they were interested in purchasing 4-6 Patrol Frigates and 6-8 Corvettes in 2007. 2007 would be year two in a three year massive military purchasing spree, which started with Army and Air Force purchases in 2006 and will conclude in 2008 with athe purchase of new submarines. It was originally thought Saudi Arabia was going to purchase the French FREMM, but it appears the Multi-Mission Combatant (MMC) version of the Littoral Combat Ship (LCS) is getting all the attention lately.

The Saudis are not known for the skill of their military commanders. Their military is among the most spectacularly equipped in the world, which only serves to emphasize the poor quality of its leaders, soldiers, airmen, and sailors. This lack of large scale proficiency is Saudi Arabia's weakness.

That is why with the $20 billion in spending discussed for Saudi Arabia, most of it will ultimately go for training. We are already seeing a lot of this with the purchases so far, if you read the details of the specific purchases for the Saudi Air Force and Army over the last year and a half, you will notice the price is far and above the equipment costs. That is because Saudi Arabia understands that it needs better military training, something our defense industry provides, and is working on that problem.

When you talk about naval vessels, it is noteworthy the MMC version of the Littoral Combat Ship has a crew roughly a third of the Riyadh-class frigate. Not surprising then, in leading up to the purchase of Littoral Combat Ships, it was disclosed that Saudi Arabia is looking for as many as 12 warships and is looking to spend between $11 - $13 billion dollars, which as you might guess, is high for 12 Littoral Combat Ships because it includes training costs.

The coming sales may include Patriot anti-missile battery upgrades for several countries, plus a new class of shore- patrolling warships for Saudi Arabia's eastern fleet, according to retired Air Force Lt. Gen. Jeffrey Kohler, who held talks on the matter before stepping down in August as the Pentagon's top arms-sale official.

The warship piece "of the so-called package could run as high as $11 to $13 billion and take well over a decade before delivery of the last ship" of up to 12 vessels, he said in a telephone interview.

Eastern Fleet. Iran. Iran has risen far enough for both Riyadh and Washington's tastes. With the minimal crew size of the LCS MMC, a well trained crew of sailors would be able to field a formidable force of LCS MMCs to curb Iranian influences at sea in the Persian Gulf. The LCS MMC could be the right tool for Saudi Arabia to push back against Iran in the Gulf, something the US is tired of doing without regional assistance. While it has been reported that Lockheed Martin was pushing the LCS at the Dubai Air Show, the characteristics of the General Dynamics MMC LCS previously discussed for Saudi Arabia.

Principal Characteristics:
LOA: 127.6m
Beam: 31.6m
Draft: 4.4m
Displacement Full Load: 3120MT
Max. Speed (Light Load): >40 knots
Range: Cruise @16 knots: 4,500 nm
Sprint @ 36 knots: 1,500 nm
Mission Bay: 1,100 sqm (11,800 sqft)
Flight Deck: 1,030 sqm (11,100 sqft)
Accommodation: 110 personnel

Armament Options Include:
32 Missile Vertical Launch System
1 57mm Gun (Forward)
8 Harpoon Missiles
2 Close-in Weapons systems
6 ASW Torpedoes

Propulsion and Electrical:
Gas Turbines (2)
Diesels (2)
Waterjets (4) and Retractable Azi Thruster
Diesel Generators (4)

While there is legitimate reasons why the JDAM should be discussed, and perhaps not be given to Saudi Arabia within the context of the current proposed defense sales, the MMC version (either GD or LM) of the Littoral Combat Ship is the most appropriate defense sale the US is making to the region outside of Patriot missiles. The name of the game in the Persian Gulf is security. The MMCs proposed supposedly come not only with AEGIS but additionally a ~1000 sq meter modular command center (which I've heard rumors is intended for MIW), which to me appears absolutely perfect for both the defense and security requirements of the maritime environment of that region.

Lockheed Martin Showcases LCS at Dubai Air Show

According to Defensenews, Lockheed Martin is showcasing its LCS version to the Middle East.

Saudi Arabia is understood to be interested in an LCS ship equipped with the Aegis battle management system, as part of its naval needs. France is keen to sell the Franco-Italian designed FREMM multi-mission frigate to the Saudi Navy.

