Budget constraints may halt Romania's helicopter plans

Published: 6/15/1999

On June 4th 1999, Mr Victor Babiuc, Romania"s Defence Minister, stated that Romania might shelve a multi-billion dollar deal with Bell Helicopters Textron, owing to tough budget constraints. Mr Babiuc confirmed that the defence ministry could not shoulder the cost of the project, estimated at $1.5 billion, and suggested that it might be dropped if alternate financing was not found before its deadline expires later in June 1999. At a news conference, called to announce plans to reorganise the Romanian army in line with western standards, Mr Babuic acknowledged that:“[The project"s] cost is too big for the budget of the Romanian army...and given the budget forecast for the next few years, we cannot afford it." Under the deal, approved by the centrist coalition government in 1998 after four years of talks, Bell was to pay $150 million for a majority stake in aircraft manufacturer, Intreprinderea Aeronautica Romana Ghimbav (IAR), and co-produce 96 AH-1 RO attack helicopters for Romania"s military. The army had strongly supported the deal, insisting that it needed the helicopters in order to boost Romania"s chances of securing NATO membership: its main foreign policy objective. But with NATO membership now postponed for at least several years, ministers and politicians have argued that Romania, with its shrinking economy and huge deficits, could not afford it. The International Monetary Fund has also expressed misgivings. On June 3rd 1999, a junior government official confirmed that the June 30th deadline for Bell to buy 70% of IAR would not be extended. On June 4th 1999, Mr Radu Vasile, Prime Minister, said that a deal with Franco-German company, Eurocopter, might shore up IAR, whose employees have joined thousands of workers in protests, sparked by fears of plant closures, in the central town of Brasov. State news agency, Rompres, quoted Mr Vasile as saying that IAR might be better off with a Eurocopter deal, which he said would involve building transport helicopters at IAR, plus servicing two Airbus planes owned by the Tarom national carrier. According to Mr Vasile, experts from Germany"s biggest defence company, DaimlerChrysler Aerospace (Dasa), which is involved in the Eurocopter project, were expected in Romania during the second week of June for talks involving IAR. Mr Babiuc suggested that the Bell deal might proceed in the unlikely event of an alternative financing formula being found by end June, involving a barter deal, but no government credits. He added that: “If not, we might have to drop the project, and revive it maybe in another four years, when we believe we will be able to finance major army procurement projects - buy helicopters, fighter jets, submarines and so on."

Article ID: 586