Rheinmetall denounces opaque bidding in a large military contract. The big weapon endowment scandals provoked by PSD

Over the past two years, the PSD-led government has provoked several major scandals related to the endowment of the army, involving billions of euros. The latest controversy concerns the bid for four corvettes, worth over 1.2 billion euros, suspended by the Ministry of Defense without any plausible explanation. However, there are further problems concerning the purchase of 3,000 military trucks, worth about Euro 750 million, in which case the German company RheinMetall accuses the Ministry of Defense of favoring a competitor.

Concurrent with the emergence of problems in the bids or agreements for corvettes, military trucks or Patriot missiles, Liviu Dragnea has clearly expressed the desire to negotiate directly with „the president of France and the Chancellor of Germany.”

„I do not believe in the possibility of a European Army. Romania cannot enter such adventures. We need to build some economic cooperation relations, not just with a few important EU states. These relationships cannot be built simply by communicating with ambassadors here. Romania must have some good friends, but, if for important acquisition there is no discussion with the President of France, or the Chancellor, but only exchanges with ambassadors, then we are looking there where such relationships can be developed”, Liviu Dragnea said in an interview at Antena 3 on December 27, 2018.

In Romania, problems related to big contracts have started to arise once the country started to allocate 2% of its GDP for defense, in line with NATO requirements. Thus, in 2018 the Ministry of Defense approved a budget of over 18 billion lei, of which a significant part was earmarked for acquisitions. In 2017, another year in which military equipment and weapons were purchased, the budget was 11% smaller.

The biggest controversy over the arms contracts involving the PSD and Liviu Dragnea governments are: the acquisition of Patriot missiles, the acquisition of four military corvettes, the purchase of military trucks and the cooperation agreement between Romarm and Circinus, a business owned by the US citizen Elliott Broidy, who invited Liviu Dragnea to the inauguration of US President Donald Trump.

Rheinmetall accuses the MApN (Ministry of Defense) of favoring a competitor in the bid for military trucks

Another military acquisition tainted by scandal is the one for the purchase of over 3,000 military trucks, a contract valued at 750 million Euros.

The German company Rheinmetall, which has long been “courted” by Romania in recent years for the transfer of technology and production in our country, has formally accused irregularities in the tender procedure.

More specifically, at the end of November 2018, Rheinmetall appealed against the Ministry of Defense acquisition procedure, accusing the ministry of writing up the requirements in the tender dossier in such a way as to favor the Italian firm Iveco, which was the other bidder.

The appeal, filed with the Bucharest Tribunal on behalf of the Rheinmetall-led corporation, appears on the public auction site. The auction has not been completed yet.

Another partnership in which Rheinmetall was involved in Romania, the National Company Romarm S.A. – Subsidiary Automechanical Plant Moreni S.A. for the production of an armored transporter, is also mired in uncertainty. Two years since the start of the project company, a joint venture between Rheinmetall and Moreni S.A. Automechanical Plant, the conveyor production is far from functioning .

Unclear reasons behind the suspension of the auction for corvettes

The acquisition of four military corvettes is part of the official naval power program. Discussion about the acquisition began in 2016, but successive PSD-ALDE governments have postponed a final decision on the award of the contract.

The last major controversy occurred on Friday, January 11, 2019, when the Ministry of Defense (MApN) announced on Friday that it had suspended the procedure for the purchase of multifunctional corvettes and had notified the Military Prosecutor’s Office about possible illegalities.

The first major change occurred in March 2017, when Grindeanu’s government approved a government decision in 2016 that the Dutch producer Damen was to build the corvettes at the Galati shipyard site. The PSD passed a new Government Decision, which decided to organize a tender, in which three competitors competed: Naval Group (France), Damen (Netherlands) and Fincantieri (Italy).

In 2018 there were several delays in the final decision, despite the fact that the technical and financial offers had been submitted in time by the three participants to the competition.

In December 2018, the French newspaper La Tribune accused the Romanian government of „desperately” trying to have Dutch company Damen win the auction launched at the beginning of the year for the delivery of four military corvettes. La Tribune wrote that despite the fact that the French Naval Group has provided a better financial offer, the Romanian government and Liviu Dragnea „have long been in favor of Damen,” according to Rador.

La Tribune announced at that time that the Naval Group, which was to build the four corvettes at Constanta, announced at the auction the price of 1.2 billion euros, which was cheaper than the 1.25 billion demanded by Damen and the 1.34 billions of euros demanded by the Italian manufacturer Fincantieri, the third bidder.

The French newspaper launched accusations that „the Romanian government, which should announce the selection of a supplier on January 12, has long preferred Damen, a 49% shareholder of the Galati shipyard, along with the Romanian state (51%). This is especially the case of one of the most powerful people in Romania, the social-democrat chairman of the Chamber of Deputies, Liviu Dragnea, who makes and breaks governments. ”

La Tribune wrote that the main obstacle to the plans of the PSD government to award the Damen contract to the Dutch occurred in early December 2018 when the envelopes containing the financial offers were opened, where the French at the Naval Group had the best bid. The purchase procedure had the lowest price as a selection factor.

