Analysis: European defense contracts

BRUSSELS, June 24 (UPI) -- The European Aeronautic Defense and Space Co. -- EADS -- may lose its U.S. Air Force $35 billion contract to supply 179 air-to-air tankers in a joint bid with Northrup Grumman, following a U.S. Government Accountability Office ruling against it.

The protest that led to the GAO investigation had been filed by Boeing, which felt it hadn't had a fair chance. Last week several mistakes in the calculation of costs in the competition were already admitted by Northrop Grumman.

Both Democratic and Republican congressmen have expressed concern that the EADS-Northrop Grumman deal could cost the American economy scores of thousands of jobs. The KC-45 tankers are to be assembled in the Mobile, Ala., area with parts manufactured in Europe and shipped over from there.

The U.S. Air Force defended its decision, saying it had simply granted the contract to the better bid, but Congress may now force it to reopen the competition as the GAO report recommended that a new competition be staged.

GAO lead counsel Michael Golden said in a statement that Boeing may have been misled during negotiations with the Air Force; that the operating costs of Boeing's KC-767 tanker had been overestimated and that the Air Force's favorable assessment of EADS' KC-45 tanker -- a modified version of the Airbus A330 -- may have been wrong.

The KC-45 is far larger than the KC-767, making it a potentially much more vulnerable target when operating in combat zones. It needs longer runways and uses far more fuel to fly -- a significant consideration given the current record global oil prices and projections that they will climb even higher.

The U.S. Air Force is not required to implement the GAO's recommendations. And the current 110th Congress may not make a decision on whether or not to reopen the competition, deferring that consideration until the 111th Congress assembles in January 2009.

UAE, Libya may buy French Rafale jets.

More than two decades after its creation, the French Dassault Aviation company finally may have found other countries to buy its Rafale fighter jet.

The chief of staff to French President Nicolas Sarkozy said 100 Rafale aircraft may be sold to the United Arab Emirates and Libya. Sarkozy signed a $14.7 billion arms and energy deal with Libyan leader Moammar Gadhafi in December 2007 and made similar agreements during his visit to the Gulf states in January.

The UAE recently said it might replace its old French-built Mirage 2000s with Rafales. There were reports last year that Libya was considering buying 14 Rafales.

Finland, Slovenia launch new Patria bribes probe.

The Finnish and Slovenian governments have agreed to cooperate in a new investigation of the Finnish company Patria, which is accused of having bribed Slovenian officials to win military contracts.

Two years ago, Patria was awarded a contract to supply Slovenia with 135 armored vehicles worth $400 million, the richest contract in Slovenian history. This deal is now being scrutinized and several arrests already have taken place.

The potential scandal could prove embarrassing for the Finnish government, as almost three quarters of Patria is state-owned.

Patria could lose the contract, for which deliveries were slated to start this year and end in 2013, if it is found guilty of bribery charges.