The UK has long had an awkward relationship with Saudi Arabia, but that unholy alliance now faces a stern test. After Joe Biden reacted angrily to the Opec+ decision to cut oil production, workers at BAE Systems’ fighter jet factory at Warton, on the banks of the Ribble in Lancashire, will have an eye on the fallout from the oil cartel’s decision.
The US president had hoped to persuade the world’s largest oil producer to ramp up production in order to lower oil prices, which have fed into surging inflation and fears over a global recession. Biden had been cultivating relations with Saudi Arabia’s de facto ruler, Mohammed bin Salman, illustrated by a fist bump in Jeddah in July. But despite all that, Prince Mohammed defied Biden, with Opec+ opting for a cut in output, a move that was seen as siding with fellow cartel member Russia, helping prop up its arms revenues.
Biden, who previously vowed to make Saudi Arabia a pariah state over the murder of the dissident journalist Jamal Khashoggi in 2018, has threatened “consequences” and US Democrats have suggested a one-year freeze on all arms sales.
The row leaves Britain’s arms industry on increasingly fragile ground. That industry, of which jets-to-warships company BAE is the biggest business, has long looked the other way over Saudi Arabia and its human rights abuses. Despite the murder of Khashoggi, BAE has continued to operate there, with a small army of about 5,300 workers embedded in the country.
Even after criticism for supplying the Saudi military during the deadly bombing campaign in Yemen, in which Lancashire-built Eurofighter Typhoons have been involved in a campaign that has killed thousands of civilians, it remains deeply entrenched.
The country is by far the largest single destination for BAE’s global sales outside its core US and UK markets, generating £2.5bn last year. It makes up 12% of BAE’s global sales, behind the US with 43% and the UK with 20%.
That relationship spans more than half a century, from a contract to supply Lightning and Strikemaster aircraft in the 1960s, to the 1985 al-Yamamah guns-for-oil deal, which was embroiled in corruption allegations.
Today the company provides support and training for systems and equipment for the royal Saudi air force and works with the country’s navy. Its efforts are largely concentrated on support for Typhoon jets and upgrades to existing Tornado aircraft. The kingdom has also recently taken delivery of 22 of BAE’s Hawk aircraft, single-engine advanced trainers originally designed in the 1970s. The company is even involved in the development of a new laboratory to train engineers and mathematicians at Majmaah University.
A bigger prize may be in sight. A softening in Germany’s hardline stance against exporting to Saudi Arabia has triggered chatter over various global arms deals. Earlier this month, French media reported that Britain was closing in on an agreement to sell between 48 and 72 BAE Typhoons to the Saudis, four years on from the signing of a memorandum of intent between the nations.
Such a deal could keep its factory at Warton motoring for five years. That would represent a coup for a site that traces its aviation roots to the brink of the second world war, when the Air Ministry ordered the construction of three runways on the site, which later became a US air force base in 1942.
BAE, which employs about 10,000 workers at Warton and nearby Samlesbury, has been handed a grim bounce by the war in Ukraine. BAE’s stock is up nearly 50% this year, valuing the company at £25bn.
But if relations between Saudi Arabia and the US break down entirely, it could be the trigger for western nations to evaluate their position. The extensive Saudi investments in Britain may be re-examined, including the high-profile joint ownership of Newcastle United, as well as stakes in luxury carmaker Aston Martin and Phoenix Group, the country’s biggest pensions provider.
The UK – and BAE – could be forced into picking a side. With the US providing the bulk of BAE’s business, and the nuclear deterrent cementing that relationship, Britain will always go with Uncle Sam if forced to choose.
However, defence analyst Francis Tusa says: “BAE is very federated. There isn’t a British voice to be heard in BAE Inc in the US. Even if Biden’s row with Saudi escalates, BAE should be insulated from that and could even pick up work that American firms normally do for Saudi. If [Liz] Truss gave in to US pressure to cut off Saudi, the French would step in the very next day.”
The UK may not be able to look the other way for much longer.