French military electronics giant Thales is negotiating with Saudi Arabia for a contract, worth up to $3 billion, to upgrade the kingdom's air-defense network, particularly those guarding key military and government sites.

The French company's regional arm, Thales International Middle East, is well-established in the kingdom.

Over the last three decades Thales has maintained the Shahine and Crotale surface-to-air missiles built by its predecessor, Thomson-CSF, for Saudi Arabia. The Shahine is a land-based mobile version of the Crotale and was specifically designed for the kingdom's air defense forces.

It became operational in 1980 and the 40 Crotale, 73 Shahine and 68 Crotale/Shahine launchers held by the Saudis have been maintained and periodically upgraded by Thales. The company's latest Shahine modernization contract was signed in December 2010.

The Intelligence Online Web site observed that "after the French rail company SNCF's failure to obtain the contract to build the Mecca-Medina 'Pilgrim Train' line and Thales' unsuccessful bid for the Miksa border security contract, the French are hoping that air defense may yet (get) that much hoped-for mega-contract with Saudi Arabia."

France, which is the third biggest arms supplier to the Arab monarchies in the Persian Gulf after the United States and Britain, has lost out on some big defense deals there recently.

Leading French plane maker, Dassault Aviation, is vying for a contract with the United Arab Emirates for 60 Rafale multi-role combat jets worth up to $10 billion. But the deal, in the works since 2008, hit a snag in November 2011 when Sheik Mohammed bin Zayed, crown prince of Abu Dhabi, dismissed Dassault's terms as "uncompetitive and unworkable."

Oil-rich Abu Dhabi is the emirates' main economic powerhouse and handles all its military procurement. The emirate's air force, now one of the most powerful in the region, wants to replace the 63 Mirage 2000-9 fighters it purchased from Dassault two decades ago.

"Rather than using the strength of the bilateral relationship to close the deal out they're attempting to use it to hold out on pricing and a deal structure that hasn't changed in more than a year and that's been significantly bettered by all competitors," an emirates' defense source observed.

The emirates had shown interest in Boeing's F-15 Eagle and F/A-18E/F Super Hornet, as well as the Eurofighter Typhoon. That's built by a consortium comprising the German and Spanish branches of the European aerospace giant EADS, Britain's BAE Systems and Finmeccanica of Italy.

After failing to sell the Rafale to Morocco, Brazil and Switzerland, Dassault has been desperate for an export sale of the jet, which like the Eurofighter made its combat debut in the NATO air campaign against the late Moammar Gadhafi's ill-fated regime in Libya in 2011.

As prospects of achieving a sale in the emirates dwindled, Dassault achieved its aim Tuesday when it emerged as the lowest bidder for a 126-plane contract with India, beating the Eurofighter which also lost out in December on an $8 billion deal with Japan.

Dassault will now enter final negotiations with New Delhi for the deal, the value of which industry sources say could swell to as much as $15 billion-$20 billion.

The India deal keeps the Rafale production line going, as until now the jet's only customers had been the French air force and navy. The Financial Times estimated Dassault Aviation, as the core manufacturer, should reap 60 percent of the value of the Indian contract.

But Thales, which supplies Rafale's avionics and in which Dassault has a 26 percent stake, should also benefit, along with Safran, which manufactures the engines.

EADS didn't go away empty-handed either, even though New Delhi passed on the Eurofighter, as the European outfit owns 46 percent of Dassault.

Meantime, the Europeans are involved in another scrap in the Persian Gulf.

Executives at Germany's Daimler are seeking to block the planned sale of the company's holdings in EADS to the gas-rich emirate of Qatar. Daimler wants to shed its 15 percent stake in the Franco-German aerospace conglomerate, but fears if the shares are sold to Qatar this would allow old rival France, which has close links with the emirate, to dominate EADS.

France has 22.5 percent of EADS, the parent company of Airbus.