Knight Ridder News Service

An order by the United Arab Emirates for 80 F-16 fighters is being held up as officials from the United States and the Emirates haggle over the Gulf nation's unusual request for weapons technology.

The U.A.E. announced in May that it had picked the F-16 over two European contenders in a long, fierce sales competition.

The $7 billion selection meant $5 billion in revenue to Lockheed Martin Corp. alone and promised to secure some 2,500 jobs at the firm's Fort Worth, Texas, fighter plant, where the F-16 is assembled.

But the final contract, which the firm expected to have signed by now, has been pushed off by new U.A.E. demands for software “source codes" basically the master keys to the fighter's computerized brains.

The U.A.E. has hinted that it may order a French jet if it doesn't get fairly sophisticated technology.

The software codes would allow a nation to copy weapons systems or redefine which nations' aircraft are friendly and which hostile, analysts said.

“We don't release the full software codes to any country," said Anthony Cordesman, a Middle East expert with the Center for Strategic and International Studies think tank.

“To put it simply, it is blackmail, and blackmail for all the wrong reasons."

Government and industry officials say the United States is unlikely to lose the deal or to give up all the codes. However, some analysts said that granting a portion of the demands might still fuel arms races in a region that, as the ongoing bombardment of Iraq shows, is full of military and political tension.

“The whole thing's opening up a can of worms," said Luke Warren, an analyst with the think tank Council for a Livable World Education Fund.

On Lockheed Martin's F-16 line, which today builds fighters mostly for export, finalizing the U.A.E. contract would ensure lots of work through at least 2004. That's when low-rate production will start on the next U.S. attack plane, the Joint Strike Fighter. Lockheed Martin is competing with Seattle-based Boeing Co. to win a contract to build that jet.

When the U.A.E. deal was announced in a high-level ceremony with Vice President Al Gore, plant officials said the work would immediately halve 1,000 layoffs planned because of slow F-16 orders. By 2001, they said, the deal could create 2,000 new jobs at the plant.

In May, the U.A.E. said it wanted “Block 60" F-16s, the newest model of the fighter with a very long range and advanced radar a version even the U.S. Air Force doesn't have.

Then the U.A.E. sought and got air-to-air missile technology more advanced than it had previously had, Warren said.

But when the U.A.E. asked for the software source codes, he said, red flags flew up and the deal bogged down. That's also when the U.A.E. reopened discussions with the French firm Dassault on buying fighters, presumably with a high degree of software technology tacked on.

Playing U.S. and European competitors against each other has become a standard way for foreign nations to get more sophisticated weapons technology for lower costs.

The U.A.E. has said it needs cutting-edge weapons to defend its oil holdings from potential aggressors. It is especially wary of nearby Iran, which lies across the gulf from the tiny sheikdoms that comprise the Emirates.

But several analysts said the U.A.E. doesn't need such sophisticated planes and weapons to protect itself, pointing out that long-range and advanced weapons on the “Block 60" F-16s make the jets good for attacking, not just defending.

Cordesman said that, rather than rationally addressing a threat, “the U.A.E. sees this as a prestige issue. They want the best weapons in the gulf."

Warren said a sale including software codes might fill nearby nations with the same desire. Saudi Arabia, Israel, Egypt and others might demand similar technology, reducing the amount of control the United States maintains over exported weapons, he said.

For now, most analysts believe the coming months will yield a final contract that gives the U.A.E. highly advanced technology but not full control over the jet's software. The United States' strong presence in the gulf, and Gore's personal involvement in the F-16 deal, would make a switch to French jets politically difficult, they said.

An official with the State Department, which must approve all arms transfers, said no disagreements in the negotiations appear too extreme to solve. The official spoke on condition of anonymity.

Kathryn Hayden, a spokeswoman for Lockheed Martin's Fort Worth plant, said company officials “are optimistic that we'll be able to finalize the contract in 1999."

The Defense Department, which also must approve arms transfers, declined to discuss the talks. Officials with the Emirates' Embassy in Washington could not be reached for comment.

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(c) 1998, The Dallas Morning News.

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AP-NY-12-18-98 1837EST

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