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Russia Plans a Permanent Naval Task Force for the Mediterranean

March 4, 2013 by · Comment
Filed under: Greece, Syndicated Industry News 
AdmiralKuznetsovRussia is considering deploying a permanent naval task force in the Mediterranean Sea. Such a task force will be commanded by the Black Sea Fleet and could consist of up to 10 combat and auxiliary ships deployed on rgathered from three Russian fleets. These vessels could rely on ports in Cyprus, Montenegro, Greece as resupply points, in addition to Syria.

Bribes, Corruption Suspected in Greek Submarine Order

Procurement fraud and outright crimes have afflicted government spending and contracting since the dawn of history. There have been many recent cases of bribery used to affect contract awards or purchasing decisions. This has included elected officials, civil servants as well as company representatives. There are cases large and small from accusations against BAE Systems (BAE:LSE) in a multi-billion deal with Saudi Arabia to a U.S. Army Major who took $200,000 in bribes from foreign companies to give them work in Iraq, Kuwait and Afghanistan.

Foreign military sales has always been one area that in the past has seen rampant bribery and corruption. In the last few decades governments have been cracking down on such practices especially the United States. They have made it illegal to use such methods to help win contracts overseas even if those practices were considered part of the cost of doing business. In 2008 for example Siemens (SI) settled with the U.S. government on charges they used such methods to win contracts.

Now there are allegations that Greek defense and elected officials were bribed to influence the award of a contract for four submarines to a German company. The contract was one of the largest in Greek history and would see one boat built in Germany and the other three in Greek yards.

The Greek government and the manufacturer, ThyssenKrupp, ended up having long running dispute about the quality of the submarine leading to the builder to threaten to cancel the deal outright. Greece then came up with the idea of taking delivery of only the first one and perhaps selling it directly themselves to recover some of the costs.

Greece’s government is suffering from financial and debt issues and the idea that the contract was inflated in cost due to corruption has only added fuel to the fire of disputes between the government and political rivals.

Corruption distorts contracts so that the buyer may not get the best value for what could be limited funds. It also affects the contracting market as it may not allow a company with better products the ability to sell those and they cannot or will not pay the necessary bribes to get the work. As more countries follow the U.S. lead in investigating and ending this type of fraud the overall defense market will benefit. Unfortunately stories like this remain much too common.

Photo from sky#walker’s flickr photostream.

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Greece Loses Submarine Contracts

Normally it is the government customer who ends a contract for non-performance or because they cannot afford it anymore. Today it was announced by ThyssenKrupp that the shipbuilder was ending a contract with Greece for new construction as well as upgrading existing ships and submarines. The company claims that the Greece Ministry of Defense has failed to pay them for the work done.

The original contract was for the construction of four advanced diesel electric submarines as well as modifying and upgrading three older ones already in use by Greece. In 2007 the first new submarine was ready but Greece didn’t take delivery and refused payment. ThyssenKrupp has been trying to go into arbitration over the deal but has now decided to go ahead and cancel the contract. The company has seen major contraction and loss of business due to the global economic downturn.

The Greek government is blamed for failing to negotiate or move out on the contract. There is an election upcoming and the opposition is expected win and has used this issue as part of their campaigning.

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Greece Looks to Modernize Military

Greece signed a contract to buy French warships and entered discussions on purchasing fifteen Puma helicopters. Reuters reports that the Greek government may also be open to purchasing new fighter aircraft. Greek defense spending has been limited due to the costs of hosting the Summer Olympics recently. If Greece did pursue the fighter aircraft it would attract attention from a variety of companies. One would expect Lockheed Martin, Dassualt, SAAB and Eurofighter to possibly propose.

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Greece to Continue Military Upgrade

Aviation Week reports on plans by the Greek government to continue the expansion and upgrade of their military. With the end of the Cold War Greece has the ability to turn to more suppliers then just the traditional NATO ones in the past. A recent purchase of Armored Personnel Carriers (APC) from Russia for instance. This has led to some friction with America and other European nations on how the procurement process is carried out. As usual the main threat continues to be Turkey, but there is also participation in the Global War on Terror and other NATO operations.

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