Poland's military support, warplane deal coincided; $3.5 billion purchase of F-16s; Bargain included sending American business there

Baltimore Sun
October 17, 2004
By Robert Little, Sun National Staff

As the Bush administration scrambled last year to pull together a "coalition of the willing" to wage a war in Iraq, it simultaneously negotiated and financed an unprecedented multibillion-dollar arms deal with Poland - a compact that promises to funnel at least $6 billion in U.S. investments into the former Warsaw Pact nation, which has become one of the United States' primary wartime supporters.

President Bush and Vice President Dick Cheney have criticized Democratic presidential candidate John Kerry in recent days for suggesting that the administration used financial inducements to assemble its coalition, calling his comments an insult to a country like Poland, which dispatched 2,500 troops to fight alongside Americans in Iraq.

But the record shows that early last year, the United States brought the full force of its powerful economy to bear on prospective military allies, offering more than $4 billion in an unsuccessful attempt to gain the allegiance of Turkey and helping to negotiate Poland's $3.5 billion purchase of 48 F-16 fighter planes from Bethesda-based Lockheed Martin Corp.

The Polish deal also included more than $6 billion in U.S. business investment that Lockheed promised to channel into Poland, an economic "offset" that caused Polish officials to call the purchase "the deal of the century."

Although perhaps not rising to meet Kerry's contention before the war that the United States formed a "coalition of the bribed, the coerced, the bought and the extorted" in Iraq, the type of economic incentives won by Poland were called "economic bribes" this year by Rep. Duncan Hunter of California, the Republican chairman of the House Armed Services Committee.

Troop withdrawal
Poland's allegiance seemed shakier Friday, when Prime Minister Marek Belka said that his country will start withdrawing its troops - the fourth-largest contingent in Iraq - early next year.

The announcement came weeks after Polish officials complained that the F-16 deal is not producing as much U.S. investment as they anticipated, though they have long denied any relationship between the deal and the troops.

Seventeen Polish troops have been killed in Iraq, and Polish public opinion has been anti-war from the start of hostilities. Eight other members of the coalition, including Spain and the Philippines, have withdrawn their troops.

At the very least, the fine print to Poland's mammoth weapons deal illustrates the benefits - both political and economic - enjoyed by a country that chose to fight beside the United States.

The deal, which allows Poland to defer payments for eight years and then begin repayments at below-market interest rates, has fostered such trans-Atlantic ventures as building General Motors cars in Gliwice, manufacturing U.S. Army explosives in Bydgoszcz and, after the intervention of the Federal Aviation Administration, selling Polish airplanes in southern Florida.

High-level support
"Lockheed didn't win the contract, the U.S. government did, with pressure and support coming from the very highest levels," said Gregory Filipowicz, a defense industry consultant who lives in Poland and has helped arrange at least two of Lockheed's "offset" investment deals related to the F-16 contract.

"They created a program that, politically and economically, was very hard to say no to," Filipowicz said.

"As for the deeper political motives, of course, we'll never know what was said in the back rooms," he said.

Polish officials say that their political ties to the United States are unwavering and that their decision to participate in the war was unaffected by their economic interests.

"Our decisions were not taken on the basis of tactical considerations," Foreign Minister Wlodzimierz Cimoszewicz said last month during a speech at Columbia University. "We were not calculating what we can win from this or that choice.

"We did not expect to make political profits or economic gains. The decision to support the invasion of Iraq was mainly based on our understanding of the true meaning of alliance and solidarity."

Still, Cimoszewicz said, they appreciate the benefits - political, economic and otherwise - of forging a military partnership with the United States.

"The Polish support to the military action against Saddam Hussein and our role in the stabilization process in Iraq gained us true friends in Washington," Cimoszewicz said. "Although these decisions in Poland were not easy to take, they proved to be the right ones."

Poland's interest in fighter aircraft predates the war in Iraq, as does Lockheed Martin's interest in Poland. Both engaged in an eight-year courtship as Polish officials debated which of the world's fighter planes suited their needs, and which of Poland's budding political alliances - with the European Union or NATO - they most needed to nurture.

The U.S. government also has long taken an interest in which fighter plane Poland would buy, hoping to secure the former Soviet-bloc nation's allegiance to NATO. The purchase of such expensive and dangerous hardware as an F-16 is more than a simple arms deal; it is a decades-long commitment to a weapons platform, whose support networks and spare-parts chains all lead back to the United States.

