Brazil "very likely" to choose French fighter jet: sources

SAO PAULO (Reuters) - Brazil is "very likely" to choose France's Rafale fighter jet to refurbish its air force, government sources say, a decision that would award one of the emerging-market world's most coveted defense contracts to a jet whose future was in doubt only two weeks ago.

President Dilma Rousseff and her top advisers believe that Dassault Aviation's bid to sell at least 36 Rafales offers the best terms among the three finalists, the sources told Reuters on condition of anonymity.

The other two bidders are Boeing's F-18 and Saab's Gripen.

Rousseff has cast the deal as a watershed decision that will help mold Brazil's military and strategic alliances for the next few decades as it continues to establish itself as a leading economic power. The contract will have an initial value of about $4 billion but will likely be worth considerably more over time once maintenance and follow-on orders are included.

Rousseff previously had concerns about the Rafale because the jet had not found any buyers outside France. That raised doubts about whether Dassault would have the scale necessary to build the jets at a reasonable cost and maintain them over time.

The sources said those concerns were assuaged when India announced on January 31 that it had entered exclusive talks to buy 126 Rafales. Brazilian Defense Minister Celso Amorim traveled to New Delhi last week to discuss the deal with Indian officials and examine documents related to Dassault's bid.

"The India deal changed everything," one of the Brazilian sources said. "With India's decision, it's now very likely the Rafale will be the winner here."

The sources said that Dassault offered the best combination of a high-quality aircraft and the sharing of proprietary technology that Amorim has said is critical to the deal. Brazil hopes to use that technology to expand its own budding defense industry, led by aircraft maker Embraer .

Dassault touts the Rafale as an agile, medium-sized aircraft with low operating costs that can be more quickly deployed than its bulkier competitors. Those attributes may appeal to Brazil, which has no significant problems with its neighbors and plans to use the aircraft mainly for defensive purposes such as patrolling its recently discovered offshore oil fields.

Boeing's offer of technology has yet to be finalized but the sources said they believe it cannot compete with Dassault's bid because the United States has historically placed tight restrictions on the sale of military technology abroad.

If confirmed, the deals would enhance France's partnerships with two of the world's biggest up-and-coming economic powers - Brazil and India. They could also provide a boost to President Nicolas Sarkozy, who has cast himself as a champion of French industry and an energetic salesman of the Rafale in particular as he faces a tough re-election fight this year.

The sources said that unexpected developments, especially a breakdown in India's talks with Dassault, could still cause Rousseff to change her mind.

They also said her decision would probably not be announced until after France's April-May election, in an attempt to keep the deal from becoming overly politicized.

MEMORIES OF U.S. TENSIONS OVER JETS SALE

Brazil's air force contract is one of several deals in developing countries that have been highly contested by European and U.S. defense companies as their home markets suffer due to budget cuts. Companies are also competing for jet contracts in the United Arab Emirates, Qatar and South Korea.

Brazil's bidding process has gone through several ups and downs over the years. Rousseff's predecessor, Luiz Inacio Lula da Silva, said in 2009 that Brazil would choose the Rafale. However, he left office without finalizing the deal.

Rousseff was extremely close to Lula as his chief of staff, but upon becoming president in January 2011 she surprised her Cabinet ministers by asking them to re-evaluate the bids from scratch. A month later, Rousseff told visiting U.S. Treasury Secretary Timothy Geithner that Boeing's F-18 was the best jet among the three finalists, but she still wanted better terms on the technology transfers.

The F-18 is widely believed to be cheaper than the Rafale. Boeing recently confirmed that it will offer the F-18 to Brazil at the same per-unit price as during the last round of bidding in 2009, Reuters reported on Friday.

Ultimately, though, Rousseff grew frustrated by what she perceived as Boeing's inability to improve the guarantees on the transfers, the officials said. Rousseff is a moderate leftist who has built her presidency around policies she believes will help Brazilian industries in areas from oil exploration to auto production.

