ARTEM I NFORMATION & STRATEGIES

ARTEM Defence n°02 - 2006/11 n° ISSN 1951-6878

ARTEM Defence is the free newsletter provided by ARTEM INFORMATION & STRATEGIES. It is not a journal nor a surveillance report but a zoom on some important subjects concerning current Defence news, in correspondence with the activities of our company. Specialised in analysing Defence and Security markets, ARTEM I&S is a French bureau presided by Patrick Cansell, prior manager of Business Intelligence within the Giat Industries group (now NEXTER group).

215, rue JJ Rousseau 92130 Issy les Moulineaux

FRANCE

Telephone : +33 6 75 65 59 86

Fax : + 33 1 47 36 25 42 e-mail : artem-is@voila.fr

ARTEM I NFORMATION & S TRATEGIES

SARL A U C A P I T A L D E 1 5 . 000 E U R O S

This second issue of our newsletter is dedicated to the DEFENDORY exhibition, and therefore to news related to Defence covering the southern-east European zone, with of course a zoom in on the host country : Greece. David Spindler also makes a point on EADS and Russian ambitions with regard to that company. To follow are the analyses of ARTEM on the potential represented by the Libyan market and the latest information collected on the future soldier system programmes. Last, is a point on the market situation of the 8x8 wheeled armoured vehicles.

Patrick Cansell

DEFENDORY and Greek ambitions

On the 25th July Greece presented an ambitious 2006-2010 procurement programme (mentioned are 45 advanced trainer aircraft, 20 transport helicopters, 15 CSAR helicopters, 5 maritime patrol craft, 6 frigates, 400 wheeled armoured vehicles, unmanned air vehicles, etc…) for 11.39 billion Euros. Not forgetting the possibility of acquiring new generation multi-role fighter aircraft which is postponed until beyond 2010. The Defendory exhibition illustrated these perspectives through the presence of over 400 defence industrialists from 32 countries : 184 Greek exhibitors, 49 American, 35 German, 29 British, 17 Poles, 15 Italians, 14 Russian and 13 French (classed 8th in the non official classification just before the Czech Republic with 12 exhibitors). To be noted also was the marked presence of India and Iran. Greece still represents a major market in Europe (in fact the 3rd importer worldwide in 2004 behind India and China) even though Greek industrialists remain discrete in large European cooperation programmes and this is a paradox which makes Greece a priority target for large scale exporters.

Bulgarian Future Soldier

ARTEM Information & Strategies has extended its research for contacts and information on the future soldier system programmes within the European Union. Amongst the new projects, other than Greece and Rumania, Bulgaria appears as a particularly representative actor. Indeed we had a meeting with the second in charge of Army Procurement at Defendory 2006. Bulgaria is currently in the ‘upstream’ phase (‘paper study’) of the ‘BFS’ project and its priority is the observation of major programmes pertaining to other states (IDZ and FELIN are the programmes mentioned as references) with the purpose of drafting the first specifications. The panorama carried out by our company covering future soldier systems (in the European Union) will therefore extend from 14 to 17 programmes (slightly anticipating the adhesion of two new members which are Rumania and Bulgaria). (continued p.4)

ï 5.56x45 AR-M9 assault rifle, equipped with 40mm UBGL-M4 grenade launchers, by the Bulgarian ARSENAL company, distant relative to the de Krinkov AK-74. This weapon could serve as a base for the BFS weapon system, at least in the initial phases.

DEFENDORY : Piraeus, Greece

2006/10/03 to 2006/10/07

1

FREMM frigate proposed for the Greek market.

1st LEO II HEL produced under license in Greece.

T-50 advanced jet trainer, proposed by the Korean company KAI .

