Bulgaria Shakes Off Costly Arms Deals, Still Grapples with Eurocopter

Bulgarian Defense Minister Angelov revealed the government is in extremely difficult talks with Eurocopter. Photo by BGNES

The Bulgarian government has managed to re-negotiate the terms of notorious arms deals with Daimler-Chrysler and Alenia Aeronautica, for which it did not have the money, Defense Minister Angelov announced.

Gen. Angelov gave a special news conference Thursday to announce the progress his team has made on several major arms deals made by the past two Cabinets that he criticized severely over the recent months. Angelov believes that, first, the terms of the deals have been unfavorable to Bulgaria, and, second, the Defense Ministry cannot afford them, especially after the austerity measures adopted in 2009 and 2010.

The weapon contracts in question are with the Eurocopter Group, the Italian aerospace company Alenia Aeronautica, the German company Daimler-Chrysler, and the Belgian government, and were signed by the former governments of Sergey Stanishev (2005-2009), and Simeon Saxe-Coburg (2001-2005).

The Bulgarian government government has managed to get both Daimler-Chrysler and Alenia Aeronautica to agree to renounce any claims on penalties worth several million euro because of delayed payments by the Bulgarian government.

The contract with Italy's Alenia Aeronautica for the purchase of 5 Spartan C-27 tactical transport military aircraft was signed in February 2006 by former Defense Minister Veselin Bliznakov for a total of EUR 91.8 M. By the spring of 2010, Bulgaria had received the first two airplanes, and still owed BGN 57.6 M to the Italian company.

Angelov's team has managed to renegotiate the deal by giving up the fourth and fifth planes, and transferring the 20% of the sum paid as an advance payment on the fourth plane to the total sum owed for the third plane. In addition, the overall price of the Spartan planes has been reduced by EUR 12 M.

The Bulgarian government also signed a maintenance contract with Alenia Aeronautica, under which it will pay EUR 25 M for maintenance costs from 2012 until 2017. Bulgaria should get the third Spartan plane by March 2011.

The deal with Daimler-Chrysler was sealed in 2003 by former Defense Minister Nikolay Svinarov. It provided for equipping the Bulgarian Army with new transport vehicles, with specific agreements for each year. Thus, in 2009, Bulgaria received 155 transport vehicles under the contract for which it owed the total sum of BGN 22.3 M.

Angelov said the government renegotiated the Daimler-Chrysler deal as well, saving several million euro from it.

At the same time, however, the government still remains tangled in talks with Eurocopter over the most costly deal for the deliver of combat helicopters for the Bulgarian Air Force and Navy.

Minister Angelov described the talks with Eurocopter as "extremely difficult" because they have to be conducted not directly with the supplier but through a bank, which is an intermediary.

The contract with Eurocopter was singed by former Defense Minister Nikolay Svinarov in January 2005. Under it, Bulgaria is supposed to receive 12 Cougar helicopters for its Air Force, and 6 Panther helicopters for its navy at the price of EUR 358 M.

By August 2010, Bulgaria had received 11 Cougar and 3 Panther helicopters, and had paid 60% of the entire deal – about EUR 240 M – which is the guarantee deposit.

Under the contract, if the Bulgarian state fails to pay the entire due sum, the bank servicing the deal can withdraw 60% of the value of each of the helicopters whose delivery has not been paid for from the EUR 240 M deposit made by the Bulgarian government.

Subsequently, the Bulgarian government decided to pay all the money for the Cougars and to ask Eurocopter to renegotiate the deal in order to give up buying the three Panthers.

In December 2010, the 12th Cougar helicopter arrived from France, and was received at the Krumovo base of the Bulgarian Air Force. According to a statement of the Bulgarian Defense Ministry, the 12 Cougars for the Air Force are to be used for "combat searches and rescue operations."

In August 2010, Bulgaria's government allocated BGN 256 M from the country's fiscal reserve in order to complete several arms deals with foreign companies widely seen as problematic, including the deal with Eurocopter.

At present, the Bulgarian Air Force and Navy cannot even use the helicopters already delivered to them because under the terms of the deal they are not entitled to do that until the accounts have been fully settled.

Angelov indicated on Thursday that Eurocopter had very little desire to renounce the penalties worth EUR 12 M that Bulgaria has to pay for delaying its scheduled payments.

Angelov has sent a letter to the French Defense Minister asking him for helping for reaching a settlement with Eurocopter in January 2011. During talks in Brussels, the French Minister has expressed readiness to help even though Eurocopter is a private company.

The Bulgarian government is holding meetings with the European Aeronautic Defence and Space Company N.V. (EADS), which is Eurocopter's parent company, in an attempt to reach a settlement sooner.

During his press conference, Angelov also announced that while the Defense Ministry ended 2009 with debts amounting to BGN 580 M, it has managed to reduce them, and will end 2010 with debts of BGN 132 M.

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