The two first-of-class LCS vessels being built by Lockheed Martin and Northrop Grumman cost around $400 million per ship, including development. It was too early to talk of the unit price for the LCS, Trice said.

French naval company DCNS estimates the average price of a French FREMM frigate at 280 million euros ($411 million), based on a 17-ship buy for the French Navy.

Northrop Grumman is mentioned because of its management suite, specifically because it is the integrator of the mine warfare system and the LCS hull. Saudi Arabia is looking for 3 small ships that can each act as a surface combatant but additionally act as a mine warfare command ship.

In the past Saudi Arabian interest has been focused on the General Dynamics version of the LCS. As far as I have heard, this is the first mention of Saudi Arabia mentioned to be looking at the Lockheed Martin version of the LCS.

5th Fleet Focus: Contingency Plans

If you follow my Friday Order of Battle posts, you'll notice I don't list submarines outside of US strike groups. For example, when HMS Cornwall (F99) completed its patrol, it looked like the Royal Navy scaled down its presence, but in fact the opposite is true. The Royal Navy replaced HMS Cornwall (F99) with HMS Talent (S92). In my book, a Trafalgar class submarine is a major upgrade over a Type 22 frigate.

In the spirit of increasing capabilities in the region, the Royal Navy has indicated they intend to increase their naval presence in the Middle East and Indian Ocean.

Britain is planning to increase its naval presence in the Persian Gulf by next year, a top British naval commander in the area has revealed.

Deputy Combined Force Commander Royal Navy Commodore Keith Winstanley said Monday that Britain has a range of capabilities deployed at various times in the region ranging between submarines, frigates, and destroyers, and that it plans to increase its naval presence by 2008.

"We will be improving and uplifting that presence next year, so you can expect to see more mine counter-measure vessels in the [Persian] Gulf. We will also put some ships in the Indian Ocean to work with both the Indians and Pakistanis, so they are not all held in this area but they are able to come back to operate as part of the coalition should we require."

This appears to be one of several contingency plans in the works in the Middle East. The Wall Street Journal recently ran an interesting article that discusses some of the other long term plans taking place in the region. While the article is behind their firewall, it was syndicated here.

Now sheikdoms in the United Arab Emirates -- the third-biggest OPECOPEC oil producer -- are looking at projects that would keep oil and commerce flowing if the Strait is blocked. The U.A.E. won't say the projects are a direct response to Iran's threats -- but the plans would clearly help in the event of an emergency.

Many of the plans center on the U.A.E.'s sleepy eastern coast, which is on the open-ocean side of the Hormuz choke point. Abu Dhabi, the key oil producer among the U.A.E.'s seven semi-autonomous enclaves, is planning an oil pipeline to the eastern emirate of Fujayrah, where it can be carried to the sea without passing through the Strait. And a host of other development is being considered for Fujayrah, including a larger port and the world's biggest liquefied-natural-gas storage and trading hub.

In terms of volume, blocking the Strait of Hormuz "is probably the biggest single energy-security risk that exists in the world," says Lawrence Eagles, head of oil markets at the International Energy Agency, the Paris-based energy watchdog for the world's most industrialized nations. "There is a lot of discussion on these issues, and from an energy-security perspective, it would be very welcome to have any opportunity to bypass the Strait of Hormuz."

The devil is in the details. At last count 17 million barrels of crude oil moves through the Strait of Hormuz daily, while the pipeline would only move around 1.5 million barrels per day. Every drop counts, but it is hard to say that 9% recovery is a significant impact, or does it?

Saudi Arabia actually already has pipelines that can bypass the Gulf. Those pipelines can send crude across the country to the Red Sea at an increase over the current rate of 4 million barrels per day. Combined this would represent about 1/3 recovery in a strait blockage scenario, not good, but the difference is the world reserves supplying the loss of Gulf crude for 86 days, or around 114 days. In that regard, it makes a big difference, particularly considering it might take 30 - 45 days just to get heavy salvage ships organized and in position to remove debris from the straits, after a mine clearance operation which could last up to 30 days after hostilities cease. When evaluated in those terms, the extra window means the difference between world supply absorbing the shock, or not.

