France optimistic about Malaysia Rafale warplane deal - Diplomatic source

PARIS - France is confident it will sell 18 Dassault-built fighter jets to Malaysia after submitting a formal proposal, a senior diplomatic source said on Wednesday - extra firepower for one of China's neighbours in the South China Sea.

While Malaysia has traditionally played down any tensions with China over the contested waterway, it has long expressed concern about piracy and security along its land and coastal borders and wants to replace its ageing MiG-29 fighter jets.

"We have the feeling that there is a clear preference (for the Rafale) because they have not made the same type of announcement for the other manufacturers being considered," the source said. "We are entering concrete discussions." French Defence Minister Jean-Yves Le Drian was in Kuala Lumpur on Monday and his counterpart Hishammuddin Hussein said any future purchase would depend on affordability.

Fiscal troubles due to low commodity prices might delay any decision to buy fighter jets, although Malaysian military sources expect the armed forces to push for more procurement funds in the next five-year plan starting in 2016.

Malaysia's top priority is to replace its ageing Russian MiG-29 fighters with 18 modern jets that would join a fleet of Boeing F/A-18Ds as well as Russian-made Sukhoi Su-30MKM warplanes.

Malaysian defence officials have said they are assessing Boeing's newer F/A-18E/F, the Dassault-built Rafale, Swedish manufacturer Saab's Gripen, and the Typhoon from European consortium Eurofighter. "We can't rule it out happening quite quickly," the diplomatic source said.

China claims most of the potentially energy-rich South China Sea, through which $5 trillion in shipborne trade passes every year. Malaysia's public response to China's shows of strength has been low key, unlike fellow Southeast Asian countries the Philippines and Vietnam, which have been more outspoken.

Dassault received a boost after a long-awaited first export deal for the Rafale to Egypt earlier this year was quickly followed by a sale to Qatar.

It is also finalising the sale of 36 jets to India, a deal that could be rubberstamped soon. New Delhi is keen to modernise its ageing air force, with military officials warning of a major capability gap opening up with China and Pakistan without new Western warplanes. "We're expecting that things go relatively quickly in the coming weeks. The dynamic is very good," the source said.