Storm clouds gather over Qatar’s $7 billion Typhoon deal

If Qatar fails to pay up, responsibility for settling the bill with British Aerospace will fall on the Treasury — which means British taxpayers. (Defense Ministry of Qatar)
Updated 07 September 2018
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Storm clouds gather over Qatar’s $7 billion Typhoon deal

  • The concept of the government underwriting a contract such as the Typhoon deal with Qatar was not unusual
  • ‘This is an example of the cozy and compromising relationship between arms companies and government’

LONDON: Qatar could saddle British taxpayers with a bill for billions of pounds by defaulting on payments for military equipment ordered from the UK.
According to one expert, while it was not unusual for buyers to miss payments for various reasons, it was hardly likely to be necessary for Qatar, one of the wealthiest countries in the world.
Jeremy Binnie, Middle East specialist on the publication Jane’s Defense Weekly, questioned whether Qatar needed the 24 Typhoon supersonic fighter jets it has ordered from British Aerospace as part of a £6 billion ($7.7 billion) package, including weapons, pilot training and maintenance.
“The Qataris are also buying from the French and the Americans. Do they need three types of fighter jets? The Ministry of Defense dismisses the suggestion that they don’t,” he said.
Andrew Smith, of the Campaign Against Arms Trade, said the concept of the government underwriting a contract such as the Typhoon deal with Qatar was not unusual.
“But the fact that Qatar has already defaulted has obviously set off alarm bells in the Treasury and calls the entire deal into question,” he said.
“This is an example of the cozy and compromising relationship between arms companies and government. It is risking billions of pounds in order to support military sales to a repressive and authoritarian regime at a time of severe regional tensions.
“The risk is made even greater by the Qatari government’s disregard and the complete lack of transparency in its military spending, on which zero information is publicly available.
“The sale of these fighter jets is totally irresponsible and so is this deal,” he said.
A deal to sell the jets — the biggest export contract in a decade for Typhoon fighters — to Qatar was struck last December during a visit by the UK Defense Secretary, Gavin Williamson, to Doha.
By underwriting the deal through UK Export Finance (UKEF), the government’s credit agency, the UK Treasury guaranteed that Britain’s defense industry and its employees would not lose out financially if the buyer failed to honor the contract.
However, under the arrangement, if Qatar fails to pay up, responsibility for settling the bill with British Aerospace will fall on the Treasury — which means British taxpayers.
Doha does not appear to have shown any concern either for taxpayers or for the thousands of jobs potentially at risk at the British Aerospace plant in northwest England, where the Typhoons will be built.
Leaked documents from the Treasury show that the Qataris wanted Britain to finance most of the cost of the deal and also use British guarantees to reduce interest payments.
The documents describe the arrangement as “unprecedented” and indicate there is concern over whether Qatar can meet its obligations.
“The transaction amounts to an unprecedented level of support from UKEF to one buyer, skewing the UKEF portfolio by concentrating about 25 percent of their portfolio risk in one transaction,” the Treasury memo said.
Qatar has already missed the July deadline for the first instalment. Embarrassingly, this was revealed just after the emir of Qatar’s visit to London.
The situation is not especially unusual, said Binnie, since such deals are sometimes announced before all the financing is in place.
That appears to be the case with Qatar, which was still trying to arrange $4 billion of financing in July. According to British Aerospace, the new deadline for the first payment is now the end of September.


Cyprus, Egypt sign accord for Mediterranean gas pipeline

Updated 23 min 18 sec ago
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Cyprus, Egypt sign accord for Mediterranean gas pipeline

NICOSIA: Cyprus and Egypt on Wednesday signed an agreement paving the way for the Mediterranean’s first subsea pipeline to carry Cypriot natural gas to the Arab country for re-export to Europe.
“Today’s signing is an important milestone, not only for Cyprus but also the entire eastern Mediterranean region,” said Energy Minister George Lakkotrypis after he signed alongside visiting Egyptian Oil Minister Tarek el-Molla.
He said the agreement, “the first of its kind in our shared region,” was crucial for channelling gas from the island’s “Aphrodite” offshore field to Egypt and to attract multi-billion-dollar infrastructure investments.
A joint committee would be set up in 30 days to oversee the project.
Texas-based Noble Energy in 2011 made the first discovery off Cyprus in the Aphrodite block estimated to contain 4.5 trillion cubic feet (130 billion cubic feet) of gas but it has yet to be extracted.
The Aphrodite consortium, which also includes Israel’s Delek and Royal Dutch Shell, seeks to renegotiate terms before it taps the gas.
It is currently in talks with the Cypriot government over a bigger share of profits to make the project viable.
The discovery of nearby Egypt’s huge Zohr offshore reservoir in 2015 has stoked interest that Cypriot waters could hold the same riches.
Wednesday’s agreement is backed by the European Union in its search to diversify energy sources.
“We are essentially talking about a European pipeline, intended to transport Cypriot natural gas to Egypt for re-export to Europe in the form of liquified natural gas (LNG),” said Lakkotrypis.
The pace of construction of the pipeline to deliver gas to Egypt would depend on commercial agreements with investors.
Cyprus aims for natural gas to start flowing to Egypt’s LNG facilities in 2022, thus generating its first revenue from natural gas.
The island has also issued exploration licenses to ENI of Italy, the US firm ExxonMobil and France’s Total.