S. Africa Reopens Probe Into Gripen Bribes: Report

JOHANNESBURG, South Africa - South African police have reopened their investigation into a controversial arms deal after Swedish defense group Saab admitted bribes were paid to clinch a contract, according to a July 31 report.

A South African Air Force Gripen fighter jet is on display at a 2006 airshow in Cape Town, South Africa. A July 31 report says an investigation into claims of bribes paid by Saab and BAE to South African officials has been reopened. (File photo / Agence France-Presse)

Officials will approach authorities in Sweden and Britain to find out what their investigations have uncovered about allegations of corruption in the 1999 deal for 26 JAS Gripen fighter jets, South Africa's Sunday Times reported.

Saab last month admitted that 24 million rand ($3.6 million, 2.5 million euros) in bribes had been paid to secure the deal, but blamed its former British partner BAE Systems for making the payoffs.
The Sunday Times said the head of South Africa's elite investigative squad, the Hawks, had sent a letter to parliament's Standing Committee on Public Accounts indicating the investigation would be reopened, 10 months after the Hawks were sharply criticized for dropping the politically sensitive probe.
"I have already instructed two officials... to approach the relevant authorities in both Sweden [National Anti-Corruption Unit] and the UK [Serious Fraud Office]," Hawks chief Anwar Dramat wrote.
"Subject to approval by these authorities, [we] will assess the available information with a view to determine whether there is information which points to crime[s] in South Africa."
The chair of the parliamentary committee, Themba Godi, said reopening the investigation was "a brave and correct decision."
"Unless justice is being done and is seen as being done on this matter, it's going to continue to cast a cold shadow over the political landscape of the country," Godi told the Sunday Times.
Saab's admission came after Sweden's TV4 television channel said it had evidence the defense group had promised to pay Fana Hlongwane, then advisor to the South African defense minister, millions of euros in bonuses if Pretoria did not back out of the Gripen deal.
Saab said bribes had been paid in the form of bonuses and salaries between 2003 and 2005 by its South African subsidiary Sanip, which was then controlled by BAE Systems.
The deal provided for the sale of 28 Gripen fighters for 1.6 billion euros, later trimmed to 26 planes. The last is due to be delivered next year.
Claims of corruption in the multi-billion-dollar program to modernize South Africa's military after apartheid have threatened to damage the careers of some of the country's top politicians.
In 2005, President Jacob Zuma's former financial adviser, Schabir Shaik, was sentenced to 15 years in prison for charges that included soliciting bribes to Zuma from French arms company Thomson-CSF. He has since been released on medical parole.
Efforts to put Zuma on trial for corruption have collapsed, but questions over the arms deal continue to hang over his presidency.
After Zuma won control of the African National Congress in 2007, the ruling party made a successful push to disband the predecessor to the Hawks, the Scorpions, an investigative unit that led the probe against Shaik and also implicated Zuma in questionable deals.

With No 'Plan B,' U.S. Marine Corps Shows Off F-35B

NAVAL AIR STATION PATUXENT RIVER, Md. - In a graphic demonstration of the U.S. Marine Corps' strident support of its F-35B version of the tri-service Joint Strike Fighter (JSF), the service flew the first-ever live demonstration the aircraft's short take-off/vertical landing (STOVL) capability before reporters on July 29.

BF-01, the first F-35B short take-off/vertical landing (STOVL) Joint Strike Fighter built for the U.S. Marine Corps, performs a slow flyby for media July 29 at Naval Air Station Patuxent River, Md. (Christopher P. Cavas / Staff)

Piloted by Marine Lt. Col. Fred Schenk, the F-35B accelerated down the runway and lifted off in less than 450 feet. Once in the air, it flew past the assembled reporters and senior Marine Corps, Navy and industry brass at 60 knots airspeed. Schenk brought the plane, designated BF-1, to a hover and landed it vertically.