ARTEM I NFORMATION & STRATEGIES

2

ANALYSIS « BORN TO BE WHEELED »

Wheeled armoured vehicle (8x8) market in Europe

Whilst many European countries have recently initiated the renewal of their fleets of armoured vehicles, the tendency does not seem to be reversing : other States like Greece, Slovakia or Turkey could in the short term initiate similar acquisition programmes. The industrial actors that are most present on the European market are STEYR DAIMLER PUCH (General Dynamics European Land Combat Systems) with the Pandur II, MOWAG (also part of General Dynamics European Land Combat Systems) with the Piranha III, and lastly PATRIA with the AMV. These companies represent nearly 50% of the contracts signed since 2004 on the European market alone and are present on the prospective markets open to competition (Turkey, Greece, Slovakia).

by Alexandre TARGÉ (ARTEM INFORMATION & STRATEGIES)

TURKEY : to be noted on the Turkish market : the Terrex from Singapore by STK, the AMV by Patria and the Turkish PARS by FNSS will also be competing via their local partners (ARTEM INFORMATION & STRATEGIES has produced a detailed report dedicated to IDEF 2005. Please consult us). An outsider from the GD ELCS range is however not to be excluded.

VBCI : NEXTER (Giat Industries) seems for the moment absent from large international competitions notwithstanding its French success : the first VBCIs will be delivered to the French Army as from 2008 with a final target of 700 units). Indeed, apart from the competition in Belgium the French industrialist remains strangely discrete on export markets.

SOURCE : ARTEM INFORMATION & STRATEGIES

Panorama of programs of wheeled armoured vehicle in Europe realized by ARTEM INFORMATION & STRATEGIES. Panorama or market study available on request.

CENTAURO 8x8 with the DARDO AFV with a 25mm gun in its light version, at Defendory 2006. It is proposed to Greece but suffers from a handicap : it is not amphibious ...

Slovakia and Greece will no doubt see the same actors confront as those in the Czech Republic. The Centauro, present at the Defendory exhibition, is only for the time being in service in its ‘fire support’ version with a 105mm gun in Spain and in Italy. Proposed to Greece in a ‘personnel carrier’ version, it seems that the specifications are not in its favour (the future wheeled armoured vehicle of the Greek Army will have to be, unless specifications evolve, amphibious).

8X8 STEYR DAIMLER PUCH

(GD ELCS) PANDUR II and

8X8 PATRIA AMV at DEFENDORY

2006. There were only 3

companies presenting their 8x8 armoured

vehicles. Mowag (certainly because

of GD ELCS strategy) and Giat stayed at home.

Wheeled armoured vehicle market in Greece

The call for tender expected in 2007 could be announced by the Greek MoD only in 2010. Even if the global order could be 400 as announced this year, the first batch could only concern 84 vehicles.

ARTEM I NFORMATION & STRATEGIES

3

STRATEGY Why is Russian industry interested

in entering EADS capital ?

by David Spindler (Spindler Consulting)

The Russian aeronautical industry, that was before brilliant in the Soviet fashion, is today in very bad shape. There really only subsists the Sukhoy in the military arena. Yet, the aeronautical industry is a prestige industry that a world ranking power must possess. Russia is probably no exception to the rule in the minds of its leaders. So it is clear that the only way to rebuild the aeronautical industry in Russia is to find an ally, at least provisionally, either Boeing or EADS.

Russia has a few trump cards : - the near future renewal of the Aeroflot company fleet

(Moscow leaves it to be said the 787 by Boeing would be preferred) with no doubt the renewal of internal company fleets,

- also, that the main supplier of titanium for Airbus and the Boeing 787 is the VSMPO-Avisma company, controlled by the State via Rosoboronexport,

- Moscow is also preparing the implementation, under State control, of the aircraft manufacturer’s holding UABC (United Aircraft-Building Corp.).

Both Western aircraft manufacturers have already taken an option in Russia, EADS by a 10% participation in the capital of the Sukhoy aircraft manufacturing factory, privatised as Irkut, and Boeing provides work for a team of 1,000 engineers in Moscow.