The officials said that Rousseff was also wary of a 2006 incident in which the United States blocked the sale of Embraer's Super Tucano military aircraft to Venezuela's leftist government. Washington had the power to veto the deal because Embraer's planes contained U.S. technology.

In a separate incident in 2009, Embraer said it was temporarily blocked from selling commercial jets to Venezuela because they contained U.S. communications systems.

The episodes raised doubts about whether Brazil would face similar restrictions in the future with the technology it received from Boeing as part of the F-18 bid. "Nobody's ever forgotten what happened with Venezuela," one official said.

Brazil's point man in the confrontation with the United States in both Embraer incidents was Amorim - he was Lula's foreign minister at the time and Rousseff appointed him as her defense minister in August.

Despite her misgivings regarding Boeing, Rousseff also did not want to choose a jet that might not even be in production a decade into the future. In December, French Defense Minister Gerard Longuet warned that Dassault would stop production of the Rafale in 2021 if it did not win any export orders.

Within days of India's announcement regarding talks for the Rafale, Amorim traveled to New Delhi to gauge the bid's terms and its likelihood of proceeding as planned.

Amorim told the Times of India on Wednesday that Indian officials "promised to give us some documents ... such as basic rules on the tender process that we could compare to ours."

Brazil is not the only country that appears to be suddenly following India's lead. French newspaper La Tribune reported on February 2 that Dassault could soon seal a sale of at least 60 Rafale fighter jets to the United Arab Emirates, turning around a deal that also appeared to be a lost cause.

(Reporting by Brian Winter; Editing by Kieran Murray)

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AP sources: Obama revamping birth control policy

WASHINGTON (AP) — Rushing to end a political uproar, President Barack Obama on Friday will announce that religious employers will not have to cover birth control for their employees after all, The Associated Press has learned. The administration instead will demand that insurance companies will be the ones directly responsible for providing free contraception.

Obama's abrupt shift is an attempt to satisfy both sides of a deeply sensitive debate, and most urgently, to end a mounting election-year nightmare for the White House. The leader of a Catholic organization and a prominent women's group both expressed initial support for the changes.

Women will still get guaranteed access to birth control without co-pays or premiums no matter where they work, a provision of Obama's health care law that he insisted must remain. But religious universities and hospitals that see contraception as an unconscionable violation of their faith can refuse to cover it, and insurance companies will then have to step in to do so.

Obama will speak about his decision at 12:15 p.m. EST.

Senior administration officials confirmed the details to the AP but insisted they remain anonymous in advance of the president's announcement.

By keeping free contraception for employers at religious workplaces — but providing a different way to do it — the White House will assert it gave no ground on the basic principle of full preventative care that matters most to Obama.

Yet, it also was clear that Obama felt he had no choice but to retreat on a three-week-old policy in the face of a fierce political furor that showed no signs of cooling.

The White House consulted leaders on both sides of the debate to forge a decision.

The president of the Catholic Health Association, a trade group representing Catholic hospitals that had fought against the birth control requirement, said the organization was pleased with the revised rule.

"The framework developed has responded to the issues we identified that needed to be fixed," Sister Carol Keehan said in a statement.

Planned Parenthood also backed the revisions, saying the Obama administration was still committed to ensuring all women have access to birth control coverage, no matter where they work.

"We believe the compliance mechanism does not compromise a woman's ability to access these critical birth control benefits," Cecile Richards, the women's group president, said.

Officials said Obama has the legal authority to order insurance companies to provide free contraception coverage directly to workers. He will demand it in a new rule.

Following an intense White House debate that led to the original policy, officials said Obama seriously weighed the concerns over religious liberty, leading to the revamped decision.

It was just on Jan. 20 that the Obama administration announced that religious-affiliated employers — outside of churches and houses of worships — had to cover birth control free of charge as preventative care for women. These hospitals, schools and charities were given an extra year to comply, until August 2013, but that concession failed to satisfy opponents, who responded with outrage.

