BAE Systems in the middle of a dogfight between the Saudis and Biden over oil | BAE systems



The UK has long had a delicate relationship with Saudi Arabia, but that unholy alliance now faces a severe test. After Joe Biden reacted angrily to OPEC+’s decision to cut oil production, workers at BAE Systems’ fighter jet factory in Warton, on the banks of the Ribble in Lancashire, will have a eye on the fallout from the oil cartel’s decision.

The US president had hoped to persuade the world’s biggest oil producer to increase production to bring down oil prices, which have fueled soaring inflation and fears of a global recession. Biden had had a relationship with Saudi Arabia’s de facto leader, Mohammed bin Salman, pictured by a punch in jeddah in July. But despite all that, Prince Mohammed defied Biden, with OPEC+ opting for a production cut, a move seen as siding with cartel member Russia helping to prop up its arms revenue.

Biden, who previously vowed to make Saudi Arabia a pariah state following the 2018 murder of dissident journalist Jamal Khashoggi in 2018, has threatened ‘consequences’ and US Democrats have suggested a one-year freeze on all arms sales.

The row leaves Britain’s arms industry on increasingly shaky ground. This industry, of which the warship-jet company BAE is the largest company, has long turned a blind eye to Saudi Arabia and its human rights abuses. Despite Khashoggi’s murder, BAE continued to operate there, with a small army of around 5,300 workers embedded in the country.

Even after being criticized for supplying the Saudi army during the deadly bombing campaign in Yemen, in which Lancashire-built Eurofighter Typhoons were involved in a campaign that killed thousands of civilians, he remains deeply rooted.

The country is by far the biggest destination for BAE’s global sales outside its main US and UK markets, generating £2.5bn last year. It accounts for 12% of BAE’s global sales, behind the US with 43% and the UK with 20%.

This relationship spans more than half a century, from a deal to supply Lightning and Strikemaster aircraft in the 1960s to al-Yamamah’s arms-for-oil deal of 1985, which was embroiled in corruption allegations.

Today, the company provides support and training for Royal Saudi Air Force systems and equipment and works with the country’s navy. Its efforts are largely focused on supporting Typhoon jets and upgrades to existing Tornado aircraft. The kingdom also recently took delivery of 22 Hawk planes from BAE, advanced single-engine trainers originally designed in the 1970s. The company is even involved in the development of a new laboratory to train engineers and mathematicians to Majmaah University.

A bigger prize could be in sight. A softening of Germany’s tough stance against exporting to Saudi Arabia has sparked talks of various global arms deals. Earlier this month, French media reported that Britain was closing in on a deal to sell between 48 and 72 BAE Typhoons to the Saudis, four years after the signature of a memorandum of intent between nations.

Such a deal could keep its Warton Motoring plant for five years. It would represent a bang for a site whose aviation roots date back to the brink of World War II, when the Air Ministry ordered the construction of three runways at the site, which later became an army base. of the American Air Force in 1942.

BAE, which employs around 10,000 workers in Warton and nearby Samlesbury, has suffered a grim rebound following the war in Ukraine. BAE shares are up almost 50% this year, valuing the company at £25bn.

But if relations between Saudi Arabia and the United States completely collapse, it could be the trigger for Western nations to assess their position. Large Saudi investments in Britain could be reviewed, including high-profile co-ownership of Newcastle United, as well as stakes in luxury carmaker Aston Martin and Phoenix Group, the country’s biggest pensions provider.

The UK – and BAE – could be forced to choose a side. With the US providing the bulk of BAE’s business and nuclear deterrence cementing this relationship, Britain will always go with Uncle Sam if forced to choose.

However, defense analyst Francis Tusa says, “BAE is very federated. There are no British voices to be heard in BAE Inc in the United States. Even if Biden’s feud with Saudi Arabia escalates, BAE should be immune to that and could even take over the work American companies normally do for Saudi Arabia. Whether [Liz] Truss bowed to American pressure to cut off Saudi Arabia, the French would intervene the very next day.

The UK may not be able to look away any longer.

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