Malaysia shells out oil for planes

Malaysia will partially pay with palm oil for 18 state-of-the-art fighter planes it purchased from Russia, a minister said on Thursday.

    PM Mahathir Muhammad in talks with Boeing

    Under the agreement, Moscow will buy palm oil to the value off 30% of the contract price over five years, with the fighters due for delivery in 2006-7, Deputy Defence Minister Muhammad Shafie Apdal told parliament.

    The deal also includes the setting up of a service centre and sending Malaysia's first astronaut into space.

    Malaysia is the world's largest palm oil producer, accounting for half of all output.

    It agreed to buy the 18 Sukhoi 30-MKM fighters earlier this year to add to its stock of Russian MiG-29Ns, US made FA-18/Ds and British manufactured Hawks.

    They are part off an arms-buying spree that also includes French submarines worth $972 million, British and Russian missile systems for $364 million and Polish attack tanks worth $368 million.

    Prime Minister Mahathir Muhammad's government is also negotiating with Boeing to replace its FA-18s with newer versions of the plane.

    The spree has sparked fears of a regional arms race, but Malaysia says it is only upgrading its defences after plans were derailed by the financial crisis in Asia in 1997-1998.



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