US embassy cable - 05BANGKOK2822

C O N F I D E N T I A L SECTION 01 OF 02 BANGKOK 002822 
 
SIPDIS 
 
DEFENSE FOR OSD/ISA (POWERS & STERN), DSCA, STET/ISA 
(NSCF), PACOM FOR FDA HUSO, DEPARTMENT FOR EAP/BCLTV 
 
E.O. 12958: DECL: 04/21/2015 
TAGS: MASS, MCAP, PGOV, EIND, TH, POL/MIL 
SUBJECT: F-16 AND RTAF FIGHTER REPLACEMENT:  ELEVATING 
PROFILE OF LOCKHEED MARTIN BID 
 
REF: BANGKOK 07550 
 
Classified By: Ambassador Ralph L. Boyce. Reasons 1.4 (a) and (d) 
 
 1. (C) SUMMARY:  On April 20, in a meeting with 13th Air 
Force Commander, Major General Edward Rice and the Royal Thai 
Air Force (RTAF) Selection Committee, Lockheed Martin (LM) 
executives advocated that RTAF purchase F-16s to replace 
their aging F-5 fighters.  The presentation offered three 
principal advantages of the F-16: (1)- vastly increased 
technical capabilities over what the Thais have now, (2)- a 
system which is compatible and already familiar to RTAF 
personnel, and  (3)- an offer of up to 100% countertrade and 
various options of industrial cooperation, as well as 
flexible financing and technological transfers. 
 
2. (C) According to US military officials, LM is offering the 
best planes at the best price, but their bid is by no means 
certain to win, due to the higher-profile campaigns and 
under-the-table tactics from both the other bidders.  USAF 
and LM officials believe the LM bid is on the upswing, and 
though it was seen as a lost cause until a few weeks ago, it 
may have drawn even with the two rival bids.  The key 
obstacle is an earlier directive from PM Thaksin to consider 
only the Swedish and Russian bids, due to their offers of 
countertrade. Although LM is now offering countertrade, it 
appears possible that the Thai Commerce Department is still 
adhering to this earlier directive and not considering LM's 
bid. Post believes that if senior-level US officials clarify 
LM's countertrade proposal with PM Thaksin directly, the tide 
could turn in LM's favor. RTAF will have to make its final 
recommendation to the PM by late May, while the final 
decision on a winning bidder is expected to made over the 
summer. We ask that PACOM Commander ADM Fallon and the Deputy 
Secretary both raise F-16 in separate meetings with the Prime 
 
SIPDIS 
Minister during the week of May 2.  END SUMMARY 
 
ENHANCED CAPABILITIES 
 
3. (SBU) The meeting between Lockheed Martin and the RTAF 
Selection Committee began with a highly detailed technical 
presentation by USAF which highlighted the enhanced 
capabilities of the new F-16 (Block 52) fighter planes.  The 
presentation meticulously contrasted the capabilities of 
RTAF's current hardware with what they would be getting with 
the new equipment.  Having the new F-16s would mean enhanced 
communications systems, safety features, information 
gathering, night visibility, fuel storage, among other 
things. The briefer stressed the commonality of F-16s already 
in the RTAF inventory, training and equipment with the Block 
52s, and further emphasized the ability of the Block 52s to 
provide a solid bridge of experience and skill sets for the 
RTAF to transition to the Joint Strike Fighter (JSF) in the 
future. 
 
MAKING THE MOST OF WHAT THAILAND ALREADY HAS 
 
4. (SBU) LM also focused on the logistical advantages to the 
Thai military of choosing the F-16 fighters.  RTAF pilots 
already had experience flying F-16s.  Having a system that is 
compatible with that of the United States and mutual allies 
would also be beneficial for military cooperation among all 
sides. LM highlighted that under their proposal, Thailand 
would also be entitled to certain specified amounts of 
support equipment, spare parts, USAF pilot training, as well 
as a 2-year "update service". 
 
BARTER AGREEMENTS, COUNTERTRADE AND TECHNICAL & INDUSTRIAL 
COOPERATION 
 
5. (SBU) LM highlighted the 18-year client relationship 
between LM and the RTAF, and their place on the cutting edge 
of international aviation technology. Officials made it clear 
that LM was willing to share LM technology through industrial 
cooperation projects and other technology transfers. LM 
officials stressed their willingness to offer 100% 
countertrade or offsets if the RTG so desired.  The head of 
the delegation added that his company was willing to exercise 
a great deal of "financial flexibility" in order to satisfy 
Thailand and pointed out that if Thailand was interested in 
assistance in fields unrelated to the defense industry, LM 
was willing to work with them on that as well.  The LM team 
emphasized that no other company in the world possessed the 
assets and capabilities to tailor a winning package for 
Thailand. 
RENEWED OPTIMISM...CONTINUED PESSIMISM 
6. (C) During preparatory meetings and side meetings, USAF 
and LM officials agreed that the LM bid offered the best 
package for RTAF.  Despite widespread support from 
lower-ranking members of the RTAF who favor the superior, 
easier-to-integrate F-16s, the Embassy remains concerned 
about the transparency of the selection process.  The Swedes 
and the Russians also have the added advantage of having 
high-level officials (King Carl XVI Gustaf and President 
Putin) raising the issue directly with RTG. Post believes 
similar high-level involvement on the part of USG may still 
influence the RTG.  Still, these same officials agree that LM 
has a definite shot at winning the bid, which they certainly 
didn't have one month ago.  Reasons for the shift include a 
renewed push by LM, which had previously figured Thailand 
might opt simply for an upgrade of current planes rather than 
a purchase of new fighters.  The RTAF officers present for 
the meeting considered this the "first" meeting with LM in 
which the company expressed a strong intention to meet the 
legal requirements for countertrade. 
 
7. (C) RTAF informed JUSMAG that the key obstacle to purchase 
of F-16s is an earlier directive from PM Thaksin to consider 
only the Swedish and Russian bids due to their offers of 
offsets and countertrade.  At that time, one of Thailand's 
key objectives was to unload its stockpiles of frozen 
chickens.  Although LM is now offering countertrade, and 
although chickens have become a less important issue, it 
appears possible that the Commerce Department is still 
adhering to this directive.  Complicating matters is the 
perception that Lockheed Martin's bid lacks high-level 
backing from the USG.  Our RTAF interlocutors suggest that 
this could be remedied by direct involvement by senior USG 
officials. Clear guidance from PM Thaksin to consider the 
F-16 offer must be received by RTAF before they will forward 
a recommendation to acquire F-16s. 
 
FOLLOW-UP 
 
8. (C) In all meetings, RTAF officials repeatedly stressed 
that there was a widespread consensus within the organization 
that F-16s were the logical choice for their next generation 
of fighters. LM hopes to boost this level of support by 
meeting with F-16 pilots and key wing leadership at both 
Korat and Takhli Air Force Bases April 21-22.  The RTAF New 
Fighter Selection Committee expressed their intention to 
forward packages and a recommendation to the Ministry of 
Defense by approximately May 22, while the final decision on 
a winning bidder is expected to made in July or August. 
 
9.  (C)  Post expects PACOM Commander ADM Fallon will raise 
F-16 in his meetings with MOD, MFA and the Prime Minister on 
May 3 and 4.  We also will recommend that Deputy Secretary 
Zoellick urge Thaksin to seriously consider Lockheed Martin's 
countertrade offer during his meeting with the PM on May 4. 
We are working closely with Washington colleagues to find 
other high-level opportunities to promote F-16, including 
Foreign Minister Kantathi's upcoming visit to the United 
States. 
BOYCE