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Special Report: Iraqi Aggression and the Politics of the Arab World

Volume 4, Number 35 August 29, 1990

He has detained as hostages the diplomats and workers of numerous nations and used their children in an atrocious psychological manipulation of the peoples of western nations. He has wreaked dread upon innocents by threatening acts of terrorism the world over. His adventurism threatens to take control of the Middle East, choking the flow of petroleum energy, promoting automobile fuel prices climbing to $1.00 per litre, right here in Canada.

Singly, these charges would fetch scorn. In aggregate they invite, perhaps compel the dismantling of this dictator's criminal regime.

On its present course, if unchecked, Iraq in this decade would become a nuclear power with expanded territory including Kuwait, Saudi Arabia, Jordan, and more. Israel would be destroyed at the hand of Saddam Hussein, a man who does not issue idle threats. He has promised to murder "half of" Israel's population thus removing what he calls a "Zionist Invasion". Baghdad would control the world economy and decide at will when North America would have recession, depression, inflation and chaos — all of this achieved through the most heinous infraction of human rights using in cavalier fashion every dread of living history: nuclear, biological, and chemical (NBC) weapons.

George Bush and Maggie Thatcher know that if the world does not deal with its problem now it will be faced with greater danger at a later time when its combative means may not be so potent.

From "Operation Desert Shield" the Pentagon in Washington has already learned the hard way that it does not have enough C-5 Galaxys; that North American sealift capacity is insufficient; and that in this, the largest emergency deployment of U.S. forces since WW II, there is no easy way to move M1A1 tanks and other heavy armour.

Today, logistics alone prevent the U.S. from undertaking a preemptive strike against Iraq and temporarily limit U.S. forces to a defensive role.

As if biding his time, U.S. President Bush seems to patiently endure the psychological war fare Saddam has engaged against the world.

Comment:

IS WAR INEVITABLE?

Saddam Hussein's dangerous regime is too great to ignore. His country holds stockpiles of hideous chemical weapons and has or will soon have "The Bomb". Saddam has threatened use of chemical weapons against all opponents and past crimes leave no doubt that his threat is real. He has invaded a sovereign Arab nation, Kuwait, plundering its beauty and its wealth, raping its women, seizing homes, releasing inmates of Kuwait's jails and mental asylums, and robbing the Kuwaitis of their right to self determination. And his track record shows that he is capable of anything.

The impressive advancement of Iraqi scientists in a quest for mass destruction weapons; rapid progress in ballistic missile technology; undying pursuit of long range artillery development; advanced research into biological warfare agents; the continued growth of Iraq's million-plus troops; an Iraqi defence budget comprising 20 percent of the country's GDP; conspicuous support of terrorism; and rumours about misbegotten Soviet tactical nuclear weapons; coupled with Saddam's propensity for bloodshed using any new "toy" he can lay his hands on, all point to a nation readying for boundless aggression — a world of  trouble.

Saddam will not just go away. Impervious to challenge he continues to irradicate the balancing counter-views of internal political opponents.

Bush seems indifferent to the hopes of U.N. Secretary-General Javier Perez de Cuellar who will meet tomorrow in Jordan with Iraqi Foreign Minister Tariq Aziz in an effort to mediate personally.

Bush's conditions have been simple and simply stated. "He must get out of Kuwait and free all hostages." But Saddam virtually spat at those demands with military entrenchment of Kuwait where he hopes to fight a war outside of Iraq's geography; by declaring Kuwait to be a province of Iraq; and by "toying" with his Western hostages, one of whom has recently died of a heart attack.

Clearly, George Bush will select a course of action that promises to ensure his presidency will not be marred by this crisis and at the same time reduces the likelihood of the U.S. having to relive "Operation Desert Shield" in coming years. If the job can be done while he is in the Middle East with an armed force of some 300,000 and multinational support, he will likely do that job irrespective of whether it entails surgical air and land force strikes against Iraq's chemical and nuclear weapons facilities (and Saddam Hussein himself), or an all out war.

Unless Saddam Hussein's regime collapses due to a timely misfortune befalling him — and rumours `on the streets' in Washington suggest endless possibilities — then an armed clash is a likelihood. When the U.S. Joint Chiefs of Staff inform President Bush that they have fully deployed their assets — perhaps by mid to late September — armed conflict in the Persian Gulf region will be imminent.

Micheal John O'Brien

GETTING THERE AND FIGHTING — A REPORT FROM WASHINGTON

"The hardest environment we've ever tried to operate in." Delivered by U.S.M.C. Deputy Commandant General Jack Dailey at the annual Modern Day Marine Military Exposition in Washington D.C., this summary of the conditions that the United States Marine Corps has encountered in Saudi Arabia set the tone of the Corps' fourth report to industry.

Dailey, who was joined by Corps Commandant General Alfred M. Gray for parts of his presentation, like senior officers at associated seminars spoke of the success of the sealift which provided the U.S. commanders with the heavy equipment that they needed to establish their presence on the far shore. "We have been doing our job the way we've been designed to do over the years," was the view of the U.S.N. Military Sealift Command's Admiral Francis R. Donovan on the success of the Maritime Prepositioning forces stationed at Guam and Diego Garcia. Seven major ships were dispatched from these bases and three more either en route to or at U.S. ports for maintenance were swiftly turned around — one putting into Singapore to have its hull and rudder scraped to enable it to make best speed.