The display was all the more impressive because it was made during a humid summer day when temperatures exceeded 95 degrees Fahrenheit. Heat and humidity reduce aircraft and engine performance.
Moreover, BF-1 is a test aircraft, not a mature production plane. That is not without risk and the service took precautions. Multiple aircraft had been prepared as back-ups, test pilots at the base said.
At least one backup aircraft, BF-3, flown by test pilot Marine Lt. Col. Matt Kelly, went on to conduct a test sortie after BF-1 successfully flew its demonstration. BF-4, which is a mission systems test plane, was also on standby in case both aircraft aborted.
U.S. Marine Corps Commandant Gen. Jim Amos, himself an F/A-18 Hornet pilot, reiterated that the F-35B is vital to his service. The Corps' position is that the service has no backup plans if the F-35B does not make it though the two-year probation period that then-Defense Secretary Robert Gates placed upon the variant when it encountered technical problem and fell behind in flight testing.
"There is no Plan B," Amos said. "We need this airplane."
Asked what would allow the F-35 to exit probation, Amos said that the exit criteria have not yet been set. But he voiced confidence the jet would meet whatever those requirements might be.
Lt. Gen. Terry Robling, the service's deputy commandant for aviation, said the F-35B's progress in test flights since last year was "amazing." The F-35B caught up on last year's test points, and is now head of this year's flight test schedule, he said. Soon, in September, the F-35B will go to sea onboard the amphibious assault ship USS Wasp, he said.
Robling also expressed confidence that the STOVL version, which is the most expensive version of the jet, will come down in price as production increases.
"As soon as that ramp goes up, the costs will start coming down dramatically," he said.
Robling and Amos both reiterated the Corps' argument that the service needs an aircraft that can be based anywhere, which is the primary requirement behind the F-35B. The F-35B model will allow the Navy and Marine Corps to effectively double the number of aircraft carriers in the U.S. fleet because amphibious assault ships would be able to carry strike aircraft.
However, the service is also buying five squadrons of the carrier variant F-35C model planes to support the Navy's carrier fleet. Robling said that even though the service is buying some 80 C-models, the F-35B can also operate from a Navy carrier.
The F-35B will also play in the DoD's Air-Sea Battle concept, Robling said. Despite sacrificing some range, the jet retains all the capabilities of the Air Force and Navy versions. The F-35B would also support the land component of Air-Sea by providing support to Marine ground operations with having to rely on a carrier, he said.
Robling reiterated the Marines' need for a fifth-generation fighter to counter emerging threats such as advanced Russian and Chinese aircraft.
"It's absolutely the aircraft that we need to counter the fifth-generation aircraft that are coming online in places like China, "Robling said. "If we take this fifth-generation aircraft away, there is not another one on the drawing boards in the United States."

Iraq Plans to Double Planned F-16 Purchase

BAGHDAD - Iraq will ask for future defense contracts to include provision for trainers, bypassing MPs to allow some U.S. soldiers to stay past a year-end pullout deadline, Prime Minister Nouri al-Maliki said.
Maliki also told reporters on July 30 that he had revived talks to purchase 36 U.S. F-16 fighter jets, rather than the originally mooted 18, in a multi-billion-dollar deal that has been on the cards for several months.

"Training missions do not need the approval of parliament," the premier told a news conference. "The government will include in agreements to purchase weapons that there should be trainers to train Iraqi forces to use these weapons."
Maliki said he submitted a report to parliament which concluded Iraq's security forces still required training on purchased weapons. He did not give details on the report.
Foreign Minister Hoshyar Zebari said this month that plans for a contingent of U.S. military trainers were gaining traction among Iraqi leaders, but no agreement has yet been reached on the future of the American presence here.
Iraqi leaders have already missed a self-imposed July 23 deadline to reach agreement and, in the past, political deals have rarely been reached during the holy Muslim fasting month of Ramadan, which is set to start Aug. 1.
Politicians have previously noted the difficulty of reaching an agreement in parliament on a prolonged American troop presence, as many Iraqis still view U.S. forces as occupiers.
Maliki said he had signed documents restarting talks to purchase F-16s from the United States, a deal that had been close to agreement earlier this year but was put off due to widespread protests railing against poor basic services.
The original deal had involved the acquisition of 18 jets, but Maliki said the new contract would lead to the purchase of 36 F-16s.
"The new contract will be larger than what we agreed earlier, to provide security for Iraq," he said.
Any potential deal would be worth billions of dollars and take years to implement, as it would require the manufacture of the planes and the training of Iraqi pilots.
U.S. commanders say that while Iraq's forces are able to maintain internal security in the country, improvement is required in protecting Baghdad's airspace, territorial waters and borders.

Chinese General: Country Needs 3 Crriers

BEIJING - China needs at least three aircraft carriers to defend its interests, a general said, days after the state media broadcast footage of its first carrier in a rare public mention of the project.
"If we consider our neighbors - India will have three aircraft carriers by 2014 and Japan will have three carriers by 2014," Gen. Luo Yuan, a senior researcher with the Academy of Military Sciences, was quoted as saying by Beijing News.

