U.S. Saudi fighter jet sale to help offset Iran

The deal is the single priciest U.S. arms sale to a foreign country, dwarfing previous multibillion-dollar sales to Saudi Arabia, for years the biggest U.S. arms buyer.

The sale includes the 84 advanced Boeing (BA.N) F-15SA fighters with cutting-edge Raytheon Co (RTN.N) radar equipment and digital electronic warfare systems for which BAE Systems Plc (BAES.L) is the key supplier.

Also included are upgrades that will bring Saudi Arabia's 70 older F-15s up to the new standard, as well as HARM AGM-88 Anti-Radiation Missiles, Laser JDAM and Enhanced Paveway munitions and related equipment and services.

The deal was formally sealed by Saudi Arabia last Saturday, days before Iran repeated threats to close the Strait of Hormuz in response to mounting U.S. and European economic sanctions over its disputed nuclear program.

Administration officials described the advanced F-15s as designed to bolster overall Saudi defenses in an uncertain region.

"In the Middle East right now, there's a number of threats," Andrew Shapiro, assistant U.S. secretary of state for political-military affairs, told a news briefing. "Clearly one of the threats that they face, as well as other countries in the region, is Iran," he said.

But the sale was "not solely directed" toward Iran, Shapiro said. "This is directed toward meeting our partner Saudi Arabia's defense needs," he said.

The United States has long identified Iran as a major threat, partly for suspicion that its nuclear power program is a cover for weapons building, a charge that Tehran denies.

Saudi Arabia, a key oil supplier, also is suspicious of Iranian regional ambitions.

DELIVERIES TO START IN 2015

The Obama administration in October 2010 notified Congress of the proposed F-15 sale as part of a potential package valued at up to $60 billion over 10 to 15 years, including Boeing Apache AH-64 attack helicopters, munitions, spare parts, training, maintenance and logistics.

The first new F-15s are expected to be delivered to Saudi Arabia in early 2015, an administration release said

The head of Boeing's military business, Dennis Muilenburg, told Reuters the deliveries would take about five years to complete, extending the F-15 production line toward the end of this decade. The first modified Saudi F-15s are expected to enter overhaul in mid-to-late 2014.

Saudi Arabia was the biggest buyer of U.S. arms from January 1, 2007 through the end of 2010, with signed agreements totaling $13.8 billion, followed by the United Arab Emirates, with $10.4 billion, according to a December 15 Congressional Research Service report.

The announcement the F-15 deal had been clinched came as President Barack Obama swings more into campaign mode for a bid for a second term in November 2012, a campaign likely to be fought over the U.S. economy and job growth.

A White House spokesman said the deal would give the U.S. economy a $3.5 billion annual boost and bolster exports and jobs. Boeing will work with about 600 suppliers in 44 states.

The Saudi buildup, part of a wider U.S. arming of its regional friends and allies, could eventually help offset the departure this month of the last U.S. combat troops in Iraq.

U.S. arms sales to Saudi Arabia often raise concern in Israel, but Shapiro said the Obama administration believed the new advanced warplanes would do nothing to curtail the Jewish state's comparative military advantage in the region.

The Saudi arms package was controversial when it was sent to Congress last year, due chiefly to concerns over maintaining Israel's edge. A total of 198 members of Congress wrote to the Obama administration in November 2010 to raise concerns about the sale. The so-called Arab Spring political upheaval in the Middle East this year also may have slowed negotiations.

Muilenburg said separate deals had been signed since the package cleared Congress last year to provide Saudi Arabia an initial 36 of 70 planned Apache AH-64D Longbow attack helicopters.

The full total of F-15s, Apaches and 36 AH-6i helicopters, if purchased as planned, would yield Boeing and its industry partners about $24 billion in sales, he said.

Boeing shares closed up 85 cents at $74.11 on the New York Stock Exchange.

(Additional reporting by Laura MacInnis in Honolulu and Andrew Quinn and Toby Zakaria in Washington, Kyle Peterson in Chicago; Editing by Peter Cooney)