Admiral Donovan was pleased too with the performance of the Ready Reserve fleet, which is maintained on behalf of the U.S.N. by the U.S. Maritime Administration. However with some equipment being stored at the ports on large Ro-Ro ships in preference to being exposed to the harsh conditions ashore, and the prepositioning ships committed to support roles, the Navy will have to dig deeper into the Reserve fleet. As it does so, said Donovan, it will find only old breakbulk ships. It will therefore have to go into the charter market for high capacity container and Ro-Ro ships. It has already chartered three such vessels, and with U.S.M.C. planners now working towards what they term a `downstream' plan for sustainability beyond the fifty-fourth day on shore, Donovan believes that the need for specialized containers including refrigerated, liquid, and dry powder types will make heavy demands on the resources of the commercial market.

The demand on transportation resource will continue to extend across into wide-bodied jets. Thirty-eight aircraft have already been chartered from 16 airlines including Pan Am, Delta, Continental, and United Parcel Service. These charters extend beyond the Civil Reserve air fleet and at present are said to have typically been arranged at a rate of $308,000 (U.S.) for a 7,000 mile flight.

Some idea of the scale of the planners' demands may be found in the 6,000 tons of food purchased on behalf of the U.S. expeditionary force in the two weeks after first deployment. This surge demand included 450,000 pounds of canned ham and 1 million pounds of veal and rib-eye steaks.

Some of the equipment that has been deployed to Saudi Arabia is still in the developmental phase — notably GPS navigation equipment and the Tactical Air Operations Module of the command and control infrastructure. Instructors have been posted to deployed units to oversee its introduction, and both General Dailey and General Gray stressed that they would be seeking an

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urgent dialogue with industry to overcome operating problems across the entire range of deployed equipment.

The U.S.M.C.'s `Want List' for equipment reflects the conditions that it has encountered in Saudi Arabia. These said General Dailey make the Corps' Twenty-Nine Palms desert facility in Colorado "seem like Aspen, Colorado." Daytime temperatures of around 115 degrees and relative humidity in excess of 50 percent might make night fighting an imperative. Dust storms due to start in the next few weeks might rule out the possibility of any action until they subside.

The U.S.M.C. is well experienced in night warfare techniques and has much of the necessary equipment. It is less well-equipped to counter mine warfare and sees procurement of the right system as its top priority. General Dailey said that inexpensive fusing has made the mine a readily affordable form of defence. The Corps is "completely open in terms of opportunities" for equipment that it can use in shallow water as its amphibians approach the shore, and other systems for use once the marines are disembarked. "It is still a case of sending out an infantryman with a bayonet to find the mines," he told his audience of industry executives.

The need for NBC clothing has been widely discussed, and General Dailey is particularly concerned that there is as yet no practicable solution to the process of degradation that starts "as soon as you open the bag that it's packed in". Thus the need to conserve suits for combat use imposes limits on the amount of training that can be done, and points to the need for systems which ensure a rapid reaction to the onset of NBC attack.

That might lead to an increase in the demand for robot NBC reconnaissance systems. Indeed General Dailey considers that since Saudi experience has pointed to the difficulty of getting peak efficiency from the human resource in a harsh environment, there are "unlimited possibilities" for the application of robotics to NBC and mine warfare and any tasks which make heavy physical demands.

Other U.S.M.C. requirements may be set in a less compelling time frame. Having axed its requirement for half of the M1 MBTs that it was originally scheduled to receive, the U.S.M.C. is now seeking a 23-tonne light tank, and hopes that it will be able to gain Army support for a similar project. An off-the-shelf solution — which could typically favour the Cadillac Gage Textron Stingray or the French MARS 15 — seems a prerequisite, and Dailey says that the Corps might be prepared to trade off a loss of some ballistic protection to acquire the higher degree of mobility that it requires in its armour.

The programmes for air defence and assault gun versions of the LAV are unlikely to be put into a higher gear if there are risks that doing so will involve compromising on the original requirements. Cadillac Gage Textron has recently been awarded a contract for the development of a 105mm turret for the latter, but General Dailey does not believe that the Assault Gun will go far enough towards meeting the requirements for the light tank for it to be offered as a form of compromise solution. Antiarmour capability is a high priority with a one-man ATGW that can defeat any MBT as a particular need. That may not be entirely practicable, but General Dailey says that the Corps is "looking at ways of reducing warhead size."

Because it likes to "fight with its own package" the U.S.M.C. would also like to acquire its own Airborne Early Warning assets. The problem is the size of the market and difficulty in overcoming non-recurring development costs. It might be able to get approval for some suitably equipped C-130s for its Reserve units — but, said General Dailey, "not if it means that we give up medium airlift to get them."

U.S.S.R. WOULD ONLY JOIN A U.N. PEACEKEEPING FORCE IN GULF

The Soviet Union will not use force in the Gulf crisis, although it might take part in a U.N. multinational peacekeeping endeavour, says Soviet Foreign Minister Eduard Shevardnadze. "Even though we voted for U.N. Security Resolution 665 — which permits using force if ultimately necessary in pursuit of U.N. sanctions against Iraq — and bear our share of responsibility for its implementation... we have no such plans," Shevardnadze told a press conference last Saturday shortly after the U.N.S.C. approved Resolution 665.

"Our contacts with the Iraqi leadership did not stop even for one day. Aside from political problems, practical matters were discussed, specifically those dealing with the evacuation of Soviet citizens from Kuwait and the departure of women and children from Iraq."

Shevardnadze said Soviet military experts would remain in Iraq for the time being, but "if problems emerge and the necessity arises", they will be brought home. He again insisted that

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Soviet military experts had absolutely nothing to do with "Iraqi plans for military operations". Press claims of such involvement "are at variance with reality," Shevardnadze protested.

