The Reagan administration is urging Saudi Arabia to lend Egypt as much as $2 billion to manufacture U.S. warplanes for friendly countries in the Middle East and Persian Gulf, administration officials said yesterday.
The plan calls for a friendly Persian Gulf state such as Bahrain to receive its Northrop F5G fighters, for example, from an Egyptian plant. The United States would provide the designs, engineering and engines, keeping the most secret techniques under wraps while giving Egypt experience in manufacturing modern fighter planes.
The administration hopes to strengthen U.S. ties to pro-Western Arab nations while giving them weapons needed to deter such extremists as Iran's Ayatollah Ruhollah Khomeini. Defense Secretary Caspar W. Weinberger, in championing the rearmament effort for Mideast and Gulf countries, has stressed that Israel has nothing to fear from it, given Israel's overwhelming military superiority.
The glittering prospect of the administration clearing the way for selling billions of dollars worth of new weapons to oil-rich Arab nations has sent U.S. defense contractors scrambling for position.
For example, the Northrop Corp. of Century City, Calif., and General Dynamics of St. Louis and Fort Worth are fighting to be the supplier of the FX (fighter export) warplane for the Gulf.
Northrop is offering its F5G Tigershark, with Bahrain the first buyer, while General Dynamics is trying to sell a downgraded version of its first-line F16 called the F16/J79. It is powered by the older General Electric J79 engine.
Oil-rich Bahrain, Kuwait and Qatar look particularly promising to U.S. aerospace firms. Bahrain already has agreed to buy four F5Gs for openers as part of an $180 million arms deal with the United States to build a modern air force.
Northrop got the inside track on selling its FX warplanes to Bahrain. The firm received State Department permission last month to export technical data on its F5G to Bahrain, industry sources said, while the department turned down four similar requests by General Dynamics to brief Bahrain, Kuwait and Qatar on its F16/J79.
Deputy Defense Secretary Frank C. Carlucci has urged the Air Force and Navy to push overseas sales of FX warplanes. In an internal memo issued July 29, he said Bahrain, Oman and the United Arab Emirates were among the "strong candidates" for the FX "because of a combination of threat, absorbability and fiscal resources."
The Pentagon, in justifying the proposed sale of four F5Gs to Bahrain, noted that the country "is a member of the recently created Gulf Cooperation Council and seeks a modest defense establishment in this context . . . . "
Defense industry sources said Egyptian manufacturing of U.S.-designed warplanes for itself and Gulf states would be concentrated south of Cairo in Helwan.
A Pentagon official specializing in overseas arms sales confirmed that "co-assembly" with Egypt of U.S.-designed warplanes to be sold in the Middle East, Persian Gulf and Africa is an administration objective that has been under discussion with Saudi Arabia and Egypt.
Between $1.5 billion and $2 billion would be needed, he said, to put Egypt in the FX business, and he cautioned against expecting the master plan to be implemented quickly. Still missing is the banker ready to commit the $2 billion, he noted.
The official said he assumed the two FX contenders, Northrop and General Dynamics, had chances to make their pitches to Bahrain. But the Pentagon, asked about this, said Bahrain requested and received only information about the Northrop F5G Tigershark.
"Only the F5G has been offered to Bahrain," the Pentagon said in its formal explanation. "In making an offer, we respond to the foreign government's request. The Bahrain government did not ask for the F16/J79. To our knowledge, there have been no briefings to the Bahrainis on the F5G by either DOD [Department of Defense] or contractors.
"The only discussions by U.S. government officials have been the presentation of cost and availability data by the American Embassy in Manama at the request of the Bahraini government."
The State Department's Office of Munitions Control, after consultation with administration policy-makers, approves or denies requests from defense contractors to brief foreign countries on their arms. An official at that office said he could not discuss its FX licensing decisions because the information, though not secret, is released only to contractors.
Thomas V. Jones, chief executive officer of Northrop, is a close friend of President Reagan. Northrop said that as of June 30 it had spent $360 million of its own money on the F5G Tigershark.
The firm is strenously looking for buyers of the F5G beyond Bahrain because only a much larger order than Bahrain's would put the Tigershark into mass production.