"So I think the number [for China] should not be less than three so we can defend our rights and our maritime interests effectively."
His comments, published July 29, came after China sought to downplay the capability of its first aircraft carrier, saying July 27 the vessel would be used for training and "research."
Beijing believes that the three Japanese carriers it referred to, built for helicopter operations, could eventually be converted into full aircraft carriers.
China recently confirmed it was revamping an old Soviet ship to be its first carrier, a project that has added to regional worries over the country's fast military expansion and growing assertiveness on territorial issues.
"We are currently refitting the body of an old aircraft carrier, and will use it for scientific research, experiments and training," defense ministry spokesman Geng Yansheng told a news briefing.
Asked whether the carrier's addition to China's military arsenal would significantly raise the country's military capability, Geng said only that to "overrate or underrate the carrier's role are both incorrect."
The United States has welcomed China's mention of the carrier, calling it a step toward better transparency between the Pacific powers.
China's People's Liberation Army - the largest armed force in the world - is extremely secretive about its defense programs, which benefit from a huge and expanding military budget boosted by the nation's runaway economic growth. The PLA also operates the country's navy.

U.S., China Discuss Weapons Sales to Taiwan

WASHINGTON - The United States and China on July 29 held top-level talks on Taiwan, with Washington working preemptively to avoid a fallout as a decision nears on whether to sell fighter-jets to Taiwan.
U.S. officials have said that they will decide by Oct. 1 on whether to sell F-16 jets to Taiwan, a longstanding request from the self-ruling island which fears that China's rapidly growing military has gained a major edge.

Wang Yi, the top Chinese official in charge of Taiwan, met with Deputy Secretary of State William Burns. Secretary of State Hillary Clinton joined part of the closed-door session, a State Department official said.
China's state-run Xinhua news agency said Wang "stressed that the Chinese mainland has been steadfast in opposing the U.S. arms sales to Taiwan, because it harms Sino-U.S. ties and the peaceful development of the cross-strait relations."
Burns took office as the State Department's No. 2 just July 28 after his nomination was held up by Sen. John Cornyn, R-Texas, who said he relented only after Clinton agreed to release a long-delayed report on Taiwan's arms needs. The jets would be built in Cornyn's home state.
Congress is a stronghold of support for Taiwan, with the House Foreign Affairs Committee last week voting without dissent on a measure urging "immediate steps" for arms sales.
China considers Taiwan to be a territory awaiting reunification, by force if necessary.
The United States switched diplomatic recognition to Beijing in 1979 but Congress at the same time approved the Taiwan Relations Act, which requires the United States to provide the islands enough weapons for self-defense. The law states that the U.S. administration will make the decision without consulting China.
U.S. Joint Chiefs of Staff Chairman Adm. Mike Mullen said he spoke about arms sales to Taiwan during a visit earlier in July to Beijing and "clearly, the Chinese would strongly prefer us to stop doing this."
But he said he explained to his Chinese counterpart, Gen. Chen Bingde, that the United States has "responsibilities, and they're legal responsibilities, in my country to support the Taiwan Relations Act."
The United States last year approved $6.4 billion in weapons for Taiwan, including Patriot missiles and Black Hawk helicopters, but not jets or submarines. China lodged a protest, suspending military ties with the United States for months.
Mullen has strongly advocated dialogue, saying it will be crucial to avoiding miscalculations as China ramps up its military budget.
The Pentagon offered praise on July 29 after China made a rare acknowledgement that it is building its first aircraft carrier.
State television on July 27 broadcast footage of the old Soviet ship, which is being refitted in the port city of Dalian. The defense ministry said the carrier would be used for "scientific research, experiments and training."
"That's a good sign to us. We've always talked about the need for transparency so that we better understand what their intentions are," Pentagon spokesman U.S. Marine Col. Dave Lapan told reporters.
He said that the Pentagon was already well aware of the carrier project, "but it's at least a positive sign that they are being more forthcoming."
China showed footage of the carrier at a time of high tensions on the South China Sea with Vietnam and the Philippines. China's defense ministry did not say when the carrier would be finished.
At a joint news conference during Mullen's visit, China's military chief Chen defended the project and noted that the United States has 11 aircraft carriers in service.
"China is a big country [and] we only have quite a number of ships, but small ships. And this is not commensurate with the status of the country of China," Chen said.

U.S. Army Moves Forward on JLTV

The U.S. Army insists it plans to go forward with its open competition for Joint Light Tactical Vehicle following completion of its two-year technology development phase even as many defense analysts have the program pegged for cancellation.
Tim Goddette, director of Sustainment Systems, said in a July 28 statement that the program has taken steps forward, refining the requirements during the technology development phase in order to "meet the designated capability gaps."

