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UK air show underlines geopolitical shift from West

Posted by smeddum on July 22, 2010

By Peter Apps, Political Risk Correspondent
Thu Jul 22, 2010

FARNBOROUGH (Reuters) – If you want to see the shift in geopolitical and military clout from Western powers toward their growing emerging rivals, look no further than the sales stands of this year’s Farnborough air show.

With European governments expected to slash defense spending — and the United States seen probably following suit in the coming decades — the key focus for Western defense executives and government has been new export destinations.

Asian military officers with Western liaison staff and Middle Eastern government officials wander the halls and static exhibits, ranging from the new European A400M military transport aircraft to drones, artillery pieces and helicopters.

British officials and ministers in particular have been preaching two tales — the British defense budget is unsustainably large and needs to be cut, but they are looking to exports from the defense and security industry to help growth.

“We see huge opportunities from emerging markets,” said UK Trade and Industry spokesman Adam Thomas. “We have a global market share of close to 20 percent and we have been bringing delegates from as many countries as possible to Farnborough.”

Defense firms have been putting a brave face on bad news from Europe — Italy said during the show it was cancelling orders for 25 Eurofighters, surprising some.

Europe-wide coordination on defense still seems occasionally troubled. A dispute has broken out between Britain’s Royal Air Force and Franco-German EADS on whether or not the A400M will be officially named the “Grizzly.”

Instead, defense firms point to buyers especially in the Middle East, where high oil prices, the perceived threat from Iran and aging aircraft are all seen fuelling demand for fast jets.

“AWASH WITH CASH”

BAE Systems said Middle Eastern buyers were “awash with money,” while others enthused over India — a growing market that Western firms believe they are wooing away from its traditional Russian suppliers.

As well as its traditional rivalry with Pakistan, some believe India is entering an increasing arms race with China.

Certainly, India seems keen to upgrade its military capabilities to Western standards including working on a $5.8 billion deal with Boeing on C-17 cargo planes.

“We’re seeing unbelievable demand from India,” said Mike Alvis, executive vice president of ITT Defense International, manufacturing nightvision equipment. “There’s a lot of willingness to spend on defense.”

Brazil’s air force was also being watched closely ahead of a decision on fighter purchases. Other emerging buyers sighted by Reuters included a delegation from the Libyan air force.

While most of the major defense firms are looking to sell their most expensive items, for those looking at the other end of the spectrum Farnborough saw the international debut of the JF-17, a Chinese-Pakistani warplane.

A reconditioned version of the 1950s MiG-21, the jet sells for $20 million to poorer countries such as African nations.

Not everyone seems to be buying. Some sales staff complain that military officers from some emerging nations have a tendency to turn up at the well-appointed stands, consume coffee and other handouts and appear reluctant to leave.

Nevertheless, the global demand appears there. According to the Stockholm International Peace Research Institute, global defense spending rose 5.9 percent in real terms in 2009, led by increases in the US, China, Brazil and India.

Most analysts see U.S. defense spending — currently roughly half the global total — beginning to fall back once troop levels in Afghanistan start to be reduced. Chinese spending is seen growing at near the same rate as 2009’s 15 percent level.

China and Russia looked largely absent from Farnborough this year. China is still covered by arms restrictions from Europe and the United States. It did send delegates to a Paris arms fair last month — but to sell rather than buy.

The presence of so many visitors means firms and government alike are always wary of cyber attacks, hacking and spying at such events — itself seen as a key growth area.

With China still nowhere close to challenging the United States as a global military power, analysts say it is particularly focusing on asymmetric warfare capabilities, particularly cyber warfare.

“Cyber attacks are changing the nature of war we mean by military power and national security,” said Ian Bremmer, president of political risk consultancy Eurasia Group. “That’s an area I expect the United States to spend a great deal more on as they are presently behind.”

(Additional reporting by Tim Hepher; Editing by Mark Heinrich)

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