January 13, 2016 / 3:12 AM / in 2 years

Saudi Arabia, U.S. still in talks about U.S. warship deal: sources

WASHINGTON (Reuters) - The United States and Saudi Arabia remain in discussions about the sale of four Lockheed Martin Corp warships and other equipment despite Riyadh’s rejection of the initial U.S. offer, according to sources familiar with the matter.

Saudi Arabia, grappling with 12-year low oil prices, balked at both the price offered by the U.S. Navy for the four frigates, and the proposed seven-year timeframe for delivery of the first ship, said two of the sources, who were not authorized to speak publicly.

The U.S. government in October approved the sale to Saudi Arabia of up to four Lockheed multi-mission warships valued at up to $4.3 billion, plus associated training, engineering and logistics, which would bring the total value of the deal up to $11.25 billion.

The ships are based on the steel monohull-designed Littoral Combat Ship (LCS) that Lockheed is building for the Navy together with Italy’s Fincantieri SpA.

Lockheed declined comment on the deal since it is a government-to-government transaction. U.S. officials said they do not comment on ongoing arm sales negotiations.

However, the sources said it was not unusual for arms sales to include some back-and-forth about price and schedule, and expressed confidence that an agreement would ultimately be reached. Some arms sales take years to negotiate.

They said they did not believe Saudi’s rejection of the initial offer was related to a flareup in tensions with Iran, or a memorandum by Defense Secretary Ash Carter ordering the Navy to truncate its own purchases of the LCS program and a more heavily armed frigate version at 40 ships instead of 52 ships.

Reporting by Andrea Shalal; Editing by Lisa Shumaker

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