The implication is Iran, but I actually think the larger threat of a straits shutdown comes from Al Qaeda than Iran. The region has decided to prepare for all contingencies, and in late October the US Navy, Royal Navy, and French Navy intend to exercise with Bahrain and Kuwait near Bahrain. Iran doesn't appear to be very happy about it.

Iran's official news agency IRNA quoted an unnamed foreign ministry official as describing the military manoeuvres as dangerous and suspicious.

Reports say the US is to hold naval exercises at the end of October with Bahrain, Kuwait, France and Britain.

Reports say the US-led naval exercises based near Bahrain will practise intercepting and searching ships carrying weapons of mass destruction and missiles.

The French participation in the region is a good thing. For the most part, France stays in the Arabian Sea and is a constant (and welcome) presence, in fact one could say France has become the anchor of operations off the Horn of Africa. I'm not sure what to make of the Sarkozy speech yet, I haven't had a chance to read the original (Francois care to comment?), but if you pile on Germany's increased naval focus in the Eastern Med (UNIFIL) and around Africa, France's increased rhetoric in Middle Eastern affairs, including Iraq, and something resembling a regional cooperation between the Gulf States and Saudi Arabia emerging... It does appear (on the surface anyway) that not only are we seeing an emerging international cooperation regionally, we are seeing increased presence from the major European maritime powers. It will be interesting to see if any of this makes a difference in political progress regarding the PA situation. Probably not, but shared regional interest is something that can be built on.

Finally, a word on the President Ahmadinejad and President Bush comments. The comments come off as tit and tat, but I don't see them that way. Bush honestly believes that leaving Iraq is going to lead to a disaster in the Middle East. I think the potential is there, although I would debate that there is a difference between a reduction in troops and leaving completely, but I'll wait to see the Petraeus plan before advocating any advice of my own. Ahmadinejad on the other hand isn't talking to the US with his comments, his comments appear to be directed at Saudi Arabia.

I get the impression Iran believes the US is leaving, and when we do Iran believes there is going to be competition between Iran and Saudi Arabia to fill that vacuum. I'll quote my example:

"I can tell you there will be a power vacuum in the region. We are ready with other regional countries, such as Saudi Arabia, and the people of Iraq to fill this vacuum."

Taken in context with the rest of the speech, to me this looks like a clear threat to Saudi Arabia. There will no doubt be many Americans who think Ahmadinejad is talking to us, but I'm starting to think Iran is convinced we are on our way out, meaning they are already looking beyond us. I imagine most in Congress won't want to hear that, and will ignore the implications. Congress may ignore it, but the Saudi's won't, so it's a good bet they are developing a contingency plan, which could ultimately make what Bush said more meaningful.

5th Fleet Focus: Early Middle East Arms Sales - Updated

The early announcements for the Middle East Arms sales have been announced. They prove so far exactly what has been predicted, the Diplomatic Surge is about reducing the US footprint in the region, bringing GCC states into the established international security frameworks, and encouraging regional security that includes Iraq and the PA issue.

On the Israeli front their first batch of military orders include Jet Fuel, air to air missiles, and Harpoons missiles. In relation to the defense sales for every regional nation, this is the least threatening purchase in the region this year. Egypt for its part has elected to go with tanks first. I'm not really sure what to make of that to be honest.

For me though, the most interesting response yet is the Saudi announcement today. Robot Economist predicted this when he pointed out that defense services was the primary focus of the bulk of any defense deal between the US and Saudi Arabia in the past. Todays news, no doubt highlighted by a problem I originally pointed out, begins to tell the Saudi defense sales story.

The plan to set up a force that will eventually number 35,000 to guard oil and other installations was announced in July by the country's interior minister, Prince Nayef bin Abdul Aziz. The Middle East Economic Survey (Mees) reported: "The scale of the latest security initiative is immense and several years are likely to elapse until the new force is fully capable." The total cost was likely to reach $5bn (£2.48bn), it said.

According to Mees, recruits are being trained in the use of laser security and satellite imaging surveillance equipment, countermeasures and crisis management under a programme managed by Lockheed Martin. Members of the force are being heavily vetted and largely recruited from outside the Saudi security forces. The protection of oil facilities is currently the responsibility of a 15,000-strong force run by Aramco, the state oil corporation.