Moscow’s objective is, by using competition and using its assets, to become a partner more in relation with the vision of its ‘rank’, participating, even without right of veto, in the strategic decisions of EADS. The current situation of EADS is obviously an opportunity. Such a partnership cannot exist without exchange or more probably due to the current situation in Russia, without a transfer of technologies in exchange for an opening of Russian markets, or investments of Russian industry in the new developments of EADS. § As concerns the field of commercial aircraft, could one imagine that one day we would see the light of a third range next to Boeing and Airbus within the premises of an industrialist even within the framework of criss-crossed participations ? It is a possibility.

§ In the field of military aircraft, one can conjecture that EADS is engaged in the A400M project for several decades. It seems unlikely that a market of heavy carriers such as the C17 would appear before some time to compete with the A400. The threat is probably more serious in the field of lighter transport aircraft.

§ Lastly as concerns fighter aircraft, it would seem odd (or appropriate ?) to develop a fighter aircraft with the reference foe, since there would no longer be any reference. Not counting the fact that one can legitimately question the usefulness of sophisticated multi-role fighter aircraft in asymmetric or dissymmetric conflicts. Certainly they are sovereignty machines but against what threats ?

Spindler-consulting SARL

Spindler-consulting is an independent counselling cabinet directed by David Spindler, former strategy director at GIAT-Industries (Nexter) until June 2006.

Spindler-consulting offers its services in : - Strategy counselling and industrial marketing - Commercial assistance

Spindler-consulting is specialised in Defence and Security industries. Address : 41 rue de Versailles F-78320 Le Mesnil Saint Denis Tel. : +33(0)6 08 40 90 30 E-mail : spindlerconsult@aol.com

Amongst the vast quantity of products and services proposed during Defendory 2006, one will note the cooperation between LT, an Armenian company stemming from a state organisation researching on lasers, and Pyrkal, the Greek ammunition company. The joint venture, 51% detained by LT, aims at developing and commercialising electro-optical technological products, offshoots of Armenian products. Their highlight product is the 2D01 remotely controlled electro-optical system, is presented as offering an exceptional quality to cost ratio.

2D01 optic system (surveillance and fire-control), equipped (from left to right) : • a laser

rangefinder with 20 km range

• a day camera with 7 km range

• a “night” camera (II) with 2 km range

by Patrick Cansell ( ARTEM INFORMATION & STRATEGIES )

Cooperation around the Black Sea

At Defendory SOUKOS ROBOTS presented its range of demining robots, completed by a UAV named ‘Apollo’ that looks like a UFO, capable of flying over a zone for … 50 hours ( !) and to scan it with its multiple sensors (day/night, electronic warfare, etc…). Above right is a robot equipped with 2 RPG whose aim does seem to the sole destruction of IED.

ARTEM I NFORMATION & STRATEGIES

4

General Dynamics ELCS : SUPREMACY ?

by Patrick Cansell ARTEM INFORMATION & STRATEGIES

What a reversal ! In less than 10 years, the overwhelming

leadership of European industrialists in the development and production of wheeled armoured vehicles has collapsed in favour of the United States. The nineties witnessed the European domination : one can estimate that on the 6,800* wheeled armoured vehicles (6x6 and 8x8) acquired between 1990 and 1999, more than 70% of the materiel was of European origin (including via transfer of licenses) ! What happened is as follows :

Covering 1990-1999, the main actors were : ð the undisputed leader, MOWAG with 51.7 % of the market.

The Swiss company that exported a great deal through licenses had in 1999 more than 3,500 units on order either directly or via licenses.

ð one of the outsiders was the Austrian company STEYR DAIMLER P UCH, with 5.8 % of the market (close to 400 Pandur sold to 4 countries including the United States for United States for the same period).

ð PATRIA at the time had a equivalent hold on the market (close to 400 armoured vehicles sold between 1990 and 1999) but the Finnish company appeared at that time more as a regional actor (Sweden, Norway, the Netherlands, and Finland).

ð Santa Barbara Sistemas produced the BMR-600 which was exported to Egypt and to Peru in the eighties. . The materiel is of an older generation but it was proposed with success to Saudi Arabia in 1999 (140 units).

