British Defence, Oil Business In Gulf May Be Vulnerable To Syria

September 12, 2013 by  


By Daniel Fineren and Brenda Goh

DUBAI/LONDON, Sept 9 (Reuters) – Britain’s decision not to join a military strike on Syria may have more than a purely political impact: it could over time make it more difficult for British businessmen to win billions of dollars of contracts in the Gulf.

British companies are bidding for several big-ticket deals in the region, including oil concessions and contracts to supply dozens of fighter jets to the United Arab Emirates and Qatar.

Most of the wealthy Gulf oil exporters, particularly Qatar and Saudi Arabia, are supporting – morally, financially and in some cases militarily – the Syrian rebels in their civil war with the government of President Bashar al-Assad.

So Britain’s refusal to get involved in military action could weaken its position in the Gulf as it tries to secure contracts which depend heavily on close political ties and shared strategic interests.

Companies from the United States and France, which are considering a strike against the Syrian government over its alleged use of chemical weapons, may benefit from any setbacks for British firms.

Jonathan Eyal, international director at the Royal United Services Institute in London, said parliament did not seem to have taken this into account in its surprise vote on Aug. 29 against action in Syria.

While legislators were clearly aware of the risk to Britain’s “special relationship” with the United States of their vote, the country’s footprint in the Middle East appeared either to have been taken for granted or undervalued, he said.

“There was no understanding that what was at stake was Britain’s reputation as a major security actor in the Middle East as a whole. What is the point of buying equipment which, after all, is only marginally better than that which is available from the United States, from a country that is unlikely to realise its security commitments?”

COMPETITION

Gulf governments have not commented publicly on the British parliament’s vote, and British officials said they do not expect it to affect commercial ties.

“We have no reason to believe that the UK Parliament’s decision on Syria will impact our trade and investment relationship with Saudi Arabia,” the British embassy in Riyadh said in a statement.

“The UK will continue to play a full role in seeking to bring an end to the conflict and hold the Syrian regime to account for its actions…UK exports to Saudi Arabia grew 26 percent in the first five months of this year and we expect that growth to continue.”

rivately, however, some British officials were jittery about a cooling of Britain’s traditionally warm relationship with the Gulf even before the decision on Syria.

Anger among unelected Gulf rulers over the West’s support for the 2011 Arab Spring uprisings, and British media reports seen as supportive of the Muslim Brotherhood, were blamed by some analysts for British oil major BP’s temporary exclusion last year from the bidding to run Abu Dhabi’s biggest oilfields over the next few decades.

BP was allowed to bid again after British Prime Minister David Cameron flew to Abu Dhabi to promote his country’s energy and weapons companies in November 2012.

But the United States and France have also been flexing their diplomatic muscles to win business in the Gulf; French President Francois Hollande visited Abu Dhabi in January this year. This suggests that for some contracts, the Syria issue could become a factor in decision-making.

Britain’s BAE Systems is competing against France’s Dassault Aviation to sell around 60 planes to the UAE. Qatar is weighing whether to replace its ageing fleet with BAE Eurofighter Typhoons or Dassault Rafales.

BAE has been locked in talks with Saudi Arabia over the sale of 72 Eurofighters since it signed a preliminary deal in 2007; it also hopes to sell fighters to Bahrain. Other fighters competing for Gulf sales include U.S.-based Lockheed Martin’s F-35 and the Gripen from Sweden’s Saab.

A Western aerospace executive in the Gulf noted that many factors were involved in large deals such as the UAE’s fighter purchase, including technology transfers and governments’ desire to diversify their suppliers. But that did not mean Syria would be ignored, he said.

“The UK’s stand on Syria will play into the minds of the decision-makers in Gulf. You could make an argument that this will impact Eurofighter’s chances,” he said, declining to be named because of the political sensitivity of the issue. BAE declined to comment.

STRATEGIC

William Patey, a former British ambassador to Saudi Arabia and Iraq, and now an international affairs adviser at consultancy Control Risks, said he did not expect any immediate impact on British contracts in the Gulf.

“That’s not how it works…I can’t see that the Saudis are suddenly going to say, ‘No we are not going to do this deal on Typhoon because the Brits aren’t attacking Syria,’” he said.

But Patey added that there could be long-term damage if the British parliament’s vote on Syria eventually came to be seen as part of a strategic withdrawal by Britain from action in the region on behalf of its Gulf allies.

British ministers have denied that any such withdrawal is on the cards, but the parliamentary vote showed the matter is not entirely in their hands.

Edward Hunt, a consultant at IHS Jane’s Aerospace and Defence in London, said extended Western military intervention in Syria could eventually start to help Britain’s commercial competitors if British forces sat it out.

“Historically equipment tends to sell better when it’s been proven in combat situations – manufacturers always like to see their aircraft being used, successfully anyway, because that tends to increase sales overseas,” he said.

“If the equipment isn’t used, then competitor equipment – obviously the French and the Americans sell the same sort of equipment as we do – may be favoured in future procurements and competitions.”

BP and Royal Dutch Shell, Britain’s two international energy champions, declined to comment on how political relations between London and the Gulf might affect their interests.

In April, Abu Dhabi National Oil Co (ADNOC) chose Shell ahead of French rival Total to develop the Bab sour gas field in a project that has been valued at around $10 billion. [ID: nL6N0DH31A]

The 30-year deal showcases Shell’s technology for treating potentially deadly gases from Bab and may therefore put it in a strong position to renew its role in the UAE’s largest onshore oil concession, despite growing competition from Asian buyers of the UAE’s oil.

The extent to which the Syria issue could affect this will start to become clear after October, when bids are due from international oil companies seeking to operate the UAE’s onshore fields beyond 2014.

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