Catholic cardinals and bishops across the country assailed the policy in Sunday Masses. Republican leaders in Congress promised emergency legislation to overturn Obama's move. The president's rivals in the race for the White House accused him of attacking religion. Prominent lawmakers from Obama's own party began openly deriding the policy.

The sentiment on the other side, though, was also fierce. Women's groups, liberal religious leaders and health advocates pressed Obama not to cave in on the issue.

The furor has consumed media attention and threatened to undermine Obama's re-election bid just as he was in a stride over improving economic news. Political reality forced the White House to come up with a solution to a complex matter must faster than anticipated.

The fact that Obama himself will deliver the news was a sign of the stakes.

Under the new policy, religious employers will not be required to offer contraception and will not have to refer their employees to places that provide it.

If such an employer opts out, the employer's insurance company must provide birth control for free in a separate arrangement with workers who want it.

The change will still take affect with an extra year built in, in August 2013.

Already, 28 states had required health insurance plans to cover birth control before the federal regulations were issued.

However, they appear to have differing exemptions for religious employers.

Obama's health care law requires most insurance plans to cover women's preventative services, without a co-pay, starting on Aug. 1, 2012. Those services include well women visits, domestic violence screening and contraception, all designed to encourage health care that many women may otherwise find unaffordable.

The White House says covering contraception saves insurance companies money by keeping women healthy; how the insurance industry will see the mandate is another question.

Without adjusting his stand, Obama has risked alienated Catholics who have become courted swing voters in such pivotal political states as Ohio, Pennsylvania, Wisconsin and Michigan. In 2008, Obama won 54 percent of the total Catholic vote, compared to 45 percent for Republican John McCain.

As the week wore on, the White House increasingly signaled that a change was coming.

Vice President Joe Biden, a Catholic, said in a radio interview Thursday that "there is going to be a significant attempt to work this out and there is time to do that."

Outside advocates were urging a quick resolution.

"As a Catholic I don't want to hear about this in Mass every week until the election," said Kristen Day, executive director of Democrats For Life of America. "I don't think it's good for the party and I don't think it's good for Obama's re-election chances."

__

Associated Press writer Erica Werner contributed to this story.

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Brazil "very likely" to choose French fighter jet - sources

SAO PAULO (Reuters) - Brazil is "very likely" to choose France's Rafale fighter jet to refurbish its air force, government sources say, a decision that would award one of the emerging-market world's most coveted defense contracts to a jet whose future was in doubt only two weeks ago.

President Dilma Rousseff and her top advisers believe that Dassault Aviation's bid to sell at least 36 Rafales offers the best terms among the three finalists, the sources told Reuters on condition of anonymity.

The other two bidders are Boeing's F-18 and Saab's Gripen.

Rousseff has cast the deal as a watershed decision that will help mold Brazil's military and strategic alliances for the next few decades as it continues to establish itself as a leading economic power. The contract will have an initial value of about $4 billion but will likely be worth considerably more over time once maintenance and follow-on orders are included.

Rousseff previously had concerns about the Rafale because the jet had not found any buyers outside France. That raised doubts about whether Dassault would have the scale necessary to build the jets at a reasonable cost and maintain them over time.

The sources said those concerns were assuaged when India announced on January 31 that it had entered exclusive talks to buy 126 Rafales. Brazilian Defense Minister Celso Amorim traveled to New Delhi last week to discuss the deal with Indian officials and examine documents related to Dassault's bid.

"The India deal changed everything," one of the Brazilian sources said. "With India's decision, it's now very likely the Rafale will be the winner here."

The sources said that Dassault offered the best combination of a high-quality aircraft and the sharing of proprietary technology that Amorim has said is critical to the deal. Brazil hopes to use that technology to expand its own budding defense industry, led by aircraft maker Embraer .