A program that could be worth up to $20 billion already has a host of defense companies, including BAE Systems, General Dynamics Land Systems, Lockheed Martin, AM General and General Tactical Vehicles, all vying to build the next-generation light vehicle.
Army officials hope to build a spree of capabilities into JLTV to include "fortified improvised explosive device, or IED, protections designed to withstand blast attacks, off-road mobility, variable ride height suspension, exportable power and essential command, control, communications, computers, intelligence, surveillance and reconnaissance, or C4ISR, capabilities," Goddette said.
However, budgets are shrinking and the Army also plans to field the Ground Combat Vehicle in the next seven years and complete a recapitalization of the Humvee fleet. Army leaders know JLTV costs can't spiral out of control in the current budget environment.
Originally intended to replace the Humvee, the House Appropriations defense subcommittee wrote in the 2012 defense spending bill that "the operational niche to be filled by the JLTV appears to be shrinking," and cut $50 million off the Army and Marine Corps research and development budget request.
"We gained valuable insight into the cost of each capability and effect that one capability might have on another," Goddette said in the statement. "We've learned that some trade-offs are necessary to pursue an overall strategy that best synchronizes requirements, resources, mature technologies and a cost-reducing acquisition strategy."
One such trade-off could be to not include add-on armor known as B-kits to each vehicle. Goddette said the Army does not expect every JLTV will need that level of armor and protection. He also expects more lightweight protective material to be developed in the coming years.
Goddette also tried to dispel the belief that the Army no longer needs JLTV if it recapitalizes the Humvee fleet, integrates MRAPs and delivers the GCV. He said JLTV and the Humvee recap "complement one another as part of an integrated Light Tactical Vehicle strategy."
"These two competitive efforts are also synchronized with one another to invest a limited amount of resources up front enabling a 'try before we buy' approach and capitalize on the vast experience our industry partners have gained over that past five years," Goddette said

Turkey's Top Commanders Resign

ANKARA - Turkey's top military commander Gen. Isik Kosaner and the chiefs of the three forces abruptly resigned July 29 in the worst showdown between the secular military and the government of Islamist-leaning Prime Minister Recep Tayyip Erdogan, which came to power in 2002, the Turkish media reported.

Former Turkish Chief of Staff Gen. Isik Kosaner, right, is shown with NATO Supreme Commander Adm. James Stavridis before their meeting in March. (Turkish Chief of Staff via Agence France-Presse)

Kosaner was the chief of the Turkish General Staff. The other three men who resigned are Army Commander Gen. Erdal Ceylanoglu, Navy Commander Adm. Esref Ugur Yigit and Air Force Commander Gen. Hasan Aksay.

News reports here cited a press statement by the three commanders, which said they saw "a need" to resign.
The resignations came only days before Turkey's annual meetings for military promotions.
More than 40 generals and admirals, of the military's 360-plus flag officers, are in jail and facing coup-related charges.

Germany to Press Maritime Patrol Aircraft Pool

BRUSSELS - Germany is looking to make progress on a maritime patrol aircraft pool, a European Union multinational joint headquarters (JHQ) and other high-priority military ideas at a workshop it is hosting in September and October.

At first sight, the maritime patrol aircraft pool looks to have more potential, as the JHQ has been opposed by the U.K. and requires all 26 EU member states taking part in the EU's defense policy to agree for it to proceed.

"Using the European Air Transport Command as a template, a management structure for the coordination of maritime patrol resources and capabilities could be established, bringing together partial, fragmented national capabilities into a European pool," a German Ministry of Defence official said.

The aim of the workshop is to gain thorough information on member states' interest. "Nations who have declared their intention to participate in this initiative will also have to discuss the topic of sharing the use of maritime patrol aircraft in real-world operations," the official said.

The maritime patrol aircraft pool is one of some 300 proposals for pooling and sharing put together by the EU's military staff. Other high-priority project ideas, which have not yet been planned in detail and have also been forwarded to NATO, include:

■ A JHQ, which the U.K. opposes, would build on the existing German Response Forces Operations Command and be used at the operational level by both the EU and NATO.

■ A maritime auxiliary pool would create a European pool of auxiliary ships.

■ Biological detection and defense would be made up of eight subprojects, which comprehensively address capability shortfalls in biological-agent defense.

■ A multinational simulation network would further develop simulation network prototypes such as helicopters. Such networks would offer a broad scope ranging from basic training up to mission rehearsal in complex virtual environments.

■ Multinational academic education would design and implement a European network of military academic institutions with mutual acceptance and recognition of academic qualifications.

As for the JHQ, the German official said that "a detailed analysis of costs has not been conducted so far."

"Next to costs, operational issues are also to be considered. In general, a multinational JHQ could dispose of a 'lessons learnt' department. However, details concerning the possible structure of a multinational Joint HQ have not been worked out so far," he added.

EADS Perplexed by France's MALE UAV Pick

PARIS - The French government's decision to pick Dassault to supply an interim medium-altitude long-endurance (MALE) UAV has left EADS managers perplexed, as the European aerospace and defense group reported July 29 second-quarter operating profits which beat market expectations.

EADS chief executive Louis Gallois said he had difficulty understanding why EADS lost to Dassault in its bid to supply a MALE UAV for the French Armed Forces. Gallois was speaking on a conference call on financial results, which showed a 15 percent rise in underlying earnings to 371 million euros ($527 million) from a year ago.

