LOCKHEED MARTIN PROMISES COUNTERTRADE TO THAILAND

C O N F I D E N T I A L SECTION 01 OF 02 BANGKOK 002010

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E.O. 12958: DECL: 03/17/2015
TAGS: MASS MARR PREL PGOV TH POL MIL
SUBJECT: LOCKHEED MARTIN PROMISES COUNTERTRADE TO THAILAND
AS PART OF F-16 DEAL

REF: 04 BANGKOK 7550

Classified By: Political Counselor Robert J. Clarke. Reasons 1.4 (a).

Summary.


1. (C) In a March 17 meeting with Defense Minister Gen.
Thamarak Isarangura Na Ayutthaya, Lockheed Martin Director
for Industrial Cooperation Richard Jannarone made it clear
that Lockheed Martin is willing to offer a "100 percent"
countertrade deal if the RTG selects F-16 as the fighter
aircraft to replace the aging F-5s in its fleet. Lockheed
made the offer in response to similar promises made by SAAB
to support their pitch to sell Gripen fighters and by Sukhoi
to support their efforts to sell SU-30 aircraft to Thailand.
Thai law now requires that all procurement of foreign goods
by state agencies valued at more than approximately 8 million
USD be balanced by countertrade transactions equal to at
least 50 percent of the value of the purchased goods. Good
news for Lockheed Martin's bid was Thamarak's expressed
concern that MOD wants a fighter that has a proven logistics
support chain. Nonetheless, post is concerned over continued
indications from other Thai contacts that, irrespective of
the operational performance advantage F-16 holds over Gripen
and SU-30, the RTG will make its final decision based solely
on the countertrade deal cobbled together. Swedish and
Russian sales reps are allegedly offering offsets and
countertrade at more than 100 percent. Thai Government
officials interested in F-16 winning the fighter contract
have suggested to us that senior U.S. officials weighing in
in support of Lockheed Martin would be useful to counter
recent statements of support the King of Sweden and President
Putin have made in support of their country's planes. END
SUMMARY.

LOCKHEED WILL OFFER 100 PERCENT COUNTERTRADE AND/OR OFFSETS


2. (SBU) Although the Royal Thai Government has not
officially requested RFPs nor clearly outlined mission
requirements, for a year RTG officials have expressed their
intention to purchase 18 multi-role fighters to replace aging
F-5s in the RTAF fleet. Although Thailand now has 59 F-16s
in its inventory, press stories for the past several months
have reported on Thai pilots traveling to Sweden to examine
SAAB FAS-39 Gripens or to Russia to look at SU-30's. Embassy
officials, including the Ambassador in a meeting with Prime
Minister Thaksin, have emphasized that F-16 is a more capable
aircraft, at a better price, easier to maintain, and more
likely to help Thailand's future efforts to procure the Joint
Strike Fighter when it becomes available for export in years
to come. Thai officials have responded by pointing out that
Thai law now requires any large-scale purchase of foreign
goods by the RTG to include a countertrade deal equal to at
least half the price of the purchased goods. Press reports
in the lead up to last month's national elections noted the
RTG's efforts to craft a deal with a fighter manufacturer
that would help Thailand sell approximately 80,000 tons of
frozen chickens stockpiled in Thai poultry processing company
freezers in the wake of the avian flu crisis. Embassy
contacts said that until Lockheed Martin offered a proposal
to sell F-16s that included countertrade, the RTG could not
seriously consider its offer. Contacts also suggested that
an offer that included an agreement to buy Thai chicken would
be especially welcome.


3. (SBU) In response to this information, on March 17,
Lockheed Martin's senior countertrade expert, Richard
Jannarone, met with Thai Defense Minister Gen Thamarak to
clearly spell out Lockheed Martin's willingness to offer a
comprehensive package of countertrade and/or industrial
offsets. Jannarone explained that Lockheed Martin has more
experience in countertrade than any other defense
manufacturer, having completed programs in 27 countries
valued at over 22 billion USD. Lockheed Martin is willing to
offer a "100 percent countertrade package" for a long list of
Thai goods, including agricultural products, and/or an
industrial cooperation plan that could upgrade existing Thai
maintenance facilities for C-130 cargo planes, F-16 engines
or F-16 radars, among others. Jannarone emphasized his
company's willingness to put together a package that would
allow Thailand to purchase the most capable plane under
consideration in a manner that meets the concerns of the
Prime Minister's office.
THAMARAK SEEMS RECEPTIVE

4. (SBU) Thamarak explained that he had only reassumed the
role of Defense Minister a week earlier but noted his defense
procurement plan would have each of the Thai services clearly
outline their new equipment needs and request list with a
focus on a reliable logistics train after purchase, training
follow-up and technology transfer. While quick to emphasize
that other agencies within the RTG would have to vet any
proposal on fiscal and other policy grounds, Thamarak twice
pointed out F-16's comparative advantage from a logistics
standpoint. He noted that since Thailand already owns
F-16's, it would be easier to train mechanics and perform
maintenance on new model F-16s. He indicated that he would
forward Lockheed Martin's proposal to include countertrade to
the other agencies concerned.

COMMENT: POLITICAL PRESSURE FROM WASHINGTON SOUGHT


5. (C) While we were encouraged by Thamarak's favorable
opinion of F-16, our collective sense is that Lockheed Martin
is playing catch-up in the fighter competition. The Swedes
and the Russians have worked aggressively and have made it
clear for several months that they are willing to explore
buying Thai chicken as part of a fighter deal. If the
decision to purchase were left up to the military, F-16 would
win easily. It is more capable and easier for the RTAF to
maintain than the other aircraft. However, officials in the
Commerce Ministry and PM's office seem convinced that all
three fighters are fungible and that Thailand should
therefore focus on the best business deal. As of March 18,
we were unable to arrange a meeting for Lockheed Martin with
the new Commerce Minister, Thanong Bidaya due to his only
having been appointed on March 11. We intend to follow up
with Thanong quickly because his Ministry seems to have the
most influence over the PM's perception of the countertrade
issue. Several RTAF contacts have mentioned to JUSMAGTHAI and
Lockheed Martin officials that both Sweden and Russia have
applied high-level political pressure in support of their
planes. Both the King of Sweden and President Putin have
raised the fighter purchase with PM Thaksin. Fans of F-16
within the RTAF have suggested that phone calls from senior
U.S. officials to key Thai decision makers could go a long
way towards helping Lockheed Martin win the figher
competition.
BOYCE