IRAQ VERSUS KUWAIT

Iraq first staked a claim to the territory now called Kuwait some fifty-five years ago. Then, as now, Baghdad claims were based partly on historical and partly on ethnic and geographical grounds. In the mid 1930s, in 1958, and in 1961-62 Iraq threatened to occupy Kuwait. In 1961, British troops moved in to protect Kuwait from threatened Iraqi aggression, and were later replaced by a pan-Arab force. Iraqi designs on Kuwait were put aside only in February 1963 when Iraqi dictator Abdel Karim Kassein was violently overthrown by adherents of the Ba'ath Party including, ironically, a young man named Saddam Hussein. The new Iraqi regime recognized Kuwaiti independence in October 1963.

Saddam Hussein's reasons and justifications for annexing Kuwait today involve more contemporary calculations. Foremost among these is Iraq's massive multi-billion dollar war debt to Kuwait. (Along with other Gulf states, Kuwait bankrolled Iraq's wasteful eight-year-long war in Iran.) Saddam's foreign debt exceeds $70 billion (U.S.), and Iraq's annual shortfall of hard currency is at least $7 billion (U.S.). Kuwait was next door, rich and vulnerable, so Saddam simply helped himself to his neighbour's treasury. Along with Kuwait's foreign reserves and investments — estimated between $100 and $200 billion (U.S.) — he hoped to inherit Kuwait's vast overseas refining facilities and retail outlets.

Secondly, Saddam figured that his takeover of Kuwait would cow all other Gulf oil sheikhdoms into submission, making him the boss of OPEC. Certainly he has put an end to chronic Kuwaiti oil overproduction which brought down the price of oil, and he has succeeded in driving the price per barrel sky-high. Only western sanctions prevent Saddam from cashing in.

Thirdly, Saddam's conquest gives him his long-desired Gulf coastline with good port facilities. This acquisition obviates Saddam's need to hold onto Iranian territory in the disputed Shatt-al-Arab waterway, hence Saddam's new-found willingness to make peace with Iran on Iranian terms.

In acting so boldly, Saddam has relied on the widespread, deep resentment of tiny, oil-rich Kuwait — and the other Gulf oil oligarchies — felt by the poor Arab masses throughout the Middle East. Almost all Kuwaitis were fabulously and arrogantly rich. And, while the government of Kuwait gave ritually to the usual pan-Arab causes — Palestinian refugees, the PLO, chronically weak Jordan — the sense of unfairness felt by the average Arab outside the Gulf never quite faded.

IRAQ VERSUS SAUDI ARABIA

Like the Emir of Kuwait, Saddam Hussein considers the kings and princes of Saudi Arabia to be illegitimate rulers, foreign bankers hoarding the oil riches and occupying the Islamic holy places of Mecca and Medina that all rightly belong to the believing Arab masses.

Knowing that their claim to the throne in the vast Arabian peninsula has always been tenuous, the rulers of Saudi Arabia have essentially paid protection money for years to every other Arab regime as a means of warding off trouble. Hence, their enormous annual contributions to Syria, Iraq, and the PLO. Nevertheless, the billions paid out by the Saudi kings seem to have bought little loyalty.

The hundreds of millions of dollars worth of advanced western weaponry purchased by the Saudis over the years is now proving obviously insufficient to defend the kingdom. So, the Saudis have had to suffer the humiliation of calling in non-Arab defenders, exposing the monarchy to the ridicule and wrath of Islamic purists. The Saudis have given Saddam great ideological ammunition, allowing Saddam to pose as the defender of Islam against the "evil West" and its Arab (Saudi) collaborators.

JORDAN

The most pathetic figure is surely King Hussein of Jordan. Sandwiched between Iraq which threatens to annex Jordan on its way to conquering Jerusalem, and Israel, which views Jordan as an illegitimate but necessary buffer country, King Hussein is literally between Iraq and a hard place.

His country's population is largely Palestinian and supportive of Saddam Hussein. So, the King has become Saddam's advance man, defending his character and supporting his conquest of Kuwait. The King only half-heartedly agreed to comply with the blockade against Iraq after getting a stern warning from his long-time friend, George Bush.

Jordan's internal instability has been exacerbated by the flood of Palestinians fleeing the Gulf states. The King's modus vivendi with Israel is unraveling as Israel grows increasingly nervous about Jordanian-Iraqi military cooperation. Any move of Iraqi troops into Jordan would bring immediate war with Israel and could spell the end of the Hashemite kingdom.

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Special Report: Iraqi Aggression and the Politics of the Arab World

IRAQ AND IRAN

Enemies for so long, the national interests of Iraq and Iran now seem to coincide. Even prior to the invasion of Kuwait, Tehran and Baghdad collaborated to push up the price of oil at OPEC's last meeting. Both need the increased revenues to rebuild their war-torn economies. Tehran has sat carefully perched atop the fence during the recent crisis, happy to see its nemesis jumped upon by the West. Rumours persist, however, that Iran might be willing to help Iraq skirt the international economic blockade, for a price. On the basis of the principle "the enemy of my enemy is my friend", the U.S. is considering new overtures to Iran, hoping to free some western hostages in Lebanon in the process.

IRAQ VERSUS EGYPT

Rivalry between the dynasties of the Nile Delta and the Mesopotamian Basin is ancient, today's Egypt-Iraq saw-off is but one more replay. Ever since the end of the Gulf war, during which Egypt backed Iraq, Hosni Mubarak and Saddam Hussein have been in competition for leadership of the Arab world. This competition is delineated by Egypt's pro-western, conservative, and conciliatory-to-Israel posture, versus Iraq's anti-western, anti-Israel, revolutionary approach. Iraq's size and military might pose the only real challenge to Egyptian leadership today. While seeking renewed Arab legitimacy (having been banished for years because of Sadat's peace with Israel), Egypt has nevertheless sought to maintain strong ties to the West. Mubarak has become a key U.S. partner in the search for Arab-Israeli peace. In this dispute as well, Mubarak has tied Egypt firmly to the West, making Egypt a target for Iraqi-sponsored terrorism and for the fiery anger of Islamic fundamentalists.

