Russia says helicopter deal with Iraq on track
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How Not to Buy a Russian Helicopter
How Not to Buy a Russian Helicopter
In its effort to equip Afghanistan's new air force, the Pentagon is getting an education in the shady post-Soviet arms trade.
It's one of the great ironies of the post-Cold War era. During the 1980s, Afghan insurgents turned the tide against Soviet occupiers after learning, with the help of U.S. advisors and funding, how to effectively shoot down Russian helicopters. Now, battling their own domestic insurgency, Afghanistan is in the market for those very same Russian helicopters, and the United States is picking up the bill.
If all goes according to plan, Afghanistan's air force should be fully staffed and equipped by 2016, forming a vital part of the country's armed forces -- and allowing the U.S. military to make an exit. The backbone of the air force will be over 70 Russian Mi-17 troop transport helicopters, far from the most advanced design on the market, but rugged, easily serviceable, and ideally suited to local conditions. The U.S. government is backing a deal worth upwards of $380 million to procure 21 of the new choppers from their Russian manufacturers. But buying from your former enemy is never easy, and the procurement has been mired in bureaucratic infighting and commercial protests.
The U.S. purchase of Russian helicopters dates back to Cold War intrigue, when the Pentagon and intelligence community clandestinely procured Russian equipment in order to study its capabilities and figure out how to destroy it. As the Soviet Union broke apart and the U.S. Army's Russian helicopters emerged from the "black world," the Army's once secret Russian fleet found a new mission: operating as the opposing force, or OPFOR, in war games to train U.S. soldiers. Eventually, the helicopters also allowed the U.S. military to train with new NATO partners, like the Czech Republic, which used the Mi-17. After 9/11, when the United States found itself having to quickly re-equip local armies in Iraq and Afghanistan, both countries that flew Mi-17s, buying more Russian helicopters seemed like an expedient solution.
But going from buying one or two helicopters through arms dealers to buying fleets of helicopters from Russia has proved an interesting lesson in East-West procurement.
This year, the U.S. Navy was expected to select a company to broker the sale, essentially allowing competing firms -- mostly Western -- to bargain with Russian factories for the best price. Sikorsky, the U.S. helicopter manufacturer, initially protested the competition to the Government Accountability Office, arguing that the procurement was flawed because it wouldn't consider a U.S. aircraft. The procurement process may now be taken over by the Aarmy, and officials are now saying there shouldn't be any competition at all, but rather, the U.S. government should buy straight from the Russian arms agency.
"It really is in the best interest of our soldiers that we have this relationship with the Russian original equipment manufacturer, similar to how we have a relationship with Boeing for Chinook or Sikorsky for Black Hawk," Col. Bert Vergez, the Army's project manager for nonstandard rotary-wing aircraft (the U.S. military euphemism for Russian aircraft), told Defense News, a trade publication, in a recent interview.
But going straight to the source is not so easy. Arms purchases from Russia typically start with Rosoboronexport, Russia's state arms exporter, which is both a state agency and a commercial enterprise. But until recently, Rosoboronexport was under sanctions for violating U.S. laws against selling weapons to Iran and Syria. That changed in May, when President Barack Obama's administration lifted sanctions against Rosoboronexport as part of the "reset" in relations with Moscow.
Russian companies are also not the kind of suppliers the Pentagon is used to. The Army project office, for example, is trying to wrangle two U.S. Army-owned Mi-17s helicopters out of the Saint-Petersburg Aircraft Repair Company, or SPARC, which is alleged to have illegally exported them from Lithuania to Russia with the help of a badly forged end-user certificate allegedly signed by a Pentagon deputy assistant secretary (or deputy "assistance" secretary, as the forged certificate reads). The helicopters, which the U.S. Army paid to have overhauled in Lithuania, now remain stuck in St. Petersburg amid a contractual dispute. Suffice it to say that dealing with Russian entities often comes with a unique set of business problems.
Despite the obstacles associated with buying from the Russian defense industry, the trade in Russian helicopters and other Russian equipment has only grown since 9/11 as the United States has sought to provide cheap and simple counterinsurgency tools to militaries in countries like Pakistan, Iraq, and Afghanistan. Since 9/11, the Pentagon has paid more than $1 billion to buy Russian military helicopters for its allies. Over 50 helicopters have been bought for Iraq, Afghanistan, and Pakistan to date. (Less talked about, though widely acknowledged and traceable through court documents and Federal Aviation Administration records, is that the CIA also has a fleet of Mi-17s registered to front companies. It has used the helicopters extensively in Iraq and Afghanistan, including during the 2001 Jawbreaker mission, when the CIA sent a team into Afghanistan to help cement support among tribal leaders for the U.S. invasion.)
