Банкеръ Weekly



Bulgaria's accession to NATO, which will become a fact on April 2, almost coincided with the official failure of a strategic project - the repair and modernization of the modest Bulgarian fighter squadron of MIG-29s. As Defence Minister Nikolay Svinarov announced on February 27, the contract with Russia's RSK MIG will be revoked by end-March. It was signed in March 2002, after the Russian company won the tender invited by the Defence Ministry for reanimation of the fighters which had been firmly tied to the ground since 1994, chiefly due to the expired flying resource of their engines. However, RSK MIG's turned out to be a Pyrrhic victory. Not for the company, but for the wiseexperts who chose it. Suitably for them and for their superiors, the price of the deal entered the Classified Information column. Nevertheless, back in 2002 information was published in the press that against the amount of USD60MN the Russians had to repair the 20 MIG-29s and modernize 16 of them according to NATO standards. Direct executor of the entire operation had to be the Plovdiv-based enterprise Georgi Benkovski within the system of Terem. The purpose was more than noble - to kill three birds with one stone. To raise Bulgaria's fighting aircraft, to bring this aviation in compliance with NATO standards, and ensure operation for the troubled Bulgarian enterprise, as well as presence on foreign markets. There, where more than 700 MIG-29s are also waiting for somebody to bring them in compliance with the technical standards, approved by the Alliance members. According to experts of the aviation branch, this is a lucrative business from which almost USD100MN could be made. The trouble is that this cannot be done with Russia's partnership, because the Russians would undoubtedly repair the fighters they have made, but they do not possess the NATO licences for their modernization. Why then in 2002 the Bulgarian Defence Ministry preferred RSK MIG, eliminating the other candidates? A leader among the other competitors was EADS - the biggest European company, unifying the national aviation and space industries of France, Spain and Germany, which in 1996-1997 repaired and modernized the MIG-29s of the German air forces. Unlike them, the Bulgarian Air Forces had bad luck. RSK MIG had to begin implementation of the above-mentioned contract (signed in March 2002), by October of the same year. The start, however, was in May 2003. The reasons for the delay are not known. But it became clear that from then till now the Russians have repaired only six and a half of the 20 MIG-29s. Moreover, as Mr. Svinarov specified on Tuesday, March 2, two of the aircraft showed serious defects. But he did not say why the Georgi Benkovski repair plant did not receive from the Russian company the BGN920,000 it had earned so far. The enterprise's Executive Director Yordan Kishishev explained in front of the BANKER weekly that invoices for the due money had been issued and the amount has been acknowledged as liabilities on the part of RSK MIG, but he did not know if the money had been remitted to the headquarters of Terem. In his capacity of a State director he did not undertake to comment if the choice of RSK MIG was right, i.e. the most suitable candidate for the fulfilment of the MIG-29 project. In any case, before making their choice and signing the contract with the Russians in March 2002, the Defence Ministry's officials were not at all unprepared. According to information of the BANKER weekly, in end-2001 a similar project for modernization of the MIGs was deposited in Mr. Svinarov's ministry. The main purpose of the project is in fact the modernization of the aviation radioelectronic equipment of the MIG-29 fighters, improvement of their fighting possibilities and their approximation to these of the aircraft of the F-16 and Mirage-2000 type. But the project has failed. The contract with the Russian corporation RSK MIG will be revoked in end-March. This means that almost after three years, everything should again start from the beginning. It is not known how much time will pass until the Ministry of Defence invited a new tender. It is also doubtful that Mr. Svinarov's ministry will get a pretty good sum in default payment from the Russians for the failed strategic order. The Russian themselves are adamant that the blame for that is not theirs. Meanwhile, the Bulgarian army will be an unique NATO member with outdated Russian fighters which cannot fly.Another deal which is now in the hands of the Supreme Cassation Prosecutor's Office, will be probably a similar failure. It concerns the choice of British Aerospace Systems to modernize the 36 army helicopters. However, things are different regarding the secret order as per the restricted procedure, stipulated in article 6 of the Public Procurement Act, for renovation of the army's automobile fleet. It was entrusted (without any other candidates invited) to Daimler Chrysler, producers of Mercedes-Benz. As about 12,000-15,000 various army vehicles are concerned, Daimler Chrysler is to get some EUR600MN to EUR1BN. For realization of that order the German corporation closed a framework agreement with the Ministry of Defence on December 19, 2003. As the BANKER has learned, a similar agreement was offered to the ministry by the producers of IVECO, at that at a much lower price than Daimler Chrysler. IVECO - Bulgaria insiders do not know negotiations progressed. They only explained that the conversations were held at the Ministry of Defence directly by their foreign bosses. The Bulgarian division has been kept ignorant about the negotiations for such a deal. In fact only God knows if Daimler Chrysler could be replaced at all. What is important is the fact that scientific workers have offered three alternatives for modernization of MIG-29's radioelectronic complex, considering proposals made by giants like the above-mentioned EADS corporation, the French Matra, the Russian MIG-MAPO, the US Rockwel Collins and Righton. It is noted that the modernization might be thorough, partial, or just admissible, and while it might meet completely the requirements of the International Civil Aviation Organisation, it might still fail to meet those of NATO. The technical innovations needed for each of the three options are enumerated, too. The first one includes a main and a portable computer, specific types of communication and navigation equipment, radi stations, INTRACOM systems, laser inertial system with integrated GPS-receiver, a knowledge system compatible with NATO's STANAG 4193 military standard, etc. According to the authors of the document, in this case the predicted price of the systems and aggregates (VAT, duties, fees and engineering not included) is about USD900,000. It is calculated that the partial modernization of MIG-29's board complex will cost some USD500,000, whereas the just admissible one - USD250,000.The prognosticated total price of modernization of MIG-29 planes also depends on which of the three alternatives for renovation of the board complex will be preferred. If the first one is chosen, one figher will need USD2,970,000 and the modernization of 12 fighters will cost USD23,220,000. In the second option, the prognosticated total price of modernization of one MIG is fixed at USD1,650,000, which means that USD12,900,000 will be needed for 12 machines. The third option seems the cheapest one. In case that the modernization of the board complex of the fighters is only admissible, it will take USD4,644,000 for twelve. It is understandable why the modernization of one fighter alone, regardless of the chosen option, is always more expensive than it is for more fighters.Making a relative analysis of the thorough, partial, and admissible modernization of the MIGs, the experts from the Institute for Space Research alluded to the military directors that they should not forget the old rule - cheap always comes expensive, when they make the final decision. Because if lots of money is spent on the complete modernization of the Russian fighters, less will be spent on the acquisition of additional know-how. And that will be quite necessary for a full member of NATO.

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