Now more than ever, Egypt will be dependent on massive western aid to keep its hopelessly bankrupt economy breathing. The Mubarak government must be worried about absorbing Egyptian workers fleeing the Gulf into an already strained economy, and about making do without the foreign currency remittances they formerly provided. Over 40,000 Egyptians are now on their way home from Iraq, and another 800,000 still in Iraq are expected to try to leave soon.

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THE PLO AND THE PALESTINIANS

Yasser Arafat has destroyed his little remaining credibility, shuttling about the region with the ultimate oxymoron — a Libyan peace plan. The PLO has been Saddam Hussein's most enthusiastic supporter, with Libya and Jordan running a close second and third.

Had Arafat sat on the fence in this U.S.-Iraq confrontation, his position might have been understood given the PLO's dependence on Saddam. (The PLO has extensive terrorist and organizational infrastructure in Iraq.) But Arafat's outright support for Saddam's designs on Kuwait and Saudi Arabia, and for Saddam's chilling threat to destroy half of Israel set Arafat's cause back light-years.

That Palestinian leaders in the West Bank, Gaza, U.S., and elsewhere would proclaim unmitigated support for a bloodthirsty murderer who now wishes to assume pan-Arab leadership on top the ruins of Israel has shocked Israelis and made any Palestinian-Israeli settlement ever more distant. Arafat's chances of restoring his dialogue with the U.S. are now slim and even the Egyptians aren't likely to push for him either. President Mubarak told CBS News that Arafat had "lost lots of his credibility."

Similarly, the PLO should forget about annual transfer payments from Kuwait and the Saudis which were used to fund the intifada, the PLO's enormous overseas "diplomatic operations". Tens of thousands of Palestinians who worked in the Gulf and who supported "the fight with Israel back home" with their salaries have lost their jobs. Palestinians say that the status quo with Israel is so bad that they've nothing to lose by supporting Iraq. They hope that Iraq's military power can force concessions from Israel and improve their lot. For the moment their gamble seems to have backfired.

SYRIA

Syrian leader Hafez al-Assad received a personal phone call from George Bush one Sunday morning to consult on the Gulf crisis. Bush actually began courting Assad — formerly enemy number one in the U.S. — earlier this year in the hope of getting some hostages out of Lebanon. Syria was the only Arab country to support Iran during the Gulf war and is quite pleased to see its arch enemy Iraq mired in a mess of its own making. Assad's enmity to Saddam is helping improve Syria's standing in Washington. Bush is carefully ignoring Assad's culpability in the 1983 slaughter of 260 U.S. Marines at their Beirut barracks.

TURKEY

Non-Arab but largely Islamic Turkey has been long embroiled in a dispute with Baghdad over water resources. The Turks are building a giant river dam on the Euphrates River which flows from Turkey down through Syria and Iraq. Observers fear that the Ataturk Dam project could provoke a ferocious war in the mid 1990s when the dam is completed and the Euphrates' flow slows to a trickle.

Turkish agreement to close Iraqi oil pipelines that run through Turkey, and to base U.S. long-range bombers (F-111s) on Turkish soil has heightened tensions between Ankara and Baghdad. Turkish President Turgat Ozal has arrogated emergency war powers to the government in order to prepare for a possible confrontation. Turkey stands to lose up to $3 billion (U.S.) a year in trade with Iraq because of U.N.-imposed sanctions and is looking to the West and to the Saudis for compensation.

THE OTHER GULF STATES

The biggest economic losers so far are Kuwait's neighbours along the Gulf. The banks of Bahrain, Qatar, and the United Arab Emirates have been squeezed at both ends by the crisis — by panicked depositors who have withdrawn billions in cash from the region in recent weeks, and by western creditors who have cut off lines of credit. The worst hit state aside from Kuwait is Bahrain which has no oil revenue of its own. Bahrain has prospered over the last two decades as a banking haven for the huge wave of funds generated by the oil boom. There are 55 offshore banks in Bahrain. U.S. officials are concerned that these institutions could be used for sanctions-busting activity. The Gulf states had hoped to use their huge banking industry to finance privatization and economic redevelopment in the 1990s. Now that strategy is in serious trouble.

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A NEW CHAPTER IN THE `CANADIAN HELICOPTER' SCUFFLE

In the fall of 1983, Canada's helicopter industry was born when agreements were signed to establish a Canadian presence for two of the world's leading helicopter manufacturers — Bell Helicopter Textron Incorporated of Fort Worth, Texas; and Messerschmitt-Bolkow-Blohm Gmbh (MBB) of Munich, Germany. Investment (in 1983 dollars) in the Bell project at Mirabel, Quebec included $165.2 million from the federal government; $110.2 million from the Quebec government; and $238.7 million from Bell. The cash infusion into the MBB Helicopter Canada Limited venture at Fort Erie, Ontario consisted of (in 1983 dollars) $20.9 million from the federal government; $14 million from the Ontario government; and $34.4 million from MBB. Additionally, $100 million of federal government money was added to a Pratt & Whitney Canada investment of $152 million for the development of the PW200 family of small turbine engines which were to be installed in both Bell and MBB helicopter models.

Because of the relative size of the two investments — for Bell, $514.1 million and MBB at $69.3 million — MBB has been perceived as "the other manufacturer of helicopters in Canada". Today, that `other helicopter manufacturer' is about to enter a new era of tough competition and perhaps an industrial rationalization.