Many people question why the United States is purchasing Russian helicopters with taxpayer dollars, but for those training the Afghans, the answer is simple: It's the perfect helicopter for the country. Rugged and reliable, it was essentially built by the Soviet Union to fly missions in Afghanistan, and it's what Afghan pilots have trained on for years, according to Air Force Col. Creig Rice, vice commander of the 438th Air Expeditionary Wing and the NATO Air Training Command. "Is it the only helicopter for Afghanistan? No," he said, when I interviewed him in Kabul last month. "But is it the best helicopter for Afghanistan right now? Yes."
The question for the Pentagon is not why Russian helicopters, but how to buy them. Many purchases in the past were ad hoc and with no central coordination, a point underscored when the United States imposed sanctions on Rosoboronexport in 2006. It was an act of supreme intergovernmental incompetence: It slapped the Russian arms industry in the face just at the time when the United States desperately needed help to equip local forces in Iraq and Afghanistan. The sanctions created additional problems because of the incestuous ownership structure of Russian industry, in which Rosoboronexport owned a stake in Russian helicopter factories, raising the question of whether even buying commercial helicopters from Russia was legal. Unsure of how to proceed, the Pentagon sought and was granted a waiver to the sanctions, asking the U.S. government permission to ignore hundreds of millions of dollars in helicopter purchases.
The U.S. government's history of buying Russian helicopters has a checkered history. In the 1990s, stories abounded of shoddy parts, questionable deals, and mom-and-pop operations that would appear and disappear with frightening speed, taking contract dollars with them. Among the many questionable practices were U.S. companies presenting the Pentagon with what were called "exclusive supplier agreement" letters from Russian companies and agencies, essentially empty promises assuring would-be buyers that the designated U.S. firm was the only approved supplier. Those letters, I'm told, cost as little as a few hundred dollars. There was never a standard process for buying Russian equipment, much less determining who was, or wasn't, a legitimate supplier.
Recognizing the supreme mess the Defense Department had created over the years, the Pentagon's acquisition czar, Ashton Carter, finally stepped in this year and ordered the establishment of a single office to manage the procurement of Russian aircraft and assigned it to the Army. (Not everyone in the Army was thrilled with this move -- shortly after the decision, Brig. Gen. William Crosby, the program executive officer for aviation, which became responsible for "nonstandard aviation," reportedly referred to himself at a meeting as a "Mi-17 popsicle" because the job of procuring Russian helicopters had effectively been shoved up his backside.)
Many initially welcomed the establishment of a formal Army project office as an opportunity to do things the right way. Legitimate suppliers would bid on procurement contracts, and the days when Russian weapons purchases were routed through favored middlemen with little or no competition would end. But rather than fix the problem, the Army's project office has taken it to a new level: It's relying on a letter from Russia's Committee for Military Technical Cooperation claiming Rosoboronexport is the only lawful exporter of the Mi-17 helicopters that the United States wants to buy for Afghanistan. That letter essentially undercuts any attempt to hold a competition and would allow Rosoboronexport to set the price and terms as it sees fit.
Relying on a letter that claims there is only one legitimate seller of equipment does not have the best history. This tactic was tried in 2008, when the Army, citing an urgent requirement, sole-sourced a contract to ARINC, a U.S. defense company that claimed to have an inside track on buying Russian helicopters for Iraq. ARINC, too, had a "letter" claiming it was the only authorized seller of helicopters, according to Army emails released under the Freedom of Information Act. That gamble didn't work out very well; I'm told that only eight of the 22 ordered helicopters for Iraq have been delivered so far, well behind schedule and above budget. Ironically, ARINC has lodged a protest against the new competition, arguing it isn't being allowed to compete fairly for the Afghan procurement.
The larger question, obviously, is, does the United States need to work solely with Rosoboronexport? On one hand, the company is the state arms exporter, making it a legitimate seller of weapons, but on the other hand, it is not a manufacturer -- like a broker, it will have to obtain helicopters from the factory that produces them. So, does the U.S. Army really want to award a contract worth almost $400 million without any competition?