Saudi Arabia has seen several attacks on its infrastructure, but none has so far disrupted the flow of oil. In February 2006, al-Qaida attacked the Abqaiq oil facilities in Eastern Province, which supplies almost 10% of the world's oil. The attack did not stop exports, but pushed up oil prices by $2 a barrel.

A lot was made of JDAMs, and a Saudi offer for the LCS is coming, but when you add up the costs of what they will buy from the US this year, the vast majority of it will be training. Considering the strategic value of Middle Eastern energy, all efforts towards security is a good thing. I'm not a big fan of the Saudi government, and even less impressed with the quality of their military, but I will acknowledge that any increase in the military capability of Saudi Arabia at this time is a good thing for global economics, and certainly serves the interest of the US if we can reduce our footprint in the region.

Update: First media article to mention the LCS for Saudi Arabia came out today, not sure why it took them so long. Unlike the original reports, it appears the deal is mostly about the LCS, with a limited JDAM purchase as was said on this blog. Going by the 12 billion figure it appears AEGIS may still in the plans.

5th Fleet Focus: The Diplomatic Surge

UNIDENTIFIED REPORTER QUESTION: So there's no, sort of, quid pro quo regarding Iraq support. These countries could get tremendous amount of U.S. military equipment but still not be supportive or even be the opposite with regard to Iraq?

UNDER SECRETARY BURNS: There are no formal quid pro quos at all behind this, but it stands to reason that given the fact that Iraq is the number-one American foreign policy interest globally, we would want our friends in the region to be supportive, not only of what the United States is doing in Iraq, but what the -- but of the Iraqi Government itself. And we've made that point, obviously, repeatedly to these countries and we'll -- that will continue to be a major emphasis on our part.

Q&A; from U.S. Aid and Military Support to the Middle East Region
R. Nicholas Burns Press Briefing
Under Secretary of State for Political Affairs
Washington, DC
July 30, 2024

Call me naive, but I do believe Mr. Burns, and I also believe that the timing is important. This is the best strategic policy for the region for the United States of America given the options currently available. The United States can either demand regional players participation to the growing regional problems, or we can convince them that their best chance is to join us by choice. In my opinion the policy Burns is laying out, giving regional nations the choice, has a lower cost and is a lot less complex than the alternative of making demands of regional players. The media is asking for the US to make demands, but that is a difficult strategy that can be summarized as the "Obama Option."

Patience with the GCC and other nations the US needs assistance from in the region like Saudi Arabia and Pakistan is starting to pay off. Tensions between the GCC and Iran have risen considerably in the last month, and Saudi Arabia is now facing a real possibility of US withdrawal from Iraq. While many of my conservative friends hate how Democrats call for withdrawal, the Democrat rhetoric is actually helping apply some political pressure to the region although I doubt that is the Democrats intention.

We all know where we have been in terms of the Middle East over the last 4+ years, but consider where we are in the region today and the effect it has on Iraq, Afghanistan, and Iran.

For Afghanistan, India and the US continue to build a relationship while Pakistan is now leading CTF-150. These two events taken together point to an emerging regional cooperation while at the same time put two rivals in the region invested in the shared interest of security. People say India isn't in the mix, but they are, and it starts with the Iranian pipeline to India which appears stalled despite comments otherwise.

For Iraq, Saudi Arabia can no longer ignore the challenges facing the United States, it continues to lose considerable prestige with the US for its OPEC driven intentional reduced oil output policy, its lack of obvious support for the US in Iraq, and its populations associations with the global war on terror. These points of contention with the United States are not timely for Saudi Arabia, as the Saudi's have now found themselves as the regional counterweight to Iran's growing influence in both the Persian Gulf and on the issue of Israel. This month Saudi Arabia will have dropped to #5 in oil exports to the United States, behind Canada, Mexico, Venezuela, and a Nigeria that is at about half production. Saudi Arabia finds itself for the first time in decades as needing the US security blanket at least as much as the US needs Saudi Arabia's energy resources.