The collapse of the Canadian Forces Light Helicopter (CFLH) project has removed the most attractive "carrot" which, apart from lucrative financing, drew MBB and Bell into Canada. Bell continues to manufacture a substantive portion of its commercial product in Quebec and MBB is concentrating on its BO 105LS line in Fort Erie, meanwhile, outsider Aerospatiale is competing with MBB and Bell for scarce Canadian paramilitary business. And ironically, MBB and Aerospatiale may soon merge.

Competition for Canadian paramilitary helicopter acquisitions has been fierce for decades, but never so fierce as in times of a declining military market. Last Friday, Aerospatiale of Grand Prairie, Texas brought that message to Toronto, Ontario in the form of fully-equipped aviation delegations from the Maryland State Police and the Detroit Police Department accompanied by a bevy of Aerospatiale marketing executives. The two police forces operating Aerospatiale Dauphins and Twinstars with state-of-the-art cockpits and specialized law enforcement equipment, demonstrated to local agencies the utility and efficiency of their equipment.

The visit follows the landmark decision earlier this year by the Ontario Provincial Police (OPP) which agreed to purchase two Aerospatiale "Twin Stars" (AS 355 F2R), instead of the `made-in-Ontario' MBB BO 105LS. The two new OPP aircraft replace aging Bell 206 "B" and "L" models which Aerospatiale will take in trade presumably in March of 1991 when they deliver the OPP's new machines. Notably, these will be the first helicopters to use the new F-2R variants of the ubiquitous C20 Allison engine which, according to both the airframer and the engine builder, make the AS355 "a true twin-engined helicopter" putting the AS355 a step ahead of competitors.

Coincident in timing, as the OPP receives its Twinstars the merger of MBB and Aerospatiale will likely be finalized. In view of this, the Ontario government decision to buy from Grand Prairie instead of MBB in Fort Erie has raised eyebrows toward the question of how the proposed merger of MBB and Aerospatiale helicopter divisions will impact on MBB's Fort Erie facility.

According to Don Chambers, recently appointed vice president of marketing for MBB, the Fort Erie plant is not only a full manufacturing operation, but also has significant engineering and product support proficiencies. Aerospatiale officials suggest that the proposed merger could allow the OPP and other customers to receive product support for the new AS355s from Fort Erie. (See The Wednesday Report, April 11, page 10, "Aerospatiale And MBB To Unite Their Helicopter Activities".)

No one questions the reasoning which favoured the Twinstar over the MBB BO 105LS. According to OPP Inspector Colin Brittan, "The Twinstar was more suitable for the OPP operating requirements. Because we must fly extended distances, fuel capacity was critical. In this area the Twinstar shines." But consistent with traditional government moods during tough economic times, one factor seems to have stood above the rest. "Aerospatiale was the lowest bidder," said Brittan. Chambers confirmed that saying, "We [MBB] were $5-600,000 higher."

Although there have been rumours suggesting that the MBB line could fold, Aerospatiale officials contacted in Texas and Ottawa say they expect the two companies will retain their identities, product line, and respective marketing forces and will continue to compete in certain areas. Chambers of MBB says he too has been told that the merger will be "beneficial" to the MBB operation. And all parties say "A solution can be worked out."

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PEOPLE: LIONEL LEVEILLE LEAVING OERLIKON AEROSPACE INC.

In Saint Jean sur Richelieu, Quebec, the employees of Oerlikon Aerospace Inc. `partied' last Thursday at the College Militaire for one of their most likable friends and colleagues, Lionel Leveille, who leaves his position as Executive Vice-President of Operations this Friday.

Oerlikon, like other companies sharply dependent on the skittish defence business, has undertaken an extensive diversification programme that applies the firm's technological assets in a broader scope, merchandising them into commercial markets. Owing largely to this fact, and partly due to the company's successful achievement and conclusion of most of the major milestones in its two, large, defence programmes — FAADS in the U.S., and LLAD in Canada — Leveille maintains that there is now an "extra management level" that will be eliminated with his resignation.

Oerlikon President, Dr. Marco Genoni showed obvious disappointment in his tone when contacted by The Wednesday Report, but took apparent delight in pointing out that Leveille would continue to do some "important work" for the company. "Lionel has made a significant contribution to Oerlikon," said Genoni.

Leveille told The Wednesday Report that he intends to do some consulting while assessing his career prospects. Of his commitment to the aerospace industry where Leveille has made sizable contributions, there is little doubt. "I intend to stay in aerospace," said Leveille. "It's a business I love."

`DUE DILIGENCE' COMMENCES FOR SALE OF DE HAVILLAND

According to high placed officials at Aerospatiale it was Boeing that approached the French aerospace giant with an offer to sell de Havilland for $200 million (U.S.). "Boeing has had enough. They don't want to loose any more money on de Havilland," The Wednesday Report was told.

Last Monday, Aerospatiale began the process of "due diligence" wherein, according to Aerospatiale's Canadian President Michel Troubetzkoy, a 50-50 partnership of Aerospatiale-Alitalia will evaluate the current state of de Havilland and produce a business plan that will determine: viability of the company under new ownership, a "reasonable" acquisition price, what other financial and political considerations may be entailed in a transaction, and what impact the purchase would have on the partnership's other operations.

"We are not buying our competitor," said Troubetzkoy in a pre-arranged interview with The Wednesday Report last Friday. Troubetzkoy believes that British Aerospace and Fokker are the prime competitors of Aerospatiale's aircraft manufacturing operations. "We simply don't have thirty seat aircraft such as those of the de Havilland [Dash 8] family."

Since deregulation of the air transport industry in the United States and in Canada, and since the early '80s energy crisis, a preponderance of short to medium stage-length "regional" turboprops have entered the market. "There are too many manufacturers in the marketplace. An industrial rationalization is inevitable," noted Troubetzkoy.