Dassault touts the Rafale as an agile, medium-sized aircraft with low operating costs that can be more quickly deployed than its bulkier competitors. Those attributes may appeal to Brazil, which has no significant problems with its neighbors and plans to use the aircraft mainly for defensive purposes such as patrolling its recently discovered offshore oil fields.

Boeing's offer of technology has yet to be finalized but the sources said they believe it cannot compete with Dassault's bid because the United States has historically placed tight restrictions on the sale of military technology abroad.

If confirmed, the deals would enhance France's partnerships with two of the world's biggest up-and-coming economic powers - Brazil and India. They could also provide a boost to President Nicolas Sarkozy, who has cast himself as a champion of French industry and an energetic salesman of the Rafale in particular as he faces a tough re-election fight this year.

The sources said that unexpected developments, especially a breakdown in India's talks with Dassault, could still cause Rousseff to change her mind.

They also said her decision would probably not be announced until after France's April-May election, in an attempt to keep the deal from becoming overly politicized.

MEMORIES OF U.S. TENSIONS OVER JETS SALE

Brazil's air force contract is one of several deals in developing countries that have been highly contested by European and U.S. defense companies as their home markets suffer due to budget cuts. Companies are also competing for jet contracts in the United Arab Emirates, Qatar and South Korea.

Brazil's bidding process has gone through several ups and downs over the years. Rousseff's predecessor, Luiz Inacio Lula da Silva, said in 2009 that Brazil would choose the Rafale. However, he left office without finalizing the deal.

Rousseff was extremely close to Lula as his chief of staff, but upon becoming president in January 2011 she surprised her Cabinet ministers by asking them to re-evaluate the bids from scratch. A month later, Rousseff told visiting U.S. Treasury Secretary Timothy Geithner that Boeing's F-18 was the best jet among the three finalists, but she still wanted better terms on the technology transfers.

The F-18 is widely believed to be cheaper than the Rafale. Boeing recently confirmed that it will offer the F-18 to Brazil at the same per-unit price as during the last round of bidding in 2009, Reuters reported on Friday.

Ultimately, though, Rousseff grew frustrated by what she perceived as Boeing's inability to improve the guarantees on the transfers, the officials said. Rousseff is a moderate leftist who has built her presidency around policies she believes will help Brazilian industries in areas from oil exploration to auto production.

The officials said that Rousseff was also wary of a 2006 incident in which the United States blocked the sale of Embraer's Super Tucano military aircraft to Venezuela's leftist government. Washington had the power to veto the deal because Embraer's planes contained U.S. technology.

In a separate incident in 2009, Embraer said it was temporarily blocked from selling commercial jets to Venezuela because they contained U.S. communications systems.

The episodes raised doubts about whether Brazil would face similar restrictions in the future with the technology it received from Boeing as part of the F-18 bid. "Nobody's ever forgotten what happened with Venezuela," one official said.

Brazil's point man in the confrontation with the United States in both Embraer incidents was Amorim - he was Lula's foreign minister at the time and Rousseff appointed him as her defense minister in August.

Despite her misgivings regarding Boeing, Rousseff also did not want to choose a jet that might not even be in production a decade into the future. In December, French Defense Minister Gerard Longuet warned that Dassault would stop production of the Rafale in 2021 if it did not win any export orders.

Within days of India's announcement regarding talks for the Rafale, Amorim traveled to New Delhi to gauge the bid's terms and its likelihood of proceeding as planned.

Amorim told the Times of India on Wednesday that Indian officials "promised to give us some documents ... such as basic rules on the tender process that we could compare to ours."

Brazil is not the only country that appears to be suddenly following India's lead. French newspaper La Tribune reported on February 2 that Dassault could soon seal a sale of at least 60 Rafale fighter jets to the United Arab Emirates, turning around a deal that also appeared to be a lost cause.

(Reporting by Brian Winter; Editing by Kieran Murray)

View the original article here