Defence Minister A K Antony has every reason to be angry with the agents of foreign arms manufacturers, especially after the recent admission of hundreds of millions of dollars in bribes paid to countries across the globe, including the USA, by the UK’s BAE Systems alone, the world’s second largest manufacturer-exporter of weapons and military services after Lockheed Martin, through shady shell companies and agents. The news of recent FBI arrests of 22 US arms sellers trapped in the act of bribing officials in Africa, following a series of sting operations by the federal agency, may have also enraged Antony to take harsh measures against some of the foreign arms suppliers, last month.
BAE’s stunning admission has opened a Pandora’s box among official investigating agencies in the European Union as well as in the USA, with which the $32-billion-plus British arms behemoth is engaged in multiple arms deals. BAE Systems agreed to pay fines up to $79 million to the US government for breaking military export rules. BAE’s external auditors, KPMG, have come under fire. TheUK’s Accountancy and Acturial Discipline Board (AADB) has launched investigations into KPMG’s work in auditing secret payments made by the arms manufacturer using front companies to channel covert payments to foreign politicians, bureaucrats and defence officials.
Going by the reports of the UK’s Export Credits Guarantee Department (ECGD) on a large arms deal between BAE Systems and South Africa, with specific reference to commissions “acceptable”, India’s defence contractors might have been paid over $ 300 million in bribes in 2011 alone and well over a billion dollars since 2006 when the import of foreign arms started surging. The amount may sound mind-boggling, but seven to 12 per commissions in international arms deals are said to be common depending upon the contract size and competitive pressure. India’s military imports in 2011 are estimated at $ 5 billion, up from $3.4 billion in 2010.
BAE, traditionally a major arms exporter to India, has also accepted guilt over dirty arms deals in the African continent, the biggest being the long-term Pound Sterling 1.6 billion ($2.56 billion) fighter and trainer aircraft supply contract with South Africa. Former British Prime Minister Tony Blair himself strenuously pushed the deal with the ANC-led South African government for BAE Systems against a much cheaper bid from an Italian rival. BAE’s trainer aircraft, Hawk, was almost 100 per cent costlier than the Italian flying machine. Blair had reportedly ‘coerced’ former South African Defence Minister Joe Modise to gulp the bitter British offer. BAE employs about 1,05,000 workers. Successive British prime ministers have championed the cause of BAE in international trade deals.
Last year, the Swedish defence equipment manufacturing group, Saab AB, had confessed that millions were paid to clinch another South African contract for fighter jets, but said the bribes worth Rand 24-million were paid by its erstwhile British partner, BAE Systems, in ‘bonuses and salaries’ between 2003 and 2005 through a local subsidiary, Sanip. The deal involved the supply of 26 Gripen fighters by Saab to the South African Air Force. In June, last year, BAE Systems said the company sold its stake in Saab for $240 million.
Incidentally, BAE Systems is also supplying Hawk advanced trainer jet aircraft to India under one of the three recently concluded defence deals. Other purchases include AgustaWestland AW101 helicopter for IAF to ferry VVIPs and Sonardyne’s Sentinel underwater surveillance system. The Stockholm International Peace Reaserch Institute (SIPRI) database suggests India has been one of theUK’s biggest arms dispatch destinations.Britain had exported arms worth $ 15.34 billion to India between 1950 and 2010, next only to the erstwhile Soviet Union/Russia and the USA during this period. Comparatively, India’s imports from the four-nation (France, Italy, Germany and Spain) European consortium, EADS, builders of Eurofighters, were a little over $ 6 billion during the same period. EADS holds 46 per cent shares in Dassault Aviation, the French firm that manufactures Rafale.
The political clout of leading arms dealers is so strong that very often even powerful heads of states push sale-deals on their behalf as part of foreign diplomacy. President Barack Obama had personally pushed some $10-billion defence deals with the Indian government. French president Nicolas Sarkozy , German chancellor Angela Merkel and former Italian prime minister Silvio Berlusconi have all been pushing India to buy their respective military-wares such as aircraft, ships, submarines, guns, munitions and what-have-you. And,India, boasting the world’s third largest defence force served by a weak and inexplicably neglected domestic military industry, has always been an easy prey of international arms vendors.
India’s arms needs are not restricted merely to equip its 1.3-million strong force of active combatants in army, navy and air force. India has a reserve military force of 1.15 million personnel. Weapons have to be adequately stockpiled for their use in times of war. In addition, it has 2.28 million personnel engaged in paramilitary services such as BSF, ITBP, Indian Coast Guards, all under-armed. The logistics and arms requirement of even NSG and the central and state police forces are also not small. Non-defence deals, including VVIP security apparatus, are approved by their respective administrative departments or ministries.
The question is: what message does India’s defence minister want to serve before the global defence manufacturing industry by his action of blacklisting four small foreign arms suppliers, namely Singapore Technologies Kinetics Limited, Israeli Military Industries, Rheinmetall Air Defence of Zurich and Corporation Defence of Russia for following ‘unfair business practices’ in India? Is the government truly serious about fair, transparent, commission-free defence import deals? The defence ministry is already under pressure from its military to lift ban on certain foreign dealers or arrange alternate supply sources to avoid shortage of critical items such as certain types of tank munitions which are said to be down to only four days’ reserves.
What would happen to national security if the government takes similar actions against big bullies in the arms business such as Lockheed Martin, BAE, Boeing, Northrop Grumman, General Dynamics, Raytheon, EADS, Finmeccanica, United Technologies, Almaz-Anteid, Saab and Oshkosh Truck? Will India take the risk of going without critical defence equipment imports, which account for almost 70 per cent of the total annual arms procurement by the three services, just to ensure transparency in defence deals?
Maybe, India should try to replicate what the USA, the UK, Germany, France and Canada are doing to check bribery at home. Bribery is a huge issue everywhere. The $400-billion-plus global armament industry thrives on ‘push’ sales and bribes. India must have a strong criminal law to provide exemplary punishment to the offenders. Unfortunately, India does not have such a specific law. The UK’s ‘Bribery Act, 2010,’ which came into force last year, provides law offenders rigorous imprisonment up to 10 years, unlimited fine and total confiscation of property. The UK law, regarded among the toughest of anti-corruption laws in the world, has a near universal jurisdiction over its citizens involved in bribery, regardless of the place of crime.
The real challenge is to spot and punish those Indian culprits sitting in high places taking big bribes from foreign arms dealers staking national security. The task is by no means easy. It involves tracking those highly complicated money trails behind millions of dollars in bribes paid through seedy offshore banks. Given the CBI’s miserable performance record in bribery cases involving foreign suppliers, the government would do well by setting up a separate detective agency having collaboration with some of the top global offshore crime investigation firms to catch the culprits. At the same time, the government must go full steam ahead to improve the capability of domestic defence manufacturing industry. (IPA Service)