Pentagon rules slow defense sales to Iraq

July 27, 2009 at 1:45 PM
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BAGHDAD, July 27 (UPI) -- European and Asian manufacturers could be the beneficiaries in Iraq of rigid Pentagon rules governing the credit rating of governments seeking to buy military equipment.

Russia -- traditionally the largest arms seller to the Saddam Hussein regime -- as well as France and South Korea have been named as likely suppliers if the U.S. government fails to loosen regulations governing the financing of armaments contracts. says sales of U.S. military equipment to Iraq worth billions of dollars are at stake. The option of paying for cash, rather than financing purchases through credit, is barred to the Iraqi government largely because down payments it has already made are tied up in an escrow account with the New York Federal Reserve Bank.

The defense newsletter says these are payments in respect of a $2.1 billion deal for 140 U.S. Abrams tanks and smaller numbers of Tank Recovery Vehicles, Shelter Carriers, Humvees and armored ambulances. These purchases were approved last December by the Defense Security Cooperation Agency, which oversees such sales to Iraq.

A DCSA spokesman said further contracts are being processed for a further 140 Abrams tanks and 400 Strykers -- eight-wheeled all-wheel-drive armored combat vehicles produced by General Dynamics Land Systems. But industry sources quoted by Defense News say Iraq's lack of ready cash and its low credit rating are holding up the deal and could mean Iraq turning to other suppliers.

Alternatives mentioned by Defense Department officials include refurbished Russian T-72 tanks, Soviet-era BMD infantry fighting vehicles, and French and South Korean vehicles. And one army official quoted by says the Iraqis, who have the rights of a sovereign country, "are looking at stuff from many other countries as well.

U.S. army officials says Iraq is paying $200 million for 8,500 refurbished U.S. Humvees, but the defense newsletter names other deals done in the past nine months that could be held up by a lack of finance and Iraq's inadequate credit history.

Last fall DSCA approved a request to buy Humvees, Mine Resistant Ambush Protected vehicles, 400 M1126 infantry carrier vehicles and 400 M2 .50-caliber machine guns.

In December it approved a request to buy 26 Bell helicopters, 26 Rolls Royce engines, 26 .50-cal machine guns and 26 Hellfire guided-missile launchers in a deal worth $366 million.

In January Congress approved the sale of 80 Armored Security Vehicles and 400 Stryker vehicles.

Under Pentagon Foreign Military Sales regulations, Iraq's inability to borrow commercially to finance large arms purchases disqualifies the country from "dependable undertaking" status that would allow it to pay off such purchases over time. The U.S. Army is reportedly moving to reform other procedures that slow down for sales in Iraq.

Daniel Goure, vice president of the Lexington Institute, a Virginia think tank, said, "If at the same time we leave Iraq we are heading toward a confrontation with Iran, clearly an Iraq that is capable of self-defense against Iran would be an extremely important ally to have in the Gulf region."

Goure said the Iraqis may be eyeing older foreign vehicles as interim solutions until more U.S. equipment is approved. But given the U.S. commitment to training the new Iraqi army, large-scale purchases of non-U.S. equipment could be difficult.

"Training them on our gear is easy. Are we going to train them on someone else's equipment with their radios, weapons and their command and control?" Goure asked.

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