How US spying cost Boeing multi-billion-dollar contract

Airline loses Brazilian fighter jet deal worth $4 billion

Dilma Rousseff was thoroughly charmed.

Brazil had been struggling for years to decide which company to choose for a $4-billion-plus fighter jet contract, one of the world’s most sought-after defence deals and one that would help define the country’s strategic alliances for decades to come.

But Rousseff, the leftist president known for being sometimes gruff and even standoffish with foreign leaders, was thrilled after a 90-minute meeting in Brasilia on May 31 with US Vice-President Joe Biden.

After Biden’s reassurances that the United States would not block crucial transfers of technological know-how to Brazil if it bought the jets, she was closer than ever to selecting Chicago-based Boeing to supply its fighter, the F/A-18 Super Hornet.

“She’s ready to sign on the dotted line,” one of her senior aides told Reuters at the time. “This is going to happen soon.”

And, then along came Edward Snowden.

Documents leaked by the former National Security Agency contractor, released in the weeks after Biden’s visit, ended up enraging Rousseff and completely changing her plans, several Brazilian officials told Reuters.

On Wednesday, she surprised the defence and diplomatic worlds by tapping Sweden’s Saab to supply the jets, a move aides said was made in part as a deliberate snub to the United States.

The decision was one of the biggest and most expensive consequences yet of the NSA revelations, which have strained Washington's relations with countries around the world.

Anger over espionage was not the only reason for Rousseff’s decision. Saab’s Gripen jet offered the best combination of price, transfers of technology to Brazilian companies and low maintenance costs compared with the other two finalists, Boeing and France’s Dassault Aviation, Defence Minister Celso Amorim told reporters on Wednesday.

Still, the NSA revelations were clearly the determining factor for Rousseff, the Brazilian officials told Reuters, for reasons that were both political and deeply personal.

A former guerrilla who had fought a US-backed military dictatorship in the 1960s, Rousseff had spent the first two years of her presidency edging closer to Washington, fending off pressure from leftist elements of her Workers’ Party and scheduling a rare state visit to the White House for last October.

Snowden’s documents, many of which were published by Brazil-based US journalist Glenn Greenwald, revealed that Washington had spied on Rousseff's personal communications, those of state-run oil company Petrobras — which Rousseff once chaired — and countless Brazilian citizens.

Rousseff could not understand why Washington would spy on an ally with no history of international terrorism, aides said. She reacted by cancelling her White House trip, despite attempts by US President Barack Obama to ease her concerns, including a one-on-one meeting on the sidelines of a G20 meeting in Russia.

This week, she made a decision she believed would hit the United States where it hurt most — its pocketbook.

Defence analysts struggled to recall a major contract decided on such grounds.

“The irony is that we expected politics to play a big role, but always on the selling side, not on the downside,” said Richard Aboulafia, an aerospace analyst with the Teal Group. “Then things went horribly wrong with this NSA story.”

The final decision on the jets contract had not been expected until next year, so the bidding companies were surprised when it was announced. Brazilian military leaders said publicly that Rousseff informed them of her decision this week.

At a time when the United States and European countries are tightening their defence budgets, the contract was considered a particularly lucrative prize.

For French, Swedish and US diplomats in Brasilia, pushing for the deal had been near the top of their agendas for more than a decade.