The market had been looking for earnings before tax and interest of 317 million euros ($451 million) for the second quarter, down from 323 million euros a year earlier, a Reuters analyst poll showed.

EADS has asked for an explanation, as it was unclear whether its bid failed for reasons of operational capabilities, price, or timing, Gallois said. French Defense Minister Gérard Longuet said he would give an explanation, Gallois said.

The government's selection of Dassault maintains a national capability to design combat aircraft and reflects a political will to sustain a French design office rather than fund a German capacity based in EADS, Dassault executive chairman Charles Edelstenne said July 28 at the company's first-half results press conference.

EADS had proposed an upgraded version of the Harfang MALE UAV as an interim solution while lobbying for government-development contracts for the Talarion advanced UAV.

In the results for the first half of the year, sales at Airbus Military, the unit responsible for the A400M airlifter, showed an operating profit of 3 million euros ($4.27 million) after a loss of 161 million euros ($229 million) a year ago. The year-earlier loss reflected foreign exchange effects tied to revaluation of the loss-making contract and recovery of fixed costs on the A400M.

The A400M program booked sales of 412 million euros ($587 million) in the first half.

EADS' ability to execute the A400M program, along with the A380 superjumbo and A350 XWB airliners, will determine whether the company delivers the full-year operating earnings forecast at around 1.3 billion euros ($1.85 billion), roughly stable on a year ago, the company said.

EADS forecasts a significant improvement in earnings in 2012 based on higher volumes, better pricing and improvements in the A380 program.

First-half net profit fell 41 percent to 109 million euros ($155 million) on sales up 8 percent at 21.9 billion euros ($31.2 billion). Of total sales, defense revenues fell 4 percent to 4.9 billion euros ($6.9 billion).

New orders in the period rose 89 percent to 58.1 billion euros ($82.8 billion), with net cash of 11 billion euros ($15.6 billion), down 7 percent a year ago. The orders included a first order shared with Boeing from American Airlines.

"Our results for the first half of 2011 mirror the strong demand in the commercial aviation sector," EADS said in a statement.

"In terms of orders, Paris Air Show was record-breaking for us, particularly thanks to the A320neo (new engine version). The recent historic order by American Airlines adds to this remarkable success story as the strong commercial momentum continues beyond Le Bourget," the statement said.

Thales, Dassault Sign India Mirage Upgrade Deal

PARIS - Thales and Dassault signed July 29 a modernization contract for Indian Air Force's Mirage 2000 fighter jet fleet, the electronics company said in a statement.

The deal was worth about 1 billion euros ($1.42 billion) for Thales, a company spokeswoman said.

Thales will supply the RDY-3 radar, navigation and attack equipment, and electronic countermeasures for India's 51 Mirage 2000 fighter aircraft. Dassault will supply a new onboard computer.

"The extensive involvement of Indian industry within the program will consolidate existing ties with the French aerospace industry and will reinforce long-term cooperation based on cutting edge technologies and the sharing of technical know-how and expertise," Thales said.

Separately, Dassault's Rafale has been shortlisted with the Eurofighter Typhoon for India's contract for 126 medium-range combat aircraft in a deal estimated to be worth $10 billion.

USMC to Test Communications-jamming Device

A U.S. Marine Corps AV-8B Harrier jump jet squadron is set to conduct trials on the services' new Intrepid Tiger II communications intelligence and jamming pod next month.

The device is an open-architecture, commercially derived unit built by the service to quickly and effectively field state-of-the-art electronic attack capabilities on a limited budget. This will be the second iteration of the pod.

Each pod - which is integrated by the service itself, not a contractor - costs less than $600,000 and can be upgraded by simply replacing off-the-shelf internal components without exhaustive integration work or testing, said U.S. Marine Lt. Col. Jason Schuette, who serves in the U.S. Navy's N88 office as the EA-6B and Marine Air Ground Taskforce (MAGTF) electronic warfare requirements officer. Schuette was speaking at the Lexington Institute's Electronic Attack Capitol Hill Conference on July 28.

"In fact, in two years, when I get ready to upgrade whatever is inside this pod, I will just pullout the part and put in the new one," Schuette said of upgrading the device to it's future Intrepid Tiger II configuration. "I will [not] rely on industry to continue to make a part that is old and obsolete; I'll put in the new one."

Eventually the pod will not only collect communications intelligence and jam those transmissions, but also it will be upgraded to provide electronic support.

Schuette said the service was able to build the cheap and flexible pod by leveraging commercial development of the electronic hardware. New civilian hardware can produce very clean signals, he said.

The challenge, said Schuette, is the bureaucracy - the Marines have to convince the test community that the new part will not have to undergo an exhaustive test process from scratch.