It's not at all clear why the Mi-17s, which are produced in military and commercial variants, have to go through Rosoboronexport. The helicopters bought for Iraq, and now Afghanistan, have been commercial helicopters that are then converted to military use with Western weapons systems and cockpits. (On a side note, having the Russians install the cockpits would cause headaches with the U.S. State Department, which would have to license the integration.) Sanctions or no sanctions, the Russian government has allowed U.S. companies for over 10 years to buy commercial helicopters and spare parts for the U.S. military, without working through Rosoboronexport. In fact, in a briefing to Congress this year, the Pentagon specifically argued that its purchase of Mi-17s didn't have to go through the Russian arms agency "because this is not a defense export, [and] the transaction does not pass through Rosoboronexport."
For Rosoboronexport, of course, the question is one of money: It would like to maintain a monopoly on exports. More importantly, its commission on the $380 million sale, reported to be in excess of 10 percent, would be sizable.
On Nov. 5, the Government Accountability Office denied both Sikorsky's and ARINC's protests, setting the stage for a final battle over the Afghanistan contract: sole-source the contract to a Russian agency that was regarded as a pariah until earlier this year, or hold an open competition, which could include Rosoboronexport bidding against other brokers, and award the contract to the competitor offering the best bid.
The Russian government, for its part, pledged to provide the 21 helicopters after a meeting last month between NATO Secretary-General Anders Fogh Rasmussen and Russian President Dmitry Medvedev. It has said nothing, however, about how it expects the deal to proceed. The helicopter purchase is expected to be an important part of the upcoming Russia-NATO summit in Lisbon
In the end, there is little question that the United States needs to buy Russian helicopters for Afghanistan and that it must abide by Russian laws. But Rosoboronexport does not speak for the Russian government, and to allow a secretive agency with a history of questionable arms sales to solely dictate the terms of a contract vital to U.S. national security would be a serious mistake. Even worse, it would provide unprecedented legitimacy, and even leverage, to an agency that has proved more than willing in the past to make sales that run counter to U.S. interests.
The Pentagon can't force the Russian arms industry to behave like U.S. industry, nor should it. But the Pentagon can and should, at least when hundreds of millions of U.S. taxpayer dollars are at stake, offer two things that the Russian system may not: transparency and competition.
Source: http://www.foreignpolicy.com/articles/2010/11/12/how_to_buy_a_russian_helicopter?page=0,0
How Not to Buy a Russian Helicopter
In its effort to equip Afghanistan's new air force, the Pentagon is getting an education in the shady post-Soviet arms trade.
It's one of the great ironies of the post-Cold War era. During the 1980s, Afghan insurgents turned the tide against Soviet occupiers after learning, with the help of U.S. advisors and funding, how to effectively shoot down Russian helicopters. Now, battling their own domestic insurgency, Afghanistan is in the market for those very same Russian helicopters, and the United States is picking up the bill.
If all goes according to plan, Afghanistan's air force should be fully staffed and equipped by 2016, forming a vital part of the country's armed forces -- and allowing the U.S. military to make an exit. The backbone of the air force will be over 70 Russian Mi-17 troop transport helicopters, far from the most advanced design on the market, but rugged, easily serviceable, and ideally suited to local conditions. The U.S. government is backing a deal worth upwards of $380 million to procure 21 of the new choppers from their Russian manufacturers. But buying from your former enemy is never easy, and the procurement has been mired in bureaucratic infighting and commercial protests.
The U.S. purchase of Russian helicopters dates back to Cold War intrigue, when the Pentagon and intelligence community clandestinely procured Russian equipment in order to study its capabilities and figure out how to destroy it. As the Soviet Union broke apart and the U.S. Army's Russian helicopters emerged from the "black world," the Army's once secret Russian fleet found a new mission: operating as the opposing force, or OPFOR, in war games to train U.S. soldiers. Eventually, the helicopters also allowed the U.S. military to train with new NATO partners, like the Czech Republic, which used the Mi-17. After 9/11, when the United States found itself having to quickly re-equip local armies in Iraq and Afghanistan, both countries that flew Mi-17s, buying more Russian helicopters seemed like an expedient solution.
But going from buying one or two helicopters through arms dealers to buying fleets of helicopters from Russia has proved an interesting lesson in East-West procurement.
This year, the U.S. Navy was expected to select a company to broker the sale, essentially allowing competing firms -- mostly Western -- to bargain with Russian factories for the best price. Sikorsky, the U.S. helicopter manufacturer, initially protested the competition to the Government Accountability Office, arguing that the procurement was flawed because it wouldn't consider a U.S. aircraft. The procurement process may now be taken over by the Aarmy, and officials are now saying there shouldn't be any competition at all, but rather, the U.S. government should buy straight from the Russian arms agency.
