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A key South Korean defense delegation canceled a visit to IAI's Elta radar factory this week following US pressure on Seoul to opt for an American-made airborne early warning and control systems AWACS system rather than the Israeli Phalcon.
The competition for the lucrative arms deal has been very tight and led to Boeing, the Chicago based aerospace giant, to enlist US diplomatic pressure on the South Koreans to give them the nod over the cheaper Israeli-led proposal.
The South Korean government on December 15 is slated to choose between IAI's Phalcon mounted on a General Dynamic's Gulfstream G550 aircraft and Boeing's "Wedgetail" AWACS mounted on its B-737-700. Seoul short-listed the two teams for its plan to purchase four aircraft by the end of the decade. The deal would likely be worth well over $1 billion. The system uses radar for airborne surveillance and command and control functions.
It was to have been decided in June, but that tender was returned for best and final offers. Elta's proposal is reportedly now $1.1 billion, about half a billion dollars cheaper than its original price. Boeing's price tag is about 30 percent more expensive at $1.5 billion, which is $800 million down from its proposal last year.
Coming into the final approach, a top South Korean defense delegation headed by the official responsible for deciding on the deal visited Israel. They met with Maj.-Gen. (ret.) Amos Gilad, the head of the Defense Ministry's political desk and other top officials.
Defense Ministry officials in Tel Aviv declined to comment on the visit, preferring to keep it as low profile as possible. In Seoul, the Korean Defense Ministry confirmed that three of their delegates had been in Israel this week for a three-day visit to discuss military cooperation between the two nations. It said that the delegation was led by Lee Young-hwan, deputy minister for acquisitions, but added that it was unrelated to the AWACS tender, codenamed E-X, and had been planned long ago.
It said that the previous security meeting between the two nations had been in South Korea in November 2003. The current meeting had been delayed due to the disengagement from the Gaza Strip.
Informed sources said the Americans raised their eyebrows at the timing of the visit of the South Korean defense acquisition delegation to Israel just two weeks before the fateful decision was to be made.
The delegation had been scheduled to visit IAI but abruptly cancelled the tour. Elta wanted to show them first what their proposal entailed. Elta has teamed up with General Dynamics' Gulfstream Aerospace and L3 Communications for its offer. Gulfstream will provide the G550 aircraft. L3 the communications suite including downlinks and main ground segments. The Ashdod-based Elta will provide the main phased array radar and mission system.
Israeli defense executives are confident that the joint IAI/GD/L3 proposal had the upper hand.
The Boeing aerospace giant was obviously in a sweat since it had enlisted US government officials to pressure on the South Koreans to give them the nod. The US Ambassador to Korea Alexander Vershbow met South Korean Defense Minister Yoon Kwag-ung last Wednesday and reportedly pushed for the Boeing company.
Senior US high officials involved with making defense contracts have also spoken up for Boeing, emphasizing the need for compatible technology between the US and South Korean forces saying, "Inter-operability between the US-South Korean forces is crucial point in the E-X project. Boeing Co. has been approved to export core technology by U.S. government." The Korea Herald reported.
Defense executives in Israel rejected this tact. The US-based L3 Communications firm has access to classified radio data to ensure interoperability with any US military aircraft employed in the region, they said. They added that the attempt to present the choice as one between America and Israel was groundless. Over 50 percent of the IAI offer would be manufactured in America.
Elta's Phalcon system and its predecessor have over 10 years of experience. IAI sold it to China, but the United State torpedoed that deal. The India Air Force agreed earlier this year to purchase three systems to be installed on a Russian L-76. IAI lost bids to sell the system to Turkey and Australia.
Elta claims its Phalcon system is very versatile. It has already been installed on a Boeing 707 in Chile and will be installed on a Russian Ilyushin-76 for India's Phalcon.
The Israel Air Force chose it for its Gulfstream 550 long-range business jet configured with Elta's Phalcon system. Elta has also offered the Phalcon on an Airbus platform. This illustrates how it can be fitted on to both east and west platforms, company officials have said.
"We told the South Koreans that the IAF has chosen this as their system of choice. You have to be small and smart and this offer is suitable for the South Koreans," said one senior executive.
Korea has already purchased a number of Israeli weapons systems; including IAI's Harpy anti-radar suicide drones and the EHUD debriefing system for air combat training. South Korea has also purchased the Popeye-2 standoff missile and night vision systems.
South Korea has no air surveillance system of its own and relies on US reconnaissance aircraft based in Okinawa, Japan.