The period covering 2000-2006 sees the marked advance of MOWAG : the market share of its products and derivatives reaches 73% with more than 3.600 Piranha of all types sold for that period (including the Stryker for the US Army). Indeed its long term partnership with DDGM, subsidiary of General Motors Canada, allowed MOWAG to progressively develop its stronghold on the north American market. In 1999, DDGM acquired MOWAG and then, in March 2003, the American General Dynamics Land Systems acquired DDGM, which terminated that phase of external growth. This acquisition enabled the American giant (that had previously acquired SANTA BARBARA SYSTEMAS and STEYR) to become number 1 worldwide for a cost that in the end seems rather modest, even though it is true that is was the US Marine Corps and the Canadian Army that

respectively financed the development of the Piranha II and III. GDLS consolidated its acquisitions by creating General Dynamics European Land Combat Systems (ELCS) in October 2003. The last truly European materiel

which are the VBCI, Centauro, GTK Boxer and AMV will barely represent (in dispersed order) 20% of the world market for wheeled armoured vehicles* against more than 60% for General Dynamics alone, GD having taken full profit from the short sightedness and the dispersion of its European competitors. * without Russia, China, India and illegal sales

Bulgarian Future Soldier (part II)

It may appear appropriate for a country wishing to develop a ‘digital soldier’ programme to not be content with drawing from the concepts and solutions of the most advanced countries but also to ascertain the position with other countries of the Union that would be at the same stage of progress in order to identify synergies and to validate certain concepts. Take Slovakia for example : after having gone round the international programmes, this country could select national solutions or solutions from neighbouring countries (the Slovenian company FOTONA could present optical solutions to the Slovakian Army facing competition from German or French system manufacturers. However, in reality, the definition phase of the requirement seems to fence off the different States : ð either one shelters behind a ‘100% national’ concept aiming

to reach the best international standards with purely local means (a dead end in the context of a strict budget and of a technological race)

ð or one takes on an exogenous concept which simplifies the task (but with the risk of giving birth to a programme that is not favourable to local industrialists).

Except for LoI countries (France, UK, Germany, Spain, Italy, Sweden), an ‘upstream’ cooperation between States with comparable ambitions and means would enable to exploit local technological niches that lack outlets and/or implement shared acquisitions (buyers could be in a better position facing large system manufactures and interoperability would certainly be taken into account from the upstream stage). We submitted this path to a few State procurement officials and it appeared incongruous at best : ‘ no common points’, ‘no convergence possible’. Each State seems to want to remain alone in its requirement definition and confuses ‘being alone’ and ‘sovereignty’. One can therefore ask if European cooperation will progress solely thanks to large integration/system manufacturers ? After all, why not ?

The unavoidable items were present at Defendory 2006. Top left, a demonstrator by ELVO, integrating local technologies (optics, weapon system). Right, IDZ, integrating the OERLIKON CONTRAVES Canada data bus (also integrated on Félin). Bottom left, the body armour of NP Aerospace, retained within the framework of FIST (a programme maybe under temporary ‘freeze’). Right, the Félin system (SAGEM).

The Greek company INTRACOM presented its WISPR XXXX system whose central module serves to concentrate in a single equipment the command and navigation functions for the

IRAN at

DEFENDORY 2006

by Patrick Cansell ARTEM

INFORMATION & STRATEGIES A visit to the Iranian DIO

booth by the ARTEM INFORMATION & STRATEGIES team was a must. Indeed, the Iranian Defense Industries Organization, which supervises a important part of defence productions, occupied a large area of the Iranian booth, representing a wide array of local productions. First, here is a reminder of the DIO (or Sasadjah for Sazemane Sanaye Defa) organisation :

ð AMIG (Ammunition & Metallurgy Industries Group) which mainly produces small, medium and large calibre ammunition, including 125 mm ammunition for battle tank of the T-72 type acquired from Russia, ranging from the HEAT and APFSDS ammunition allegedly capable of penetrating 470 mm RHA at 3,000 m, without forgetting the NATO standard 155 mm artillery ammunition for the American M109 self-propelled acquired at the time of the Shah ;

