BAE wants London's backing for China

BRITAIN’S biggest defence contractor BAE Systems said yesterday it would need backing from Washington and London before joining a European push to lift an arms embargo on China.

BAE has become Europe’s largest defence company by revenue thanks largely to sales in the United States, a military market bigger than those of western Europe combined and analysts said the political standoff between the US and Europe on lifting the China arms embargo was ticklish for it.

A spokesman for BAE said: "All licensing is a matter for the UK government and not for BAE Systems.

"Individual countries could have different responses [if it is lifted]." He added that each arms deal would have to be licensed by the country concerned.

The spokesman added: "As a company we are of course concerned about the impact of these measures on the US.

"We very much hope the British government does everything it can to ensure the US government feels that we are supportive of their point of view."

BAE ranked 12th on the US Department of Defence’s list of top 100 suppliers in 2004.

BAE is also more reliant on US technology, something Washington could make harder to access if a rift opens between the US and Brussels over the issue.

The ban was imposed following Beijing’s crackdown on pro-democracy demonstrators in Tiananmen Square in 1989.

The US president, George Bush, is opposed to lifting the embargo, a message he delivered to European colleagues yesterday. "I said there is deep concern in our country that the transfer of weapons would be a transfer of technology to China, which would change the balance of relations between China and Taiwan, and that’s of concern," Bush told a news conference after a 26-nation NATO summit.

The French president, Jacques Chirac, after a meeting with Bush, reiterated Europe’s intentions.

"With regard to China, Europe intends to remove the last obstacles to its relations with this important country," Chirac told a news conference.

In a separate development, BAE said it planned to cut its stake in SAAB by selling shares totalling about 14 per cent of the Swedish company to institutions.

BAE said it planned to sell up to 15.175 million shares in a placing, which is expected to be priced after the close of London trade tomorrow.

BAE had said in early December it would take a knife to the 35 per cent stake it took in Saab in 1998 for 269 million, shortly after announcing it planned to let the Swedish company take control of Gripen International, the marketing arm of their fighter-jet joint venture. BAE and Saab set up an equal joint venture in 1995 to market the Gripen, a fighter in use with the Swedish and South African air forces.

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