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05BANGKOK2010 LOCKHEED MARTIN PROMISES COUNTERTRADE TO THAILAND AS PART OF F-16 DEALE

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“29102”,”3/18/2005 9:12″,”05BANGKOK2010″,

“Embassy Bangkok”,”CONFIDENTIAL”,”04BANGKOK7550″,

“This record is a partial extract of the original cable.

The full text of the original cable is not available.

 

“,”C O N F I D E N T I A L SECTION 01 OF 02 BANGKOK 002010

 

SIPDIS

 

DEPARTMENT FOR EAP/BCLTV AND EAP

DEFENSE FOR OSD/ISA (STERN AND POWERS). PLEASE PASS TO

DSCA/AP (NMORGAN)

PACOM FOR FPA HUSO

 

E.O. 12958: DECL: 03/17/2015

TAGS: MASS, MARR, PREL, PGOV, TH, POL/MIL

SUBJECT: LOCKHEED MARTIN PROMISES COUNTERTRADE TO THAILAND

AS PART OF F-16 DEAL

 

REF: 04 BANGKOK 7550

 

Classified By: Political Counselor Robert J. Clarke. Reasons 1.4 (a).

 

Summary.

 

1. (C) In a March 17 meeting with Defense Minister Gen.

Thamarak Isarangura Na Ayutthaya, Lockheed Martin Director

for Industrial Cooperation Richard Jannarone made it clear

that Lockheed Martin is willing to offer a \”100 percent\”

countertrade deal if the RTG selects F-16 as the fighter

aircraft to replace the aging F-5s in its fleet. Lockheed

made the offer in response to similar promises made by SAAB

to support their pitch to sell Gripen fighters and by Sukhoi

to support their efforts to sell SU-30 aircraft to Thailand.

Thai law now requires that all procurement of foreign goods

by state agencies valued at more than approximately 8 million

USD be balanced by countertrade transactions equal to at

least 50 percent of the value of the purchased goods. Good

news for Lockheed Martin\’s bid was Thamarak\’s expressed

concern that MOD wants a fighter that has a proven logistics

support chain. Nonetheless, post is concerned over continued

indications from other Thai contacts that, irrespective of

the operational performance advantage F-16 holds over Gripen

and SU-30, the RTG will make its final decision based solely

on the countertrade deal cobbled together. Swedish and

Russian sales reps are allegedly offering offsets and

countertrade at more than 100 percent. Thai Government

officials interested in F-16 winning the fighter contract

have suggested to us that senior U.S. officials weighing in

in support of Lockheed Martin would be useful to counter

recent statements of support the King of Sweden and President

Putin have made in support of their country\’s planes. END

SUMMARY.

 

LOCKHEED WILL OFFER 100 PERCENT COUNTERTRADE AND/OR OFFSETS

 

2. (SBU) Although the Royal Thai Government has not

officially requested RFPs nor clearly outlined mission

requirements, for a year RTG officials have expressed their

intention to purchase 18 multi-role fighters to replace aging

F-5s in the RTAF fleet. Although Thailand now has 59 F-16s

in its inventory, press stories for the past several months

have reported on Thai pilots traveling to Sweden to examine

SAAB FAS-39 Gripens or to Russia to look at SU-30\’s. Embassy

officials, including the Ambassador in a meeting with Prime

Minister Thaksin, have emphasized that F-16 is a more capable

aircraft, at a better price, easier to maintain, and more

likely to help Thailand\’s future efforts to procure the Joint

Strike Fighter when it becomes available for export in years

to come. Thai officials have responded by pointing out that

Thai law now requires any large-scale purchase of foreign

goods by the RTG to include a countertrade deal equal to at

least half the price of the purchased goods. Press reports

in the lead up to last month\’s national elections noted the

RTG\’s efforts to craft a deal with a fighter manufacturer

that would help Thailand sell approximately 80,000 tons of

frozen chickens stockpiled in Thai poultry processing company

freezers in the wake of the avian flu crisis. Embassy

contacts said that until Lockheed Martin offered a proposal

to sell F-16s that included countertrade, the RTG could not

seriously consider its offer. Contacts also suggested that

an offer that included an agreement to buy Thai chicken would

be especially welcome.

 

3. (SBU) In response to this information, on March 17,

Lockheed Martin\’s senior countertrade expert, Richard

Jannarone, met with Thai Defense Minister Gen Thamarak to

clearly spell out Lockheed Martin\’s willingness to offer a

comprehensive package of countertrade and/or industrial

offsets. Jannarone explained that Lockheed Martin has more

experience in countertrade than any other defense

manufacturer, having completed programs in 27 countries

valued at over 22 billion USD. Lockheed Martin is willing to

offer a \”100 percent countertrade package\” for a long list of

Thai goods, including agricultural products, and/or an

industrial cooperation plan that could upgrade existing Thai

maintenance facilities for C-130 cargo planes, F-16 engines

or F-16 radars, among others. Jannarone emphasized his

company\’s willingness to put together a package that would

allow Thailand to purchase the most capable plane under

consideration in a manner that meets the concerns of the

Prime Minister\’s office.

THAMARAK SEEMS RECEPTIVE

4. (SBU) Thamarak explained that he had only reassumed the

role of Defense Minister a week earlier but noted his defense

procurement plan would have each of the Thai services clearly

outline their new equipment needs and request list with a

focus on a reliable logistics train after purchase, training

follow-up and technology transfer. While quick to emphasize

that other agencies within the RTG would have to vet any

proposal on fiscal and other policy grounds, Thamarak twice

pointed out F-16\’s comparative advantage from a logistics

standpoint. He noted that since Thailand already owns

F-16\’s, it would be easier to train mechanics and perform

maintenance on new model F-16s. He indicated that he would

forward Lockheed Martin\’s proposal to include countertrade to

the other agencies concerned.

 

COMMENT: POLITICAL PRESSURE FROM WASHINGTON SOUGHT

 

5. (C) While we were encouraged by Thamarak\’s favorable

opinion of F-16, our collective sense is that Lockheed Martin

is playing catch-up in the fighter competition. The Swedes

and the Russians have worked aggressively and have made it

clear for several months that they are willing to explore

buying Thai chicken as part of a fighter deal. If the

decision to purchase were left up to the military, F-16 would

win easily. It is more capable and easier for the RTAF to

maintain than the other aircraft. However, officials in the

Commerce Ministry and PM\’s office seem convinced that all

three fighters are fungible and that Thailand should

therefore focus on the best business deal. As of March 18,

we were unable to arrange a meeting for Lockheed Martin with

the new Commerce Minister, Thanong Bidaya due to his only

having been appointed on March 11. We intend to follow up

with Thanong quickly because his Ministry seems to have the

most influence over the PM\’s perception of the countertrade

issue. Several RTAF contacts have mentioned to JUSMAGTHAI and

Lockheed Martin officials that both Sweden and Russia have

applied high-level political pressure in support of their

planes. Both the King of Sweden and President Putin have

raised the fighter purchase with PM Thaksin. Fans of F-16

within the RTAF have suggested that phone calls from senior

U.S. officials to key Thai decision makers could go a long

way towards helping Lockheed Martin win the figher

competition.

BOYCE

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Written by thaicables

July 6, 2011 at 7:56 am

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