By mid-October, the Aerospatiale-Alitalia analysis of the de Havilland deal should reach a conclusion. Final negotiations with Boeing will then determine whether or not there will be a sale. At present it is not clear what portions of de Havilland will remain, or what if any new form the troubled aircraft manufacturer will take.

DND FORMS BIOLOGICAL/CHEMICAL REVIEW COMMITTEE

Bill McKnight, Minister of National Defence has announced the formation of a Biological and Chemical Defence Review Committee to report annually on DND's biological and chemical research programmes and facilities. In addition, training conducted by the Canadian Forces will be scrutinized at various locations. The committee will be chaired by Dr. E.R.W. Neale of Calgary, Alberta, with Dr. C.E. Holloway of York University, Toronto, and Dr. G.L. Plaa of the University of Montreal as members.

Concurrently, DND has released the first annual review of its chemical and biological defence programme "to provide Canadians with a better understanding of the issues surrounding DND's chemical and biological research and development work". Identifying focal points of Canadian activities concerning chemical and biological self-defence including hazard assessment, detection, protection, decontamination and therapy, the report says those activities represent no risk to the public or the environment.

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THIRTY PERCENT OF SPAR TO GO TO MATRA

France's Matra could acquire 30 percent control of Spar Aerospace Limited. As reported August 1st in The Wednesday Report, Spar Chairman Larry Clarke has been seeking new funding and new technological alliances to aid his ailing company in the face of declining performance. Although the recent quarterly statements of Spar show signs of progress, there is nothing to indicate any change to the traditional feast and famine routine the company has endured in a cyclical pattern since it was founded.

Complete details of the transaction were unavailable at press time, however, sources indicate that the deal is linked to "Special Shares" purchased at nominal cost — 1.07 million issued at $151,000 — with 10-to-1 voting authority. With these shares issued to a holding company owned in the main by Larry Clarke, because there are only 11,184,126 subordinate voting shares issued, and by reason of the "Special Shares" being issued with preemptive rights in an anti-dilution clause which keeps the "Special Shares" at a minimum of 10 percent of the subordinate voting stock, Clarke has held an iron-clad grasp on the control of Canadian shareholder-owned Spar. Redeemable at $.075 each after June 30, 1991, the "Special Shares" have a limited life. Obviously, any deal with Matra is likely to take place before they, along with Clarke's control, expire.

Matra, with its own satellite "bus", the basic infrastructure for a modern, orbital satellite, would be in a position to make a valuable contribution to Spar's space business future. Tied intimately to the European space programme, Matra's connections to European and Third World programmes could obviate present concerns that Spar might be tied too closely to the floundering efforts of NASA. Full details of the Matra connection to Spar are not expected until the restructuring of Spar's senior management has been completed. (See The Wednesday Report, August 1, page 2, "Spar Restructures To Streamline Its Operations".)

UPDATE: DND's HLVW PROGRAMME IS TWO THIRDS COMPLETE

Mobile Command's Heavy Logistics Vehicle Wheeled (HLVW) programme now has slightly less than 800 vehicles completed by Urban Transportation and Development Corporation's (UTDC) Kingston, Ontario facility. The $250 million contract calls for a total of 1,200 vehicles in 8 variants.

According to Bob Gawley, UTDC's Manager of Marketing and Communications, five of the eight variants have completed reliability, adaptability, maintainability, and dependability (RAM-D) testing. The Recovery and Medium Floating Bridge variants are partially through the testing and are currently waiting for a time slot to start up again — probably September. The Dump-Box variant which had encountered some balance problems (see The Wednesday Report, May 9, page 9, "HLVW Project Meets Snag On Dump Variant") is currently on hold while DND reviews specification design. The five Dump-Box variants that have been built will be pushed to the end of the production line while UTDC awaits the results of the review.

Colonel Campbell, HLVW Project Manager was unable to comment on the status of vehicles expected to be shipped to Germany — the original projection was approximately 400 vehicles — as the Programme Implementation Plan which lists distribution figures is currently under review. Figures will be released at a later date.

CDC FINALLY AWARDED $89 MILLION CANTASS CONTRACT

Computing Devices Canada (CDC) of Bells Corners, Ontario has been awarded a contract valued at $89 million by the Department of National Defence to supply Maritime Command with the Canadian Towed Array Sonar System (CANTASS) for the twelve Canadian Patrol Frigates (CPF), HMCS Nipigon, and HMCS Annapolis.

FIELD SELLS BEECH 1900 TO BRITISH COLUMBIA CARRIER

Field Aviation Company Inc. of Mississauga, Ontario — the exclusive Canadian distributor of aircraft manufactured by Beech Aircraft Corporation of Wichita, Kansas — has sold a Beech 1900 C airliner to Central Mountain Air Ltd. of Smithers, British Columbia. The purchase includes options for Central Mountain to acquire the Beech 1900 "D" at a later date.

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A Guide to Canada's Participation at Farnborough, Sept. 2 - 9

FARNBOROUGH INTERNATIONAL AIR SHOW

THE CANADIAN PARTICIPANTS

Allied-Signal Aerospace Canada oversees the operations of Allied-Signal Canada's two operating units, Garrett Canada and Bendix Avelex. These companies are involved in the design, development, manufacture and support of advanced electronic control systems, engine control systems, and electro-optical devices.

Bell Helicopter Textron, a division of Textron Canada Ltd. (BHTC), is the first totally integrated helicopter manufacturing company in Canada. BHTC, the commercial division of Bell Helicopter Textron totally oversees the step-by-step fabrication of the single engine Jet Ranger 206B and Long Ranger 206L as well as two twin Models, the 212 and the 412.

