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Str. Cristian Popisteanu nr. 2-4
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Frigate business: BAE sunk offset agreement

In brief

Data adaugarii: 2008-09-24

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Replacing the old MiGs, acquiring long-range ground-air missile systems, purchasing multi-functional mine hunter ships, respectively armoured personnel carriers and armoured and non-armoured off-road vehicles are only some of  the priorities of the Romanian Army. However, to do this, several stages must be gone through in order to obtain financing and the necessary endorsements, but also to select the investors so as to meet all the characteristics required by the allied forces and to avoid, to the greatest possible extent, the deficient development of the offset programmes.
The subject of great interest to participants at the "Black Sea Defense & Aerospace 2008 (BSDA 2008)" fair, was addressed at length in an interview granted by the Defence Minister, Teodor Melescanu.

1. The funds allocated to the six procurement programmes for the Romanian Army amounted to 13 billion euros, two years ago. By how much have these funds been supplemented so far?

This year, the Ministry of Defence will start running some endowment programmes of strategic importance for the Romanian Armed Forces, for Romania. In February 2006, the Supreme Council of National Defence (CSAT) approved "The Endowment Conception with Major Equipment and Systems of. the Romanian Army over the period 2006-2025", and in July last year gave green light to the introduction of the six multi-annual strategic endowment programmes in the plan to equip the army. So, we have the CSAT approval for the procurement we are staring in this period.
The six strategic programs refer to the purchase of the new multi-role planes and of the multirole systems and ground-to-air long-range missiles for the Air Force, the purchase of 4 multifunctional corvettes and 4 mine-hunter boats for the Naval Forces, respectively to the acquisition of some armoured personnel carriers (8x8 and 4x4) and some armoured and non-armoured off-road vehicles for the Land Forces. These purchases are absolutely necessary for the Romanian Army, whose technique is obsolete in a proportion of 90%. In addition, the new endowments will ensure the increase of action performance of the military structures and the interoperability with the military structures of NATO member nations.
Referring to figures, the total is 13 billion euros, indeed, but I want to emphasize that we do not have this money in the budget of the Ministry of Defence or in any other wallet kept aside, ready to spend it when necessary. However, the executive has given us the possibility, by Emergency Ordinance no. 111/2006, which allows ministries to contract loans on the international banking market, we can employ such loans up to the limit of 2.38% of GDP. Any solution we may find, it should be placed in a predictable financing line for the period 2009-2013. We also consider achieving these acquisitions with the participation of internationally prestigious companies, which we would attract in the modernisation and privatisation process of the defence industry.

2. What is the status of these procurement programmes? What was purchased and what needs are still to be covered?

As I have told you, the CSAT decided the initiation of four of the six programmes of strategic importance to be carried out by applying the specific mechanisms of Emergency Ordinance no. 111/2006, and the two programmes to be financed through the annual budget allocated to the Ministry of Defence. From outlining the endowment policy to the product delivery itself, the programs in question must follow six stages. At present, the endowment programmes of strategic importance have gone through the first stage, of planning, and are at the end of the second phase, of programming, endorsement and approval. The substantiation documents were forwarded to the Ministry of Economy and Finance at the end of August 2008. On this basis the draft Government decisions on approving investment projects and, implicitly, providing financing of the supply contracts are to be promoted, with MEF endorsement. The budget of the ministry will specifically provide the level of commitment and budget appropriations for each running year of the financing programmes, by expenditure type.

3. State Secretary Corneliu Dobri?oiu, has recently advanced the idea that attack helicopters are needed in the theatres of operations. How many such aircraft do you think are needed and with what funds do you estimate they will be purchased?

There were some statements in this respect. But I want to say that a discussion about a possible deployment of attack helicopters to theatres of operations can be hold only for Afghanistan, and only under the circumstances when we create a maneuvre battalion that will alone ensure security in the Zabul province.
The Ministry of Defence in considering equipping the army with new attack helicopters, but this issue will enter the agenda of the ministry after having solved the problem of the seven Spartan transport planes that will start arriving next year, and after the start of the purchase process of the multi-role aircraft.
Attack helicopters are not a zero emergency, although, within NATO, the theme of endowing the armies of the member countries with such aircraft is one of the most stringent. There already exists a very pressing appeal to all states to modernise and increase their helicopter fleet.
At present, the Air Force fulfil their specific missions with IAR 330 SOCAT helicopters which are considered as multi-role helicopters.

4. The old MiGs are approaching the end of their lifetime. How many multi-role planes will you buy to replace them, with what funds and when do you estimate the contract will be concluded?

Indeed, the MiG 21s will deplete their flight resource by 2010-2011 and therefore we must absolutely start the programme of purchasing a multi-role plane. The Air Force should be already equipped with the new aircraft by 2011, so that they can fulfil their specific missions.
The issue is the purchase of 48 planes, the budget effort exceeding 3.5 billion lei. The multi-role programme will be financed by foreign loans, using the mechanisms of Emergency Ordinance no.
The government will adopt, as I was saying, a decision on the procedure of purchasing these planes, starting from the idea of a competitive dialogue and from providing the necessary conditions for these procedures to be carried out in the greatest possible transparency.
As there appeared some information about the purchase of second-hand planes, too, I want to emphasize that, personally, I think we are too poor to buy cheap, used things. I do not think that the solution of second hand devices is the best option and therefore I feel inclined to the purchase of new aircraft. And I insist on the human resource. We have valuable pilots and we cannot waste this value we have. In addition, in the early 90ies, they understand the situation through which the country was passing and accepted the modernisation of the old MiG 21s instead of buying new planes. It is time for the present generation of pilots to show their mastery at the stick of new multi-role airplanes.

