Saudis poised to sign $20bn Lockheed deal

Saudi Arabia is on the verge of signing a huge deal with the US plane maker, Lockheed Martin, to buy up to 100 F-16 fighter jets thought to be worth around $20bn (pounds 12.4bn).

The agreement, which is due to be officially approved in Washington next month, could risk shifting the focus of Saudi Arabia's vast defence spending programme from the UK to the US, just as British Aerospace is hard at work meeting the pounds 20bn Al Yamamah order.

A spokesman for British Aerospace declined to comment on the order. However observers said the deal would strengthen the hand of Lockheed Martin, one of the world's biggest arms suppliers, in the Middle East while European governments continued to wrangle over the pounds 40bn Eurofighter project.

Sources close to British Aerospace pointed out that the company did not offer a direct competitor to the F-16 and said the group had not been in competition for the latest order. The Eurofighter, which is not due to enter service until the millennium, is also of a different specification.

Last night US officials described the news emerging as "premature" and insisted no agreement had been reached. However, after months of negotiations Lockheed Martin is thought to have won the contract to replace the outdated Saudi fleet of 70 F-5s in competition with Dassault of France, which makes the proven Rafale fighter, and Sweden's nimble Saab Gripen. Sources suggested the total value of the deal would depend on follow-up orders, the level of after-sales support and the precise specification of the planes. It is thought that final orders for weaponry have yet to be sorted out. However, each F-16 costs at least around $20m, putting the total value of the order at $20bn, and possibly as much as $30bn.

It will make Saudi Arabia the 20th air force to order the F-16, which has been in production for two decades. Though this will be the first time the country has bought this particular plane, it has been a long- standing customer of Lockheed Martin, with 70 F-15s in service and a variety of other military hardware made by the group.

The F-16 aircraft is a high-performance single-seater and single-engined general purpose fighter and has already proved popular with other governments in the region. Egypt has 175 of the jets, while Israel and Turkey have more than 200.

Saudi Arabia's defence minister, Prince Sultan, is due to visit Washington in February to finalise the order in a sign that relations between the US and Riyadh are beginning to thaw.

One possibility is the Lockheed deal could be the prelude to a flood of orders for US hardware. Recently US officials have accused the Saudis of failing to co-operate with the FBI in the hunt for the bombers of a US military base in Dhahran last June, when 19 airmen died.