ð AIG (Armament Industries Group) which produces small, medium and large calibre weapons, from the 5.56x45mm KH2002 bullpup assault rifle to copies of the G3 HK as regards infantry weapons, 122 mm (HM40) and 155 mm (HM41) artillery, 107 mm and 122 mm LRM, RPG and mortars;

ð VEIG (Vehicle & Equipment Industries Group) which proposes a range of 4x4 tactical vehicles, without forgetting armoured combat vehicles that include the tracked BORAQ or the T72Z tanks (derived from the T-55 equipped with a M68 105 mm gun and a EFCS-3 fire control system, with a V46-6 engine (standard engine of the T-72) and ERA reactive armour bricks) and T72S tanks (licensed production of the Russian T-72) ;

ð MIG (Marine Industries Group) that develops and produces fast ships (10 m to 17 m patrol and speed boats) and 47 m/300 tonne (SINA class) or 94 m/1400 tonne (MOUDGE class) ‘frigates’ capable of being equipped with AA and anti-ship missiles, not forgetting the IS-120 type submarines (these are 29 m ‘midget submarines’) ;

ð CIDMG (Chemical Iindustries & Development of Material Group) which is in charge of the development and production of compounds, explosives and solid propellants (propulsion of small and large rockets) ;

ð SIG (Special Industries Group) specialised in NBC protection ;

ð EIPG (Engineering & Industrial Projects Group) specialised in engineering and civilian engineering counselling (dams, roads, tunnels, sport, industrial and harbour infrastructures, etc.) is also capable of supporting technology and production transfers to foreign countries.

ARTEM I NFORMATION & STRATEGIES

SFEM

The Société française d’études militaires (French company for military studies), an association created in 2001, has just issued its manifest called : Manifeste pour un renouveau de la défense française dans

l’Union européenne (Manifest for the renewal of French defence in the European Union).

This manifest calls upon the public deciders to establish a new foundation of the French defence policy by proposing a conceptual draft aimed at pursuing and amplifying the European orientation given to French defence.

To consult and download the manifest (soon available in English): www.sfem.fr

NEWSLETTER : to receive this free (or not received it anymore), just send us an e-mail : artem-abonnement@voila.fr with your name, title, company/organization name and country.

5

ARTEM INFORMATION & STRATEGIES Our company is capable, upon demand, of examining situations relative to Defence and Security markets and to propose turn key ‘panoramas’ whether terminated or in progress : future soldier systems, 8x8 armoured vehicles, artillery, grenade launchers, air and naval unmanned vehicles, battle field robotics, etc.. Our activity covering market analysis and follow-up in Defence is completed by an offer for training in business intelligence and crisis management. Our company is already one of the French leaders in “business simulation” (crisis management, information management, war rooms, strategy making). Contact : Patrick Cansell ( +33 675 655 986 artem-is@voila.fr 7 +33 147 362 542

To be noted was the absence of Iranian aeronautical products (placed under the control of Aviation Industries Organization), to start with that of the Shafagh which remains after all a propaganda tool. Indeed, the AIO mainly presented its capabilities in maintenance and its civilian activities (large civilian carriers and helicopters). Among the products exhibited by IEI, the defence electronic branch, to be noted was the array of equipment proposed : laser range finder, thermal and II optical systems (including optic systems, unmanned air vehicles, surveillance system, C4I or electronic warfare systems. Iran alleges to have a future soldier system programme.

ñ SHAFAGH (1:1 model) and a few products exhibited by Iran during Defendory : SADAD 102C long range surveillance system, night vision binoculars (top right) ABABIL (swallow) unmanned air vehicle whose range could reach 120 km.

BANGLADESH - URGENT

Bid for tender for 46 wheeled armoured vehicles to equip the Bengali contingent deployed in southern Lebanon.