"The challenge will be convincing the testing powers-that-be that we shouldn't have to go back and do all sorts integration testing to field this pod that we continue upgrade," Schuette said.

Timely fielding of new technology is critical in the fast moving electronic attack field because technology and threats change rapidly, he said. Fielding upgrades quickly is vital.

The pod will be tested next month with a Harrier squadron and will deploy in the fall if everything goes according to plan, Schuette said. But eventually the pod will also be carried on the F/A-18 Hornet fighter and AH-1 attack helicopters.

In keeping with Marine doctrine, the pod will be used to support Marine ground forces, whose radio battalions will control the pod from the surface. The pilot will be able to control the pod, but the idea is that Marines on the ground control the pod, eventually with a handheld device.

U.S., North Korea Hold Nuclear Talks

UNITED NATIONS - The United States opened discussions July 28 with North Korea, in a move testing Pyongyang's willingness to negotiate giving up its nuclear arsenal.

The U.S. special envoy on North Korea, Stephen Bosworth, greeted North Korea's first vice foreign minister Kim Kye Gwan at the entrance to the U.S. mission to the United Nations in New York before they set the talks underway.

Neither side many any comment before the meetings, which were expected to go on into July 29. The United States has stressed however that these are "exploratory talks" to see if the Pyongyang regime is serious about living up to past commitments on its nuclear program.

The United States considers progress on disarmament to be key to any hopes of improving six decades of hostile U.S.-North Korea ties.

It is the first talks since Bosworth visited Pyongyang in December 2009.

The invitation to New York was made after a meeting between nuclear envoys from North and South Korea at an Asian security forum in Indonesia last week.

The international community is anxious to see North Korea return to six-nation talks on its nuclear weapons, which broke down in late 2008.

North Korea agreed in principle at the six-nation talks in 2005 to scrap its weapons program, but staged nuclear tests in 2006 and 2009.

The North's disclosure in November that it had a uranium enrichment plant, adding a new means to produce atomic weapons, has become a new complicating factor in the talks the North has held with the United States, China, South Korea, Japan and Russia.

U.S. Secretary of State Hillary Clinton invited the North Korea minister for what she called "exploratory talks."

State Department spokesman Mark Toner said July 27 that the Indonesia meeting had been "constructive" but that the communist state needs to do more.

"What we're looking for is in our mind a clear indication that North Korea is serious about moving forward," Toner told reporters.

The United States will be watching to see if the North will recommit to the 2005 agreement "as well as take concrete and irreversible steps towards denuclearization," Toner said.

The North highlighted its mistrust of U.S. motives ahead of the talks.

At a U.N. debate on disarmament on Wednesday, the North's U.N. ambassador said a proposed U.S. missile defense shield in Europe would spark a "new nuclear arms race."

The ambassador, Sin Son Ho, said the United States was seeking "absolute nuclear superiority" and had no "moral justifications" to lecture other countries about proliferation.

North Korea's official news agency said in a commentary July 27, however, that an agreement with the United States formally ending the 1950-53 Korean War could become a "first step" to peace on the Korean peninsula and "denuclearization."

Diplomats have warned that the North is unlikely to make concessions in the talks.

"North Korea is in trouble again. It needs food supplies and its economy is falling deeper and deeper into crisis," an Asian diplomat said on condition of anonymity.

"But it cannot afford to give up the nuclear weapons, which are its main bargaining point."

In a sign of the diplomatic minefield that the United States has been going through in its dealings with North Korea in the past six decades, an aide accompanying Bosworth was seen carrying a copy of "How Enemies Become Friends," a recent book by Charles Kupchan, a former adviser to President Bill Clinton, into the meeting.

Kupchan champions the cause of U.S. engagement with its enemies in the book.

Exchange Rate Behind UAE Rafale Balk: Dassault

PARIS - The price resistance from the United Arab Emirates on the Rafale fighter jet stems from an unfavorable euro-dollar exchange rate, but talks on the French aircraft continue, Dassault Aviation executive chairman Charles Edelstenne said July 28.

The UAE's discussion with Lockheed Martin about a potential purchase of additional F-16 fighters was "not a negative sign," Edelstenne told a press conference on the company's results for the first half of the year.

"Talks are going on," he said.

But with the euro at $1.40, the Rafale's sale price was boosted by the currency exchange rate, Edelstenne said. Dassault could not cut prices by 40 percent to offset the weaker dollar.

"I make Mirages, not miracles," he said.

The euro was trading at $1.43 in early afternoon, with the dollar under severe pressure from the U.S. government impasse on raising the debt-ceiling limit ahead of the Aug. 2 deadline.