The rest of the Gulf Cooperation Council (GCC) is also having problems. Iranian influence and intimidation of Oman, Qatar, UAE, and in particular Bahrain has reached a fever pitch in Gulf, and Arab media editorials are lashing out against Iran's imperialistic ambitions. The tension between Bahrain and Iran over the last month alone has probably been more beneficial for US strategic policy with the GCC than any other single event in the Middle East since 9-11, including Iraq.

Review the link if you are scratching your head.

Without making demands, the US is making progress in the Diplomatic Surge. The Diplomatic Surge starts by reducing forces in the region, which the US did this week by reducing the number of aircraft carriers to one. It includes bringing GCC states into the established international security frameworks, for example having Bahrain join TF-152, a huge victory for the US in the Diplomatic Surge. Saudi Arabia moving with other Arab states with Israel on the PA issue is part of the plan as well. The key though, is to convince Saudi Arabia to engage, and sustain a role in supporting US policy in Iraq to promote regional security. On all these fronts, the Diplomatic surge is working.

Did Burns lie, is there a quid pro quos? Are the arms deals really a down payment for more regional cooperation with the United States, or have the stakes in the region changed? The arms deals are part of the Diplomatic Surge. To ask regional partners to share regional security responsibility, the US will have to empower those partners with the tools required to rise to the occasion. The sale of the Littoral Combat Ship is hardly the problem, anyone who feels that is more than a defensive weapon misunderstands its capabilities, but the JDAM has raised concerns. However, the JDAM is an important weapon, but we are not talking about F-22s to Japan here, the scale is much smaller.

The strategic and political environment in the Middle East is beginning to bring US and Western interests in line with regional partners, and the Diplomatic Surge is designed to build cooperation regionally regarding security similar to how the military surge in Iraq is designed to build cooperation locally regarding security. The US has an opportunity to position itself with a unified GCC in preparation for the coming challenges. To miss this opportunity because of domestic politics would be disastrous to regional US national interests, waste a moment of opportunity when the US has leverage, and leave the US with more expensive, more complex "Oboma Options."

US - Saudi Arabia Offer: It Is About Protecting Strategic Interests

This offer of 20 billion in arms for Saudi Arabia has taken a life of its own. Consider a few reactions. Lex sees a new cold war, which is echoed by Defense Tech. I tend to agree, but the cold war scenario in the Middle Easts exists without the deal offer, and existed before 2003 with Iraq and Iran as the major players. The question facing the US today is whether the US throws our weight into this cold war balance between Iran and Saudi Arabia, or do we ignore it. Russia is engaged in this new cold war on the side of Iran, with this reality, how then is it not the strategic interest of the US to not help our allies in the region?

Noah Shachtman frames the deal off as something contrary to the strategic interests of the United States. John Edwards appears to be the most ignorant of everyone regarding the deal, which is amazing considering this guy was almost the vice president of the US. He is calling on Congress to block the deal because Saudi Arabia will get advanced weaponry. Hello? They either get it from us or France John, read your memos.

What really bothers me about this debate is what isn't being said. Did you know that on March 21st, 2007 the Boston Globe reported this deal was in the works? According to the Globe, the State Dept. held classified briefings with the foreign relations committees of both houses. Read the article, the State Dept. is behind these deals, not the DoD.

Did you know Stratfor ran an article on this on March 22nd, 2007 about this deal? You won't believe where I found it available free online, no other than the Bilateral US-Arab Chamber of Commerce. Ironic, I know.

Another thing you will not find in any news reporting on this subject is the offer the US is making is competitive, the option is either the US safeguarding the Persian Gulf by living up to its defense commitments to the region, or letting France do it.

Either way, Saudi Arabia intends to buy weapons, the question is whether they buy from us or France.

5th Fleet Focus: Saudi Arabia and the Defense Industry

With the US taking its wallet to the Middle East this week and setting up defense agreements across the region, and considering the private feedback from yesterdays post, maybe its time to take a closer look at Saudi Arabia and the defense industry. Specifically, lets look at the current 3 year military purchase plan which is about to enter the 2nd year.

Saudi Arabia has been actively upgrading their military since 2005, and the result was an enormous spending spree last year pretty much across the board. Saudi Arabia is gearing up for year 2 of that spending spree, and will complete the massive series of orders next year. Lets review.