Boeing Canada, de Havilland Division manufactures the Dash 8 family of regional airliners. The 37/39-passenger Dash 8 series 100 and the 50/56-passenger Series 300 are firmly established, and the 70-passenger high-speed Series 400 is currently under advanced study.

Bristol Aerospace Limited is a leading Canadian aerospace firm with well over half a century of experience. Bristol is renowned for the CRV7 rocket weapon system, a 70mm system for both fixed and rotary wing aircraft; the Wire Strike Protection System (WSPS) designed to provide protection to helicopters against frontal strikes from horizontally strung wires and cables; and the F-5 Life Extension and Performance Enhancement Programme to extend the life of the F-5 into the 21st century.

CAE Electronics Ltd. designs and manufactures commercial and military flight simulators and training devices. CAE-Link Corporation consists of three divisions: Link Flight Simulation Division, Link Tactical Simulation Division, and Link Training Services Division. Together they provide advanced technology flight simulators, weapons systems trainers, naval tactical and operational training systems, ship propulsion systems and logistic support to all U.S. military services.

The Canadair Group of Bombardier Inc. is Canada's largest diversified aerospace manufacturer. It designs and manufactures jet transport aircraft, amphibious forest firefighting aircraft, unmanned airborne surveillance systems, aircraft components for major aerospace manufacturers, and also provides engineering and technical support for various military aircraft including the CF-18.

Canadian Marconi Company (CMC) is an electronics company known internationally for excellence and innovation in the design, manufacture, integration, and support of advanced, high-technology products. The company has developed a range of products including avionics, specialized components, tactical communications, data communications, navigation aids, and radar.

Computing Devices Company, a unit of the Control Data Corporation is a major international defence contractor, applying its expertise in a number of core technologies. These include digital signal processing, multi-scan conversion techniques, ballistics, and high resolution digital displays.

Field Aviation Company Inc. is an aviation sales, service and support firm offering a complete range of services to the general, commercial and military aviation communities in Canada and abroad.

Heroux Inc. is a Canadian company with two U.S. subsidiaries, McSwain Manufacturing Corporation and A.B.A. Industries Inc. Heroux Inc. specializes in the manufacture and maintenance of landing gear and landing gear components; A.B.A. concentrates on machining, manufacturing and assembling complex jet-engine parts; and McSwain specializes in machining high-precision parts for the aerospace, electronic, heavy equipment and data-processing industries.

Indal Technologies Inc. specializes in the design and manufacture of high-technology systems for aerospace, marine, defence, and commercial applications. Indal is a recognized leader in aircraft handling systems and shipboard helicopter hangars, and is developing unmanned vehicle handling systems for land and sea applications.

Innotech Aviation, a member of the IMP Group is unique in Canada in its diversified capabilities. Principal areas of expertise — designed to incorporate a wide variety of aeronautic endeavours — include aircraft interior completion and modification, airframe structural modification, and remote sensing technologies.

Litton Systems Canada Limited produces highly sophisticated electronic equipment. Best known for its engineering and manufacturing capabilities in airborne and maritime electronics, Litton also has credentials in the design, manufacture and integration of large scale, ground-based special purpose systems. Products include inertial navigation systems, flight inspection systems, automated test equipment, and airborne search radar.

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Mecaero Canada Inc., associated with Mecaero S.A. of France is a manufacturer of components such as specialized fasteners and a wide range of parts for the aerospace and defence industries.

Pratt & Whitney Canada (P&WC) is a subsidiary of United Technologies Corporation of Hartford, Connecticut. A leading manufacturer of gas turbine engines for the regional transport and general aviation markets, P&WC designs, develops, manufactures, markets and supports turboprop and turboshaft engines, small turbofan engines, and auxiliary units.

Spar Aerospace Limited specializes in the design, development, manufacture and servicing of systems for the space robotics, communications, electro-optics and aviation markets. The Gears and Transmissions Division manufactures precision gears, gearboxes and transmissions for turbine engines of fixed and rotary wing aircraft.

Specialized Industrial Suppliers (SIS) is a group of thirty specialist firms exhibiting together. The SIS participants represent the third tier capabilities of the Canadian aerospace industry.

Walbar Canada Inc. produces precision machined compressor blades and vanes, turbine blades, vanes and nozzle segments. The company possesses a broad range of manufacturing capabilities with more than 160 specialized machines.

FARNBOROUGH TO SEE SEA SKUA AS SHIP-LAUNCHED MISSILE

In a time when the world's navies are at sea in the Middle East monitoring and enforcing the United Nations' sanctions against Iraq, a recent development in Britain serves as a grim reminder of the vulnerability of surface vessels to sea-skimming missiles.

Originally developed as an air launched system, BAe says customer demand has prompted the development of the ship-launched version of Sea Skua recently fired in tests conducted aboard the British Aerospace Dynamics trials patrol craft Verifier. It is the first vessel to have complete installation of the Sea Skua missile system with its GEC-Ferranti Seaspray Mk3 360 degree radar.

The firing was used to demonstrate and evaluate the complete sequence of target acquisition and tracking by radar, followed by missile lock-on and launch from a deck-mounted canister while the vessel travelled at 18 knots. The missile followed a sea-skimming trajectory that resulted in a direct hit on its target from a range of 12 kilometers.

BAe says, "Sea Skua provides naval forces with a highly effective capability against ships up to destroyer size." It uses semi-active radar guidance, and missiles can be fired singly or in rapid succession from outside the range of a hostile ship's point defence systems. The Sea Skua system comprises a combined surveillance, tracking and illuminating radar, a fire control console, and deck-mounted missile containers. The combined radar and fire control consoles are configured for a single operator and provide all the weapon control data such as target designation, tracking, and weapon launch information.