Edelstenne refused to disclose the unit price of a Rafale, but he said an export purchase generally involves a political decision to pay a "price premium" that granted "independence of action." As the Rafale is built in France, reflecting a strategic decision on sovereignty, its costs are in euros, making it more expensive than an American fighter aircraft sold in dollars.

On the French government's July 20 decision to start negotiations with Dassault on a supply of the Heron TP medium-altitude long-endurance (MALE) UAV, Edelstenne said this meant sustaining a French design capability in military aircraft instead of paying for the "Messerschmitt design office" in EADS.

Edelstenne said in picking OHB over EADS, Germany made similar national selections in its space procurement.

Asked what the significance was in selecting Dassault as supplier of an interim MALE UAV, Edelstenne said the choice showed a determination to maintain a French national capability in building combat aircraft, as the next manned fighter jet would not enter service for another 30 to 40 years.

The negotiations would determine what sensors and communications payloads would go on the Israeli Aerospace Industries' UAV air vehicle, which is intended to provide an interim solution until the planned Anglo-French new generation MALE UAV enters service, expected in 2020.

IAI has agreed to disclose technical information on the Heron TP, which will be adapted to French requirements, including the ability to carry weapons, Edelstenne said.

The interim MALE UAV could have a service life of around 10 years and could overlap with the new Anglo-French air system, a company executive said.

On an asset swap under negotiation between Safran and Thales, Edelstenne said the airplane engine and equipment maker was holding up a deal by saying "no" to each new proposal from the electronics company. That forced Thales into a corner, he said.

"The valuation levels are a bit extraordinary," Edelstenne said.

Dassault signed an agreement with the government on an asset swap when it took its 26 percent stake in Thales, covering inertial navigation, onboard electricity generation and optronics, Edelstenne said.

Safran's sales in optronics are worth around 600 million euros, and if the business were put into Thales, that would make the electronics company second or third in the world market for electro-optics.

At the Paris Air Show in June, French President Nicolas Sarkozy said the government would impose a settlement if industry failed to reach a voluntary agreement.

Edelstenne said he was "very satisfied" with the Thales first-half results, which were released on July 27. The results displayed early effects of the Probasis restructuring plan and improved management of large programs and contract negotiations, he said.

Dassault reported a 35 percent fall in net profit to 129 million euros from 197 million euros a year ago, as sales dropped 34 percent to 1.32 billion euros from 1.99 billion euros.

The sales and profit slide came from lower deliveries of the Falcon business jet, with a delay in shipment of the Falcon 7X into the second half.

Orders declined to 95 million euros from 99 million euros.

On a production rate of one unit per month, Dassault has delivered six Rafale jets so far this year out of 180 total orders to date.

Privately, company executives expect the French government to stretch out future Rafale orders because of expected defense budget cuts, especially if export contracts are won.

Besides the UAE, Dassault hopes to sell the Rafale to India, Brazil and Switzerland. India is holding to its timetable to buy 126 medium-range combat aircraft, and the Swiss government has shown renewed interest in replacing its F-5 fighters.

Pentagon Seeks To Reduce Subcontractor Costs for F-35

The Pentagon is looking to lower subcontractor costs as it attempts to bring down the price tag of the Lockheed Martin F-35 Lightning II, the Pentagon's director of defense pricing said.

THE PENTAGON'S DIRECTOR of defense pricing, Shay Assad, said the agency is trying to lower subcontractor costs for the F-35 Lightning II program. (LOCKHEED MARTIN)

"What we've learned is that a lot of the money that we're spending is at the subcontract level," Shay Assad told reporters July breakfast with reporters in Washington.

"We're following money," Assad said. "We want to make sure we have a complete understanding of what we think a fair and reasonable subcontract price should be, and we do expect Lockheed Martin to develop their own position."

The U.S. Defense Department expects to have a better picture of the Joint Strike Fighter (JSF) program costs in the fall. Prior estimates have pegged the cost of the overall JSF program - which includes more than 2,400 U.S. jets and an expected 700-plus international order - at more than $380 billion.

This comes as the Pentagon prepares to enter negotiations for the fifth batch of low-rate, initial production (LRIP) jets.

Assad said DoD officials are currently evaluating Lockheed Martin and subcontractor proposals for that batch of aircraft.

"We expect that sometime in the fall we'll commence negotiations, and if it goes according to plan, we should have a deal sometime by the end of the year," he said.

Asked if Lockheed's LRIP-5 price shows a downward trend, Assad said: "We're expecting a downward trend."

DoD is "getting a much clearer view each day" of F-35 cost projections, he said.

The Pentagon is also evaluating earned value management, which had been previously "disapproved" by the Defense Contract Management Agency, according to Assad.

"They have a path, and we're satisfied that if they stay on that path, they'll be OK," he said. "One of the problems is just the ability to accurately forecast their work."