First came the Typhoon (Eurofighter) MoU in December 2005. Ultimately, the deal was for 72 Eurofighters (still pending).

The UK government confirmed Friday that it has agreed a deal reportedly worth up to Pnds 10 billion (Dlrs 19bn) to sell Eurofighter Typhoon aircraft to Saudi Arabia.

The Ministry of Defence (MoD) said that it had signed an "understanding document" with the Saudi government "intended to establish a greater partnership in modernizing the Saudi Arabian armed forces."

"The required commercial principles have now been agreed which has initiated the purchase of Typhoon aircraft and the associated commitment to the industrial plan to be launched," the MoD said in a statement without giving any further details.

Then came the LAV.

Saudi Arabia has requested 724 Light Armored Vehicles (LAV) in a number of different variants, plus weapons, night-vision equipment, communications gear et. al. to modernize the Saudi Arabian National Guard (SANG). The total value, if all options are exercised, could be as high as $5.8 billion.

Then came 24 UH-60L Blackhawks.

The Government of Saudi Arabia has requested a possible sale of 24 UH-60L Utility/Assault Black Hawk helicopters, spare and repair parts, communications and support equipment, publications and technical data, personnel training and training equipment, contractor engineering and technical support services and other related elements of logistics support.

Next Saudi Arabia turned to France and went on a buying spree.

Defense-Aerospace.com has more specific details regarding the estimated EUR 6.9 billion/ $8.8 billion helicopter deal, however, which could involve as many as 132 aircraft of various types. These reportedly include:

64 NH Industries (EADS/ AugustaWestland) NH90s. 10 would be naval helicopters, with the other 54 being the TTH troop transport version (42 Royal Saudi Army, 12 National Guard).

12 EADS Eurocopter Tiger attack helicopters. Version not specified, but likely to be similar to the Spanish/French Tiger HAD which addresses some of the shortcomings of earlier versions.

20 EADS Eurocopter AS 532-A2 Cougar CSAR helicopters. The Cougar is the Eurocopter upgrade/successor to the Aerospatiale Super Puma, which is now used to designate the AS 332 civilian aircraft. The AS 532-A2 is a specially-developed combat search and rescue (CSAR) version.

32 EADS Eurocopter AS 550 Fennec light helicopters. Defense-Aerospace.com estimates this deal at EUR 300 million ($381 million at current conversion).

4 EADS Eurocopter AS 565 Panther naval CSAR helicopters. Note that the Panther is not connected to the larger Super Puma family; it is an AS 365 Dauphin derivative that uses more composites to improve stealth and corrosion resistance, and has upgraded systems.

Main Saudi Arms Procurement Projects
(Source: defense-aerospace.com)
(Click chart below to enlarge)

In year one of their 3 year defense upgrade plan Saudi Arabia also made inquiries or purchases regarding upgrades (including US stuff) to their M1A1s, Apaches, F-15S, tankers (remember the Airbus/Boeing fiasco in Feb.?), Patriots, Light Artillery, a potential purchase of Rafale's, Tornado upgrades, M2 Bradleys, and HMMWVs.

The plan was laid out and has been followed almost exactly as it was laid out. The upgrade to the F-15s for example includes new engines that were originally proposed in November of last year, as well as the JDAM (which still has to get through Congress). When the NYTs article said new ships, I knew it had to be the MMC GD LCS which has been specifically discussed, in fact the details have gone so far as to include a mine warfare command center and UUVs for mine warfare, thus why I mention virtually no module space even though the fact sheet says otherwise.

The LCS isn't a foregone conclusion though. If Saudi Arabia continues to follow the plan laid out last year, the plan this year will potentially include 48 Rafale's (although Russia and the US may try to get in on that bid), 4 frigates which I assume the LCS is being offered for, although in the past FREMM has been specifically mentioned, and 6-8 patrol corvettes which DCN (Fr) has had its eye on, but may also be competitively sought by other players.

If you think all this is interesting, wait until 2008, when Saudi Arabia is expected to buy 6-8 submarines, an order I know DCN is hoping to get, although after the unfavorable German reaction to the upcoming US announcement on military offerings, might include U-214s.

