A guide to the Gulf arms bazaar maze

By Michael Georgy, Reuter. 16 February 1997

ABU DHABI, Feb 16 (Reuter)—When Olivier Hugla and his colleagues dined in the palaces and villas of sheikhs and military officers in Abu Dhabi, they glimpsed how lucrative weapons deals are made in this secretive land of fabulous oil wealth. The men and women sat in separate rooms to feast on generous portions of rice with lamb or fish. Conversations on everything from the latest tanks to religion often pressed through the night as servants offered sweet tea and bitter coffee. But the dinners were more than traditional Gulf Arab hospitality, as Hugla and his associates at French arms- maker Giat Industries discovered. They were one turn in a sensitive negotiation maze that can lead either to billions of dollars in weapons sales or bitter disappointment after long years of delicate talks. At first I thought it was just hospitality but eventually I learned it was more than that. Here they test you for a long time. You have to be at their disposal at all times, said Hugla, sitting in a spacious 20th-storey office overlooking the turquoise waters of the Gulf. A few feet away in the reception area, toy tanks camouflaged for desert warfare remind visitors of the $3.62 billion deal Giat struck in 1993 to supply the United Arab Emirates with 463 Leclerc battle tanks. Without these types of friendships you will only get small deals. But we need them more than they need us, Hugla added.

ARMS-MAKERS FLOCK TO ABU DHABI

A few years ago, word spread in the global arms bazaar that Abu Dhabi was in the market for high-tech hardware and the big weapons-makers set their sights on this sleepy desert capital. Big names like state-owned Giat, Lockheed Martin Corp (LMT.N) and France's Dassault Aviation (AVMD.PA)have set up shop in gleaming skyscrapers, lobbying for their products as the best deterrent against Iran, feared as a non-Arab nemesis capable of delivering military firepower from just across the Gulf. While companies practise sales pitches, their governments also engage in fierce competition, sending defence ministers and officials here to shake the right hands and pledge protection. The biggest challenge is trying to figure out how decisions are actually made, said a Western diplomat. People have no idea what's going on. There is no market intelligence and everything is kept hush- hush. In practice, the man with the key to big deals is Sheikh Mohammad bin Zaid al-Nahayan—armed forces chief of staff, son of President Sheikh Zaid bin Sultan al-Nahayan, and Abu Dhabi's chief arms procurement officer. Described as a shrewd and well-respected player who drives a very hard bargain, Sheikh Mohammad draws up Abu Dhabi's military shopping list and travels the globe to meet Western officials and diplomats. As companies try to gain access to the men of influence, they are approached by middlemen -- from smooth-talking Lebanese to aggressive Americans to UAE nationals. The UAE is trying to wipe out any corrupting influences, said a Western defence source. Any company that goes through an agent or gets involved with commissions has to pay a penalty. That is the policy of the General Headquarters. The General Headquarters, a sprawling sand-coloured complex on the edge of Abu Dhabi, is determined to keep a clean house, officials and industry executives say.

$6 BILLION PLANE DEAL ON HORIZON

But the industry executives and diplomats say that clamping down on kickbacks in the lower levels of the decision process could be a daunting task. Next month, the UAE will hold its International Defence Exhibition and Conference, attracting hundreds of companies that will display their state-of-the-art firepower, amid expectations that lucrative deals will be announced. Market rumours have been spreading for months that Abu Dhabi will award a $6 billion contract to buy 80 warplanes from either Dassault or Lockheed Martin, the remaining bidders. The United States is banking on lingering pro-American sentiment from its leading role in the Gulf War to steer all or most of the package towards Lockheed Martin. But, as a Gulf Arab military official pointed out, there is always the potential for surprise. You never know. A decision could be made by one man and another one higher up suddenly changes it. It is a difficult market to understand, he said.