"I think that by the end of this year, they'll be in pretty good shape in terms of having reliable projects and forecasts," Assad added.

Lockheed is getting better at determining common features across the three multiservice jets, which will be operated by the Air Force, Navy and Marine Corps, as well as allies.

The Air Force version is a conventional jet that takes off and lands on a runway, but the Navy version is build to operate off aircraft carriers and the Marine Corps version can launch off smaller ships or runways and land vertically.

"What we're finding is that we're getting much more precise about what is the commonality amongst these things and how should we build those common items, because that's where we'll save some money," Assad said.

The current LRIP-4 batch is the first in which all three versions of the JSF are being built at the same time.

"I would say by the end of this year, early next year, we'll have some very good insight into what the production differences are in the aircraft in terms of what they should cost," Assad said.

The Pentagon is also exploring the possibility of having Lockheed build all Air Force jets for a period, then switching to a different variant, and so on.

That review is expected to wrap up in 60 to 90 days, Assad said.

Iraq FM Hopeful Some U.S. Troops Stay Past 2011

BAGHDAD - Iraq's president has called a meeting to decide whether U.S. troops should stay beyond a year-end deadline, Foreign Minister Hoshyar Zebari said July 27, adding there could be consensus to keep a small number of trainers.

President Jalal Talabani had set last weekend as the deadline for the Iraqi government to give a unified yes or no answer to Washington about some troops remaining, but it expired without an answer from Baghdad.

Zebari told reporters that Talabani had now called another meeting for July 30 to discuss the issue.

Meanwhile, Prime Minister Nuri al-Maliki said in a telephone conversation with U.S. Vice President Joe Biden that the issue would be decided in parliament, his office said.

"The prime minister assured Mr. Biden that in the end it is up to the parliament to decide whether the country needs American forces to stay or not after the end of this year," a statement from Maliki's office said, adding it was Biden who had called Maliki.

Zebari said he believed that some U.S. troops were needed beyond 2011 to train Iraqi forces.

"Is there a need for trainers and experts? The answer is 'yes,'" Zebari said. "I think it is possible to reach a consensus on this," he added.

"The Iraqi government alone cannot reach a decision on this issue. It needs political and national consensus; it's an issue all political leaders should back."

"President Talabani has announced a decision to gather all political leaders this Saturday" to discuss the issue.

"In my assessment, it is possible to reach an acceptable agreement."

The discussions about some troops staying on comes as the nearly 47,000 U.S. troops now in Iraq are packing to pull out at the end of this year under the terms of 2008 pact.

Rebuffed by U.S. Navy, Lawmakers Order New LCS Study

Rep. Duncan Hunter, R-Calif., recently rebuffed by the U.S. Navy in asking the service to review its Littoral Combat Ship (LCS) program, has turned to the Government Accountability Office (GAO) to further examine the shipbuilding effort.

In a July 27 letter to the GAO, Hunter, joined by Rep. Rob Wittman, R-Va., cited his concerns about the program's historic cost overruns and schedule delays, and more recent corrosion and structural issues with the ships.

Hunter and Wittman asked the GAO to "review and as necessary update the August 2010 [GAO] report on the LCS program." Specifically, the lawmakers want GAO to examine:

■ what the Navy is doing to overcome technical design flaws in the first two ships;

■ what the Navy is doing to make sure follow-on ships are delivered with cost and time estimates;

■ what actions the Navy has taken to make certain that mission packages have the capabilities they were intended to have; and

■ provide performance and operational maintenance date on the propulsion systems for both LCS variants.

Hunter, in a July 1 letter to Navy Secretary Ray Mabus, had asked the service "to immediately conduct a formal review of the entire LCS program, provide an assessment of the technical design flaws of the current fleet and determine the best way forward to include the possibility of rebidding this contract so that the program can be put back on a fiscally responsible path to procurement."

Mabus, in a July 7 reply, said the Navy had "faced and overcome the program's past cost and schedule challenges," and addressed many of the issues presented in the GAO's 2010 report.

Noting that both ships have yet to complete all test and trial programs, Mabus wrote that the service now "is confident that we are on a path of success" with LCS.

In addition to Hunter, a group of seven senators, led by Sen. John McCain, R-Ariz., have questioned the Pentagon's handling of the LCS program. In a July 12 letter to Pentagon acquisition chief Ash Carter, the group questioned the Pentagon's certification procedures allowing the program to go forward, and asked for more information on corrosion problems affecting the ships.

Joe Kasper, a spokesman for Hunter, explained that the San Diego-area congressman's intent "is not to terminate the program."

Rather, Kasper said, "it's about efficiency of production, it's about efficiency of dollars. And if there's an opportunity to improve production and reduce costs in the process, then that's important and something worth considering."