"It really is in the best interest of our soldiers that we have this relationship with the Russian original equipment manufacturer, similar to how we have a relationship with Boeing for Chinook or Sikorsky for Black Hawk," Col. Bert Vergez, the Army's project manager for nonstandard rotary-wing aircraft (the U.S. military euphemism for Russian aircraft), told Defense News, a trade publication, in a recent interview.
But going straight to the source is not so easy. Arms purchases from Russia typically start with Rosoboronexport, Russia's state arms exporter, which is both a state agency and a commercial enterprise. But until recently, Rosoboronexport was under sanctions for violating U.S. laws against selling weapons to Iran and Syria. That changed in May, when President Barack Obama's administration lifted sanctions against Rosoboronexport as part of the "reset" in relations with Moscow.
Russian companies are also not the kind of suppliers the Pentagon is used to. The Army project office, for example, is trying to wrangle two U.S. Army-owned Mi-17s helicopters out of the Saint-Petersburg Aircraft Repair Company, or SPARC, which is alleged to have illegally exported them from Lithuania to Russia with the help of a badly forged end-user certificate allegedly signed by a Pentagon deputy assistant secretary (or deputy "assistance" secretary, as the forged certificate reads). The helicopters, which the U.S. Army paid to have overhauled in Lithuania, now remain stuck in St. Petersburg amid a contractual dispute. Suffice it to say that dealing with Russian entities often comes with a unique set of business problems.
Despite the obstacles associated with buying from the Russian defense industry, the trade in Russian helicopters and other Russian equipment has only grown since 9/11 as the United States has sought to provide cheap and simple counterinsurgency tools to militaries in countries like Pakistan, Iraq, and Afghanistan. Since 9/11, the Pentagon has paid more than $1 billion to buy Russian military helicopters for its allies. Over 50 helicopters have been bought for Iraq, Afghanistan, and Pakistan to date. (Less talked about, though widely acknowledged and traceable through court documents and Federal Aviation Administration records, is that the CIA also has a fleet of Mi-17s registered to front companies. It has used the helicopters extensively in Iraq and Afghanistan, including during the 2001 Jawbreaker mission, when the CIA sent a team into Afghanistan to help cement support among tribal leaders for the U.S. invasion.)
Many people question why the United States is purchasing Russian helicopters with taxpayer dollars, but for those training the Afghans, the answer is simple: It's the perfect helicopter for the country. Rugged and reliable, it was essentially built by the Soviet Union to fly missions in Afghanistan, and it's what Afghan pilots have trained on for years, according to Air Force Col. Creig Rice, vice commander of the 438th Air Expeditionary Wing and the NATO Air Training Command. "Is it the only helicopter for Afghanistan? No," he said, when I interviewed him in Kabul last month. "But is it the best helicopter for Afghanistan right now? Yes."
The question for the Pentagon is not why Russian helicopters, but how to buy them. Many purchases in the past were ad hoc and with no central coordination, a point underscored when the United States imposed sanctions on Rosoboronexport in 2006. It was an act of supreme intergovernmental incompetence: It slapped the Russian arms industry in the face just at the time when the United States desperately needed help to equip local forces in Iraq and Afghanistan. The sanctions created additional problems because of the incestuous ownership structure of Russian industry, in which Rosoboronexport owned a stake in Russian helicopter factories, raising the question of whether even buying commercial helicopters from Russia was legal. Unsure of how to proceed, the Pentagon sought and was granted a waiver to the sanctions, asking the U.S. government permission to ignore hundreds of millions of dollars in helicopter purchases.
The U.S. government's history of buying Russian helicopters has a checkered history. In the 1990s, stories abounded of shoddy parts, questionable deals, and mom-and-pop operations that would appear and disappear with frightening speed, taking contract dollars with them. Among the many questionable practices were U.S. companies presenting the Pentagon with what were called "exclusive supplier agreement" letters from Russian companies and agencies, essentially empty promises assuring would-be buyers that the designated U.S. firm was the only approved supplier. Those letters, I'm told, cost as little as a few hundred dollars. There was never a standard process for buying Russian equipment, much less determining who was, or wasn't, a legitimate supplier.
