Brazil and Saudis Reportedly Agree on Arms-for-Oil Deal

In an arms-for-oil deal, Brazil and Saudi Arabia have agreed to a $3 billion arms package that includes a technological cooperation agreement, Brazilian sources said Thursday.

The agreement provides for the purchase by Saudi Arabia of 1,000 Osorio medium tanks, multiple rocket launchers and the Tucano T-27 air force trainer, which Brazil has already sold to Egypt and Britain, the sources said.

In addition to the sales, which are covered by a contract signed in December, a Saudi military mission that visited Brazil’s arms industries this week laid the basis for a technology cooperation agreement.

The sources said this will include financial support for development of such advanced weapons as solid-fuel rockets and maintenance in Saudi Arabia for the Brazilian weapons systems, including a plant for tank spare parts that will be built in Saudi Arabia.

Visiting Pentagon Teams

Brazil’s arms industries, based on the development of modern steel, automotive, electronic and aeronautical industries, are the largest in the developing countries. Teams from the Pentagon have been visiting the factories for possible procurement of tanks and aircraft, which are low in cost by U.S. defense industry standards.

Although the Saudi deal does not explicitly include oil, Brazil has boosted its oil imports from Saudi Arabia this year to 100,000 barrels a day, compared to 60,000 last year. Saudi Arabia thus is providing more than 20% of Brazil’s current imports of about 480 thousand barrels a day and has taken a larger share of the Brazilian market from Nigeria, Libya, Iraq and Iran.

Brazil follows a policy of allocating oil imports by the state petroleum company here to countries that buy Brazilian goods as a way of offsetting the cost in foreign exchange. The $3 billion for arms sales to Saudi Arabia underlies the increased Saudi oil purchases.

The Brazilian-Saudi technological cooperation agreement points to a long-term arrangement under which Brazil’s weapons industries will move into a market that has been dominated by U.S., French and British suppliers.