Sea Skua is the first British Aerospace missile to be used operationally by the British forces. It was designed to meet a Royal Navy requirement to protect the fleet from small missile-firing fast attack craft. Fitted to Lynx helicopters equipped with the GEC-Ferranti Seaspray radar, Sea Skua is deployed from all frigates and destroyers of the Royal Navy. Its success as a helicopter and fixed wing launched antiship missile system has attracted the interest of navies all over the world, and now the ship launched variant is also expected to enter the inventories of many of the world's maritime forces.

EMBRAER'S CBA-123 VECTOR TO DEBUT AT FARNBOROUGH

Proof of Brazil's striving aircraft industry will be on display at Farnborough September 2 to 9. The country's premier aircraft manufacturer, Embraer-Empresa Brasileira de Aeronautica S.A. will be showing its new CBA-123 Vector 19-seat regional airliner. Visitors will also see the EMB-120 Brasilia transport, and the AMX ground attack aircraft at both static and flying displays.

The CBA-123 Vector which was developed in cooperation with Argentina's FMA, flew its first long distance flight on August 10 from Embraer's facilities in Sao Jose dos Campos, Brazil to FMA's facilities in Cordoba, Argentina. The 2,107 kilometer, "round robin" flight took four hours on each leg. The Vector maintained an air speed of 578 kilometers per hour at 9,144 meters carrying a 9,600 kilogram load — much above the maximum takeoff weight of 9,000 kilograms. By mid-August, the CBA-123 Vector had flown eleven flights for a total of 21 hours and 20 minutes.

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CAE TO PROVIDE FLIGHT SIMULATORS FOR CHINA

CAE Electronics Ltd. of Montreal, Quebec has added yet another new client to its growing list of simulator customers, bringing the total to 46 airlines. The Civil Aviation Administration of China (CAAC) has selected CAE to design and manufacture flight simulators for Boeing 737-300 and 757-200 aircraft in an order worth approximately $31 million.

NORTHROP/MCDONNELL DOUGLAS ATF CONTENDER FLIES FIRST

Competing in the U.S. Air Force Advanced Tactical Fighter (ATF) project, the team of McDonnell Douglas and Northrop flew their contending YF-23 prototype from Edwards AFB at 7:15 am Monday. Powered by a Pratt & Whitney YF119 prototype turbofan engine, the aircraft climbed to 25,000 feet during a 50 minute flight. The project could lead to the production of as many as 750 aircraft costing more than $65 billion. Lockheed with Boeing and General Dynamics are competing with the Northrop-led team and were to unveil their YF-22 prototype today. The U.S.A.F. is to chose a design by next April and enter full-scale development by June of 1991.

CALENDAR

September 16-19 — The AIAC's "Twenty-Ninth Annual General Meeting" is to be held in the resort area of Whistler Village, British Columbia. The four day event combines an extensive AIAC business agenda with rest and relaxation in the beautiful surroundings of the mountains and offers an enjoyable schedule of activities for members, invited guests, and their spouses. For more information contact Belva M. Neale, Convention Coordinator, (613) 232-4297.

October 4 — The fall meeting of the Forum for Industrial Participation (formerly CIBA) will be held at the Ottawa Congress Centre from 8:30 am to 3:30 pm. The meeting is open to all who wish to attend. For more information please contact Bob Brown, (613) 733-0704.

October 9 — The Canadian Defence Preparedness Association (CDPA) and the Conference of Defence Associations Institute will be co-sponsoring a luncheon at the Radisson Hotel, Ottawa from 11:30 am to 2:00 pm. Guest speaker will be Mr. Thomas Callaghan who will discuss Canadian-American defence production sharing arrangements. Tickets may be ordered at $50.00 each by calling (613) 563-1387 or (613) 235-5337.

October 24-25 — The Financial Post and The Wednesday Report will conduct the fourth annual defence conference for the Canadian defence industry. "A Turning Point for the Defence Industry" will be held at the Westin Hotel in Ottawa. Topics include Soviet Instability; A Changing NATO; and Worldwide Arms Build-Down. "What are the implications for the Canadian defence industry?" Participants will gain insight from those at the centre of change — drawing on expertise from Europe and North America — and advice from those making change an opportunity for the future. For further information contact the Registration Coordinator, FP Conferences, (416) 596-5681.

November 6 — The Canadian Defence Preparedness Association will host a luncheon in Ottawa at which DCDS or ADM Mat will present a brief on the Defence Services programme. For more information contact Mr. Bond at (613) 235-5337.

November 19 — The Canadian Defence Preparedness Association (CDPA) will host "Peace Through Preparedness — The Role of Research and Development", a one-day conference to be held at the Ottawa Congress Centre, beginning with registration at 8:30 am. Speakers featured will be Dr. Stuart Smith and the Honourable Bill Winegard. The fee for CDPA members is $125.00 prior to October 19. Non-members may attend at a premium of $75.00 which includes a one-year CDPA membership. For further information please contact CDPA, (613) 235-5337.

May 13-16, 1991 — The fourth European Aerospace Conference will be held at the Maison de la Chimie in Paris. The Association Aéronautique et Astronautique of France, Germany's Deutsche Gesellschaft für Luft-und Raumfahrt and the Royal Aeronautical Society are organizing the conference which will deal primarily with "Launch Bases" and "Satellite Control Systems". Separate symposia will be organized around each topic. This conference, to be attended by well-known specialists, will provide an opportunity to national and multinational agencies, manufacturers, operators and researchers who design, produce, manage or use these large launch and control infrastructures to exchange information and views.

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The Wednesday Report - Copyright 1990

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• Publisher and Editor In Chief: Micheal J. O'Brien

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