Why does all this military sales stuff matter?

Because there is a huge unspoken geopolitical angle here the US is moving on, and the military sales to Saudi Arabia and other regional players has more to do with Oil than Iraq. There is going to be a lot of debate in Congress on this subject, and it could well expand beyond simple military sales. While it may look like sales of some bombs, boats, and planes and have the look and feel of an arms race, I have a different take. It looks to me a lot like what the US did in 1971 with rising gas prices. In my opinion, this is a preemptive economic strike on the Middle East players, rooted in history and intended to remind the region what it means to be a superpower.

US Offers AEGIS, JDAM, and Upgrades to Saudi Arabia - UPDATED

According to the New York Times, the Bush administration will make a large offer a large arms deal to Saudi Arabia this week when Gates and Rice tour the region. This has been in the works awhile, first reported in December of 2005 when Saudi Arabia expressed interest in the LCS, and then again in September of 2006 when the Saudi's apparently decided the General Dynamics option was what they were looking for.

LCS interest to date has mostly been from Saudi Arabia and Israel, although there are others. Many are watching both the LCS and FREMM programs to weigh the differences and capabilities before choosing a small combatant.

The Arms deal offer in regards to Saudi Arabia appears to be related to the US stepping up its larger strategy in the region. From the NYT article:

The proposed package of advanced weaponry for Saudi Arabia, which includes advanced satellite-guided bombs, upgrades to its fighters and new naval vessels, has made Israel and some of its supporters in Congress nervous. Senior officials who described the package on Friday said they believed that the administration had resolved those concerns, in part by promising Israel $30.4 billion in military aid over the next decade, a significant increase over what Israel has received in the past 10 years.

After the NYT article, the US did offer a 30 billion dollar defense aid package for Israel over the next 10 years, a 25% increase. It is noteworthy the US-Israel deal appears done, while the US is only offering this option to Saudi Arabia.

The deal with Saudi Arabia would include upgrades for their existing F-15 fleet, adds the JDAM to their arsenal (something Israel wasn't happy about until they got more money), and if what I am hearing is true, offers an AEGIS version of the General Dynamics Multi-Mission Combatant (GDMMC) to Saudi Arabia. The defensenews article linked above is close, but the actual LCS version being offered is slightly better than the one listed back in 2006. The GDMMC fact sheet describes the platform as:

The General Dynamics Multi-Mission Combatant (GDMMC) is a flexible, shallow-draft, high-speed ship capable of conducting all simultaneous missions required by today’s global naval forces.

Principal Characteristics:
LOA: 127.6m
Beam: 31.6m
Draft: 4.4m
Displacement Full Load: 3120MT
Max. Speed (Light Load): >40 knots
Range: Cruise @16 knots: 4,500 nm
Sprint @ 36 knots: 1,500 nm
Mission Bay: 1,100 sqm (11,800 sqft)
Flight Deck: 1,030 sqm (11,100 sqft)
Accommodation: 110 personnel

Armament Options Include:
32 Missile Vertical Launch System
1 57mm Gun (Forward)
8 Harpoon Missiles
2 Close-in Weapons systems
6 ASW Torpedoes

Propulsion and Electrical:
Gas Turbines (2)
Diesels (2)
Waterjets (4) and Retractable Azi Thruster
Diesel Generators (4)

I have inquired to several shipbuilders asking if in fact this GDMMC version would support AEGIS and maintain the listed capabilities, and to a man each response has been yes. They point out the GD LCS is built on the fast ferry design, and catamaran's inherently have a greater potential for payload than the LM LCS version ever did. With the weight of the SPY-1F and the trade for module space for much better weapon systems, the GDMMC comes in around 400 tons heavier at top displacement, is claimed to have considerably less mission module space, is claimed to be a lot more difficult to handle in high sea states (in relation to the USN LCS version), and has a lower top speed than the US Navy LCS-2 / LCS-4 design.

H/T Springboard


Update: Inserted the word "claimed" and added some detail in the last paragraph. MattReloaded of Warships1 forum asked where i got these figures, and admittedly since I am not an engineer, I made inquiries to determine the differences between the USN LCS and MMC LCS which I used in this post.