EU palm oil curbs may stall France-Malaysia $2bn jet deal

Malaysia, the world’s No.2 producer of palm oil Thursday said if the European Union does not rescind its decision to curb the importation of palm oil, France’s hopes of winning a $2 billion fighter jet deal with it would be impacted.

According to a Reuters’ report, France’s Rafale jet, built by Dassault Aviation (AVMD.PA), had until recently been seen as the frontrunner in Malaysia’s plan to buy up to 18 new fighter planes in a deal potentially worth over $2 billion, but negotiations hit the rocks after European lawmakers pushed to stop using palm oil in motor fuels.

Earlier this week, Malaysia said it would not shy away from a trade war and that it would respond with “might and tact” if the EU does not back down on curbing palm imports.

“As you know, the jet fighters the French are looking at, the Rafale, are also competing with the Brits who have left the EU. So they have to take that into consideration (in relation to palm oil curbs),” Malaysia’s defense minister, Hishammuddin Hussein, said at a news conference outside parliament.

Britain’s BAE Systems (BAES.L) has been on a consistent and public campaign for nearly a decade now to win the Malaysia contract, even establishing a regional office in the capital, Kuala Lumpur.

Hishammuddin’s latest statement raises hopes for BAE, which looked to be on the backfoot after Malaysian Prime Minister Najib Razak said that he had discussed the possible purchase of Rafale fighters with Francois Hollande during the then-French president’s visit in March last year.

Both Dassault and BAE did not immediately respond to requests for comment.

Southeast Asia’s third-largest economy could lose some $500 million in annual revenue if the EU goes ahead with its plan to crimp palm imports, analysts have estimated.