Recognizing the supreme mess the Defense Department had created over the years, the Pentagon's acquisition czar, Ashton Carter, finally stepped in this year and ordered the establishment of a single office to manage the procurement of Russian aircraft and assigned it to the Army. (Not everyone in the Army was thrilled with this move -- shortly after the decision, Brig. Gen. William Crosby, the program executive officer for aviation, which became responsible for "nonstandard aviation," reportedly referred to himself at a meeting as a "Mi-17 popsicle" because the job of procuring Russian helicopters had effectively been shoved up his backside.)
Many initially welcomed the establishment of a formal Army project office as an opportunity to do things the right way. Legitimate suppliers would bid on procurement contracts, and the days when Russian weapons purchases were routed through favored middlemen with little or no competition would end. But rather than fix the problem, the Army's project office has taken it to a new level: It's relying on a letter from Russia's Committee for Military Technical Cooperation claiming Rosoboronexport is the only lawful exporter of the Mi-17 helicopters that the United States wants to buy for Afghanistan. That letter essentially undercuts any attempt to hold a competition and would allow Rosoboronexport to set the price and terms as it sees fit.
Relying on a letter that claims there is only one legitimate seller of equipment does not have the best history. This tactic was tried in 2008, when the Army, citing an urgent requirement, sole-sourced a contract to ARINC, a U.S. defense company that claimed to have an inside track on buying Russian helicopters for Iraq. ARINC, too, had a "letter" claiming it was the only authorized seller of helicopters, according to Army emails released under the Freedom of Information Act. That gamble didn't work out very well; I'm told that only eight of the 22 ordered helicopters for Iraq have been delivered so far, well behind schedule and above budget. Ironically, ARINC has lodged a protest against the new competition, arguing it isn't being allowed to compete fairly for the Afghan procurement.
The larger question, obviously, is, does the United States need to work solely with Rosoboronexport? On one hand, the company is the state arms exporter, making it a legitimate seller of weapons, but on the other hand, it is not a manufacturer -- like a broker, it will have to obtain helicopters from the factory that produces them. So, does the U.S. Army really want to award a contract worth almost $400 million without any competition?
It's not at all clear why the Mi-17s, which are produced in military and commercial variants, have to go through Rosoboronexport. The helicopters bought for Iraq, and now Afghanistan, have been commercial helicopters that are then converted to military use with Western weapons systems and cockpits. (On a side note, having the Russians install the cockpits would cause headaches with the U.S. State Department, which would have to license the integration.) Sanctions or no sanctions, the Russian government has allowed U.S. companies for over 10 years to buy commercial helicopters and spare parts for the U.S. military, without working through Rosoboronexport. In fact, in a briefing to Congress this year, the Pentagon specifically argued that its purchase of Mi-17s didn't have to go through the Russian arms agency "because this is not a defense export, [and] the transaction does not pass through Rosoboronexport."
For Rosoboronexport, of course, the question is one of money: It would like to maintain a monopoly on exports. More importantly, its commission on the $380 million sale, reported to be in excess of 10 percent, would be sizable.
On Nov. 5, the Government Accountability Office denied both Sikorsky's and ARINC's protests, setting the stage for a final battle over the Afghanistan contract: sole-source the contract to a Russian agency that was regarded as a pariah until earlier this year, or hold an open competition, which could include Rosoboronexport bidding against other brokers, and award the contract to the competitor offering the best bid.
The Russian government, for its part, pledged to provide the 21 helicopters after a meeting last month between NATO Secretary-General Anders Fogh Rasmussen and Russian President Dmitry Medvedev. It has said nothing, however, about how it expects the deal to proceed. The helicopter purchase is expected to be an important part of the upcoming Russia-NATO summit in Lisbon
In the end, there is little question that the United States needs to buy Russian helicopters for Afghanistan and that it must abide by Russian laws. But Rosoboronexport does not speak for the Russian government, and to allow a secretive agency with a history of questionable arms sales to solely dictate the terms of a contract vital to U.S. national security would be a serious mistake. Even worse, it would provide unprecedented legitimacy, and even leverage, to an agency that has proved more than willing in the past to make sales that run counter to U.S. interests.
The Pentagon can't force the Russian arms industry to behave like U.S. industry, nor should it. But the Pentagon can and should, at least when hundreds of millions of U.S. taxpayer dollars are at stake, offer two things that the Russian system may not: transparency and competition.
Source: http://www.foreignpolicy.com/articles/2010/11/12/how_to_buy_a_russian_helicopter?page=0,0