The official reason put forward by the Ministry of Defense for the deferral of the decision with the 1.2 billion euros stake? „The State Secretary (Andrei Ignat, who was responsible for the procurement procedure for the Essential Endowment Program” Corvette Multifunctional „- n. Red.) informed that the Department of Armaments, through his signature, notified the Military Prosecutor’s Office The Military Court of Appeal, based on reasonable suspicions, that the procedure was unlawful and liable to affect the achievement of the national security interest in the „Multi-Corvette Corvette” Essential Endowment Program. In view of this, as well as the fact that, to this date, there is a dispute before the Constanţa Court of Appeal by which Constanţa Shipyard SA, as part of the „Association between Naval Group France and Constanţa Shipyard SA” in the whole of Government Decision no. 48/2018 „, the normative act that underpins the above mentioned procedure, State Secretary for Armaments, Andrei Ignat, informed about the suspension of the procurement procedure, until the clarification of the flagged aspects”, stated the MApN in a press release .

The problem is that to this day, there is no official information on the „reasonable suspicions” invoked by the MApN to justify the suspension of the acquisition procedure for the corvettes.

Dragnea – Ciuca tensions on the subject of US Patriot missiles acquisitions

In April 2017, PSD chairman Liviu Dragnea was irritated by the statements of the Chief of the General Staff, General Nicolae Ciuca, who was talking about the acquisition of the Patriot missiles.

Thus, in a statement made on 20 April 2017 and quoted by Digi 24, Liviu Dragnea said: „What I did not like today was the statement of the Chief of Staff, who has already announced that we will purchase Patriot missiles. Well, did they complete the procedures? Should there not be procedures first? He’s the Chief of Staff and I’m very excited. Maybe the Minister of Defense is thinking about it all the time there, through the ministry. Fewer statements and more action I think is better. ”

A few hours earlier, the head of the General Staff announced at Smardan, on a joint Romanian-American military exercise, that Romania plans to acquire Patriot missiles. General Ciuca had answered a question about the procurement plan of the Ministry of National Defense in 2017.

Finally, Romania – through the Ministry of Defense – signed in November 2017 an agreement of $ 3.9 billion without VAT for seven Patriot systems in the most modern configuration, and by the end of the year it had paid about 800 million dollars for the first system.

Moreover, former Minister Mihai Fifor announced in November 2018 that the Ministry of National Defense paid for three more Patriot ground-to-air missile systems.

„By acquiring these three new systems, which come in addition to those already contracted in November 2017, the first stage of endowment with the Patriot system is completed, the four military installations being endowed to the Romanian Air Force from the second half of 2019, the first system being planned for operations in mid-2020, „wrote Fifor on Facebook in November 2018.

The Circinus – Romarm Agreement for Military IT Technology

On 1 February 2018, the US military technology company Circinus, owned by businessman Elliott Broidy, concluded an agreement with Romarm. The agreement raised questions because it was signed without press and official communications in a non-transparent manner, although the Minister of Economy Danuţ Andruşca, Minister of Defense Mihai Fifor and US Ambassador Hans Klemm attended the event.

Elliott Broidy is the Republican Party’s fundraiser who invited Liviu Dragnea in January 2017 to the investiture ceremony of President Donald Trump. He owns Circinus since 2015, and in 2009 he was involved in a resounding corruption case in the United States. Elliot Broidy resigned in 2009 as chairman of the Markstone Capital investment fund, after admitting he paid $ 1 million in bribes to New York officials and to private pension fund managers. Broidy recognized his deeds and paid $ 18 million to get out of the prison.

Although the Ministry of Economy officials did not say what agreement this was, according to the information obtained by HotNews.ro, it would be the realization of a C4ISR system targeting one of the major programs of the Armed Forces endowment with an estimated value of about 180 million.

The Adevarul newspaper, owned by Cristian Burci, was the only press organization to report on the deal in an article published the day after the event on 2 February, but later deleted the article on the site without explanation. After HotNews.ro discovered and wrote about this subject, Adevarul republished the article with some changes.

Subsequently, the American company Circinus explained, on a HotNews.ro point of view, that the agreement signed with Romarm is not a contract, but a partnership agreement for which all legal obligations have been met.

The cooperation agreement concluded on 1 February at the Ministry of Economy between Romarm and the American Circinus Defense is not a contract but a prior understanding between the parties that does not involve a selection / , stated for HotNews.ro officials from the Ministry of Economy. The partnership „aims, in principle, to favour industrial collaboration for the development of security products and solutions for both internal and external beneficiaries”, and „the event was discreet, not secret”.

Background: Controversy over the Chief of General Staff

At the end of last year, PSD, through Minister Gabriel Leş, attempted to change General Nicolae Ciuca as Chief of General Staff. President Klaus Iohannis, however, refused to appoint General Secretary Dumitru Scarlat as the head of the SMG; the latter was proposed by the PSD Minister of Defense instead of General Nicolae Ciucă, whose term expired on 31 December. Moreover, the president signed a decree extending Ciuca’s mandate as head of the General Staff for a year, a decree immediately attacked by the defense minister in court.

The President refused the proposal because General Scarlat did not meet the condition required by the law to become the Chief of General Staff – i.e. to be the deputy chief of staff or one of the chiefs of the army’s forces (land, air, naval).

Besides the political dispute between PSD and Iohannis, behind the Battle for the Chief of General Staff there are huge strategic and financial stakes. According to G4Media.ro, Liviu Dragnea and PSD would be inclined to collaborate with the Dutch company Damen for the contract for delivery of four multifunctional military corvettes, while General Ciucă is reluctant to adopt this solution for financial reasons (Damen’s offer would be higher than the French competitors from the Naval Group).

Traducerea: Ruxandra Stoicescu