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Canada And Saudi Arabia Have A $10 Billion Arms Deal

February 25, 2014

Third Army moving Strykers to Afghanistan

While the rest of the world marked Valentine’s Day, Canada’s media outlets were abuzz over a glowing announcement from General Dynamics Land Systems (GDLS), the Canuck arm of the US multinational defense contractor.

According to General Dynamics, its Canadian subsidiary won a $10 billion contract for armored vehicles from a Middle Eastern client. It took a statement by Edward Fast, Canada’s Minister for International Trade, to reveal that Saudi Arabia had placed the order. The upcoming deal, described as the “Largest Advanced Manufacturing Win,” was billed a job-provider for Canada’s economy.

A relevant press release was published in the Ministry of International Trade’s website.

The announcement was made in London, Ontario, where the light armored vehicles will be designed and manufactured and which will become the epicentre of a cross-Canada supply chain directly benefiting more than 500 local Canadian firms.

This 14-year contract will create and sustain more than 3,000 jobs each year in Canada, with southern Ontario accounting for approximately 40 percent of the supply base.

Facilitated by the Canadian Commercial Corporation (CCC), the Government of Canada’s international government-to-government contracting organization, the contract is with Saudi Arabia, a priority market under the government’s new Global Markets Action Plan.

Further details about the transaction were scarce. It’s widely speculated that the deal is related to GDLS’ LAV-25 8×8 armored fighting vehicles, which are based on the Swiss Piranha APC.

The Context

Despite the extensive media coverage in North America, there are no official press releases from either GDLS, General Dynamics’ website, or the Saudi government confirming a multi-billion dollar contract for armored vehicles. Even the US Defense Security Cooperation Agency (DSCA) didn’t verify the sale to a major US client like Saudi Arabia.

General Dynamics Corporation, a publicly listed firm, is among the largest defense contractors in the US together with Raytheon, Lockheed Martin, and BAE Systems. It manufactures the M1 Abrams main battle tank as well as the MRAP and Stryker vehicles; the workhorses of US soldiers in Iraq and Afghanistan. Its product range spans .50 caliber miniguns to bomb detecting robots.

General Dynamics Corporation also owns the Bath Iron Works, a major shipbuilder for the US Navy and Coast Guard, and Electric Boat, specializing in submarines. It also has aerospace and cybersecurity products. Thanks to enormous contracts with the Pentagon, the conglomerate’s annual revenue is in the $30 billion range.

Its usually impressive earnings have sunk in recent years, however, owing to the US withdrawal from Iraq and the end of the 14-year Afghan campaign. This is a noticeable trend in its reported yearly revenue published on its website. In 2011 it was $32.7 billion; in 2012 $31.5 billion; in 2013 it was $31.2 billion.

It’s plausible that the announcement of a $10 billion sale abroad that would be fulfilled in 14 years was meant for shareholders.

Having grabbed headlines in the last few years for its expensive weapons purchases, Saudi Arabia maintains one of the largest fleets of LAV-25’s outside the US. The LAV-25 is the primary armored vehicle of the National Guard, a separate military branch controlled by the royal family.

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