5. What are the technical characteristics that multirole planes must meet so as to guarantee the greatest possible safety of the military in the theatres of operations?

In the present conditions of modern theatres of operations, the air forces must execute missions with a high degree of complexity and risk, which imposes as a necessity for the Romanian Air Force to be equipped with a modern 4th generation multirole combat airplane, compatible with the aircraft used by NATO member states, which, in principle, must satisfy several requirements. They include maximum effectiveness in the modern battlefield conditions, flexibility in executing missions, with the possibility of changing mission during the flight, with high survival capacity in hostile environment, in electronic warfare conditions, with low operating and maintenance costs during the lifetime, with great flight autonomy and an open architecture that can provide opportunities for further upgrading, outstanding flight and manoeuvre qualities. So, it must be a total aircraft.
As I have said, there are five models of multirole planes that meet the technical-operational requirements set up by the specialists of the Romanian Air Force. We are considering the F-16 plane, manufactured by Lockheed Martin (USA), the JAS-39 Gripen, made by SAAB (Sweden), the Eurofighter Typhoon, made by a consortium of European companies from Germany, Great Britain, Italy and Spain, the F18, produced by Boeing (U.S.) and the Rafale, produced by Dassault Aviation (France).
The F-35 JSF - Joint Strike Fighter programme of Lockheed Martin, an aircraft representing the 5th generation of combat aircraft, is in the stage of development and is expected to replace the F16 planes of several NATO member countries. To take a decision based on real and as complete as possible data, the Ministry of Defense has conducted information activities during the recent years, which have included working visits of delegations of specialists, organisation of presentations and sending requests for information to potential producers, suppliers and users of multi-role aircraft. As a result of these activities the 5 types of airplanes I mentioned above were identified. But no decision has been taken yet.
Answering the last part of your question, I would like to tell you that there is no connection between equipping the Air Force with a new plane and the protection of Romanian military on mission to theatres of operations. The combat aircraft are necessary for the army to fulfil air security missions at domestic level and to execute the foreign missions incumbing on us as members of the Alliance.

6. What is the state of the offset for the frigates supplied by BAE Systems?

The Industrial Offset Programme, part of the Acquisition Agreement of the two frigates provides, as is known, for the company BAE Systems to do a compensation operations package in a percentage of 100% of the total value of the acquisition.
Most of the offset-related commitments refer to indirect compensation operations (80% - 90%) and are managed by the Ministry of Economy and Finance. The main objectives of these operations focus on the Romanian defence and aero-space industry. Direct compensation operations represent 10% - 20% of the total value of the commitments and are to be managed by us, at the Ministry of Defence, through the Romtehnica company and refer to activities/equipment related to the maintenance process.
The off-set programme was foreseen, according to the documents, for a period of five years from the date of entry into force of the agreement, namely 26 March 2003. This contract expired in March 2008, without BAE Systems to have expressed the wish for an immediate extension of the off-set agreement.

7. How do you see the offset promised for the JAS-39 multi-role aircraft, carried out in partnership by Gripen International, Saab, its majority shareholder - Investor AB, Volvo and BAE Systems (UK)?

At the meeting I had with my Swedish counterpart who was on official visit to Bucharest, I said that off-set offer of the Swedish company is a very generous one. However, the off-set is not the only criterion that we consider when assessing the offers of the companies willing to enter in the competition for the multi-role plane.

8. Speaking about the safety of the soldiers, what options you have to replace the armoured personnel carriers, the TABs? How many such military vehicles do you think are necessary and what funds do you think should be allocated?

The Romanian Army, as you know, is running a procurement program for 31 Piranha III C armoured personnel carriers 8x8, which will gradually replace the armoured combat vehicles currently in the theatres of operations in Iraq and Afghanistan. The contract for the Piranha APCs was signed in December 2006 between CN ROMTEHNICA SA and Swiss company MOWAG. Ten carriers have been delivered so far, and the entire lot is due to enter service within the next two years.
We decided to send six Piranha III-C armoured amphibious carriers to the theatre of operations in Afghanistan. Within 20 days of arrival in the theatre and completion of the training process, they will start executing missions. Sending these new, modern APCs, is aimed at upgrading the personnel protection level while they fulfil their specific missions (in these APCs the machine gunner will no longer sit outside the carrier, and the weapons system is used via remote-control, from inside the vehicle).
At the same time, the maneuvre capacity of the 30th Mountain Hunters Batallion "Dragoslavele", operating in Zabul province. Swiss carriers Piranha are, according to specialists, the most performant in the world today.
In the long run, we envisage replacing all the TABs. As a matter of fact, I have told you, equipping the Land Forces with armoured personnel carriers (8x8 and 4x4) is one of the strategic programs to be financed from the budget.

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