NEWTOWN, Conn. - Beset by six consecutive years of plummeting funding allocations Spain's Defense Ministry is set to undertake a new force modernization initiative estimated at $10 billion. The plan was announced by Spain's Secretary of State for Defense, Pedro Arguelles, who pointed out that the initiative is twofold: to help in the modernization of the Spanish armed forces and to bolster and protect Spain's defense industry through direct orders from the state.

Spain's defense budget has suffered a 30 percent drop since the country's economy began to stall in 2008, and with the ensuing post-bubble economic and deficit crises forcing the government to adopt austerity policies many legacy equipment programs dating back to the 1990s-era Special Armaments Program were re-examined with an eye on reducing or cancelling existing orders, or selling off surplus hardware upon delivery from the vendor. The Special Armaments Program consists of 19 major defense procurement projects such as the Eurofighter Typhoon, A400M tactical airlifter, the Tiger attack helicopter, Leopard 2A5 main battle tanks, Buques de Acción Maritima (or BAM) corvettes, etc, the deliveries of which on some programs continue through today. The total cost of the Special Armaments Program falls in the area of EUR32-37 billion ($43-49 billion) and in recent years the Defense Ministry has had to lean on infusions of top-up funding credits outside the core defense budget to meet its payment obligations on these programs.

Now with the economy finally beginning to show signs of returning to life the Defense Ministry wants to capitalize on the current upswing by pushing forward with its plan to upgrade capabilities that are aging or falling into disrepair. These include new naval frigates, 8x8 wheeled armored combat vehicles and three aerial refueling tanker-transports. Finally, there is a defense requirement to refinance the stalled S-80 submarine project.

The core project outlined in the latest defense investment cycle involves the F-110 frigate. The designer and builder of the ship will be local shipbuilding giant Navantia, which hopes to seal a design and construction contract in 2016, with the first of five new frigates handed over to the Spanish Navy in 2022. Once in Spanish Navy service these ships would serve as the replacement to the six Santa Maria class frigates, the last of which entered service in 1994. The estimated cost per ship is EUR800 million.

The 8x8 wheeled armored combat vehicle project - the long-delayed "Futuro Sistema de Combate Terrestre (FSCT)" requirement - would see the Spanish Army's aging Pegaso 3560 BMR personnel carriers replaced by a newer model. Under the plan a contract would be awarded to a chosen vendor in 2017 for a first-batch purchase of 350-400 vehicles at a cost of EUR1-1.5 billion ($1.27-1.9 billion).

Another item on the Spanish armed forces' wish-list that continued to be pushed to the right due to Spain's economic and financial troubles involves a fast-emerging aerial refueling gap. Currently the Spanish Air Force operates two aging Boeing 707s whose service-lives are fast approaching the end. Spain intends to retire these 707s in 2016, which - if a replacement is not acquired - would leave the Air Force with a shortage of tankers and place a strain on its remaining fleet of KC-130Hs. The Spanish Air Force has prioritized the acquisition of three Airbus A330 multi-role tanker transports (MRTTs) to serve as the replacement for the Boeing 707s. These are estimated at EUR200+ million apiece.

Finally there is the issue of covering remaining costs related to the moribund S-80 submarine project. These submarines are meant to replace the Spanish Navy's remaining fleet of three aging S-70A Galerna class underwater vessels. Navantia was awarded a EUR2.2 billion contract on March 24, 2004, for the design and build of four submarines derived from French DCNS' Scorpène class. The lead submarine, S-81 Isaac Peral, had its keel laid down in December 2007 and was expected to be delivered by 2012. Instead its launch date was postponed on May 7, 2013, following a joint statement issued by Navantia and the Spanish Navy saying the in-service date for the lead ship - and the four-sub class as a whole - would have to be pushed back by one to two years due to the discovery that Isaac Peral was at least 75 tons overweight. Delivery is now not expected until around 2018. Meanwhile, whether to forge ahead with building the remaining three submarines is a decision being pushed out until the arrival of the lead boat.

As for the financials of the latest development plan, these would stretch payments out well into the next decade, thus once again pushing out the cost burden into an uncertain future. One of the crises erupting in the Defense Ministry from the Special Armaments Program was that under the payment plans outlined when designing the program the bulk of these were pushed to the back end and thus have escalated annually - and will continue to do so - through the final pay period of 2025. Thus reaching an agreement on approval of the defense investment initiative within the cabinet of the center-right People's Party (Partido Popular, or PP) government of Prime Minister Mariano Rajoy - beleaguered by graft scandals, mounting charges of corruption and austerity fatigue amongst the general population - represents just a first hurdle. Receiving parliamentary approval for the necessary funding may prove much tougher.

Source: La Semana
Associated URL: http://www.lasemana.es/periodico/noticia.php?cod=38148
Source Language: Spanish
Author: D. Darling, Europe Analyst