Sharon put out by Putin

Russian President Vladimir Putin refused to promise Prime Minister Ariel Sharon delivery of IL-76 planes for the Phalcon AWACS. Opposition by Russian defense contractors could delay Israels Phalcon deal with India.

Sources inform Globes that Russian President Vladimir Putin told Prime Minister Ariel Sharon that Russian defense contractors oppose selling Il-76 planes to Israel Aircraft Industries (IAI) for use as a Phalcon AWACS platform. The Phalcons would be sold to India after the conversion.

During his working visit to Moscow this week, Sharon asked Putin to act to lift the Beriev Aircraft Company's objection to supply IAI with the transport plane to use for the Phalcon.

Defense establishment sources said today that Putin would not promise that the planes would be supplied, but told Sharon he would take action with the Russian manufacturer of the plane.

The sources believe that the Russian position could delay IAIs Phalcon deal with India by several months, but would not cause its cancellation, since India needs AWACS capability, and intends to buy the system.

The planes are needed to realize the sale of three Phalcons to India. India insists on the IL-76, which is in service in the Indian Air Force. Beriev is demanding royalties from IAI from any future deals involving its planes.

Similar problems arose several years ago, when IAI was negotiating to supply the Phalcon to China. At the time, Beriev raised difficulties with deliveries of the plane, and only intervention by then-Prime Minister Benjamin Netanyahu with then-Russian President Boris Yelstin, led to the first plane being delivered to IAI, at a cost of $45 million.

IAI has now organized alternative planes to the IL-76 to use as a Phalcon platform, including using the US-built Gulfstream-5, and the European Airbus 321. IAI and its US partner Raytheon proposed this platform in its bids for the Turkish and Australian AWACS tenders.

However, Elta Electronics Industries, which manufactures the Phalcons systems, says the Il-76 is the best choice for both India and IAI. The defense establishment claims that Russias objections are an attempt to push Elta out of the AWACS market.

The Indian Phalcon deal would be IAIs largest since entering the AWACS business, at an estimated $750 million. Only one Phalcon has been officially delivered to date, to the Chilean Air Force, for $130 million.

Russia is offering its own AWACS on the international market, but it is considered inferior to Western systems and the Phalcon.

IAI and the Prime Ministers Office declined to comment to the report.

Published by Globes [online] - - on October 3, 2002

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