With the Saudis, Airbus must now hope for Plan B

Twelve years ago, Airbus celebrated an order worth billions from Saudi Arabia to protect the kingdom's external borders. The group, which operated as EADS at the time, was to set up a high-tech security system with radar systems in the world's largest project of its kind.

But in 2018 the then federal government stopped arms exports because of the kingdom's involvement in the Yemen war and the murder of journalist Jamal Khashoggi in the Saudi Consulate General in Istanbul.

This also stopped the border project in its original version. According to WELT information, a change in the project, including an alternative solution, is now planned.

Airbus boss Guilllaume Faury is part of the business delegation that accompanied Chancellor Olaf Scholz on his trip to the Arabian Peninsula with a stop in Saudi Arabia. There is silence about the interlocutors of the Airbus boss, but Faury is very interested in the end of Germany's arms export ban to the kingdom. It is said that the Saudi Crown Prince Mohammed bin Salman also has hopes for an end to the arms blockade, while Scholz is more concerned with energy security issues.

For Airbus, the countries in the Gulf region visited by Scholz – Saudi Arabia, United Arab Emirates and Qatar – are major customers, be it for aircraft, satellites or armaments, but also for future hydrogen technology for eco-aircraft. But not everything is going smoothly, as the border security project shows.

In November 2021, a renewal of the expired export control license was applied for. "We are currently waiting for approval from the federal government," said a spokesman. At the same time, there are talks with the Saudi government about adjusting the contract.

After that, an established domestic partner could be involved to achieve more local added value. Saudi Arabia has announced that its state-owned armaments company SAMI (Saudi Arabia Military Industries) will become one of the world's 25 largest armaments companies by 2030.

With a Saudi partner in the border protection project, Airbus could solve a dilemma. The armaments division of the group is obliged to fulfill the contract. Airbus says: "In the current context, this includes, as far as possible, working with goods that do not require the necessary export licenses, for example 'German-free components'".

In addition, a replanning of the project to a “maritime solution” is being sought, according to a management report recently published in the Federal Gazette by Airbus Defense and Space GmbH. There, Airbus speaks openly of an alternative solution. Because of the export ban, the company decided to “aim for a partial execution of the contract”.

Literally it even says: "The new export restriction no longer poses a significant risk for the company in view of the alternative solution." Opportunities could also arise for Airbus if the customer is responsible for delays.

There is no information about the financial volume of the alternative solution. The original solution for the 9,000-kilometer-long Saudi Arabian border was speculated to be worth twelve billion dollars. However, only the northern part to Iraq was completed in 2014 and there have been delays. The new solution is likely to be significantly smaller. It is a technical solution for Saudi Arabia's sea borders, but not a solution based on ships or anything like that, they say.

One of the peculiarities of the border project is a legal dispute between the Hensoldt Group and Airbus over the use of electronic binoculars. It is a dispute between companies that once belonged together. Hensoldt's NightOwl binoculars, developed in Germany, were originally developed under EADS/Airbus before Airbus sold the sensor activities.

In 2020, Airbus sued Hensoldt for a good 30 million euros because of alleged quality defects. Hensoldt responded with a counterclaim. The conflict was settled behind closed doors in front of an arbitration tribunal. Hiddenly, Hensoldt recently announced in the half-year report that in June the dispute was "ended without any further significant effects" by a confidential arbitration award. Obviously a win for Hensoldt.

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