Lockheed got U.S. help
By the time Poland signed its contract to buy F-16s on April 18 last year - a day when Polish commandos were operating alongside Navy SEALS inside Iraq, and American troops were struggling to contain looters in central Baghdad after the fall of Hussein's regime - Polish officials had been prodded and encouraged at the very highest levels of the U.S. government.

Christopher Hill, then the U.S. ambassador to Poland, said he worked with Lockheed officials every day on the project. Defense Secretary Donald H. Rumsfeld discussed the deal with Polish leaders on a visit to Warsaw.

On Feb. 5 last year, as Secretary of State Colin L. Powell was offering evidence of Iraq's alleged weapons programs to the United Nations, then-Polish Prime Minister Leszek Miller was in the Oval Office with Bush.

He declared on Polish radio later in the day: "It seems to me that his evidence leaves little doubt. Hussein", he said, "must be ready to face consequences."

The White House was not the first stop for Miller that day. He met earlier with Lockheed Martin officials, including then-CEO Vance D. Coffman.

Backed by Congress
The deal's financing, guaranteed by Congress, was approved with similar attention from the White House. The Bush administration had the loan guarantee attached to a resolution approved in late 2002 that was needed to continue operating the federal government while Congress debated the budget, virtually assuring its prompt passage.

"We certainly think the F-16 is a superior multi-role fighter, and we were pushing for its sale in Poland," said Jason Greer, a spokesman for the State Department's Bureau of Political-Military Affairs. "But our interest was related to Poland's role in NATO, not to anything else."

As far as the economic incentives to the deal, Greer said: "We just don't get involved. That's strictly a commercial arrangement."

Economic offsets have become a standard component of most large foreign arms deals. Buyers such as Poland often demand that in return for their purchase, the seller coordinate some related amount of outside investment to soften the economic impact.

Direct offsets are common - allowing the purchasing nation to build part of the weapon system, for instance - but indirect offsets unrelated to the product being bought have grown increasingly prominent.

Among Lockheed's indirect offsets is an investment that General Motors agreed to make in its plant in Gliwice, about 70 miles west of Krakow, where Opel vehicles are manufactured. Although GM officials concede that they might have made the investment anyway, Lockheed was permitted to claim it against their obligation in the F-16 deal because it was a new investment from an American company.

'Economic bribes'
Such side deals have long been criticized in Washington as a form of kickback that defies the natural forces of free trade, including when Hunter called offsets "economic bribes" during a hearing on Capitol Hill this summer.

Defense industry officials hardly disagree, though they point out that offsets are legal arrangements and have come to be expected by most foreign customers.

"It's part of the price of international business," Rick Kirkland, Lockheed Martin's vice president of international business development, said in an interview this year. "If we couldn't offer them an acceptable package of offsets, they wouldn't be buying an American airplane. It's that simple."

Lockheed officials say they can't provide details about the arrangements in deference to their customer, and federal officials say they have no connection to the side deals associated with a weapons purchase.

But a study of the Polish F-16 purchase suggests that the United States plays an active role in ensuring that the deal moves forward smoothly.

Lance MacLean's venture in southern Florida is evidence. MacLean had tried since the early 1990s to import and sell in the United States a rugged Polish cargo plane called the M28 Skytruck, built by Polish aerospace manufacturer PZL Mielec. He hoped to serve a niche market for cargo haulers who need to use short or improvised runways and says he had little trouble finding customers for the Polish planes.

Officials in his native Collier County, Fla., have been keen on the concept as well, promising him $325,000 worth of waived government fees and cash if he builds his distribution center at the municipal airport in the small southwestern town of Immokalee. The 30 well-paying jobs he promised were too much to pass up, they said.

But despite those successes, MacLean's enterprise puttered along for nine years because the aircraft lacked the approval of the Federal Aviation Administration - a document called a type certificate.

But that complication dissolved last year, once officials at Lockheed Martin noticed that MacLean's enterprise could qualify as an offset in the F-16 contract.

"I had been trying to get FAA certification since 1995, and it wasn't going anywhere," said MacLean, president of the fledgling Skytruck LLC.

"When the Lockheed F-16 deal came along and it looked like we could become part of the offset package, my understanding is that the State Department called up the FAA and said, 'What's going on?'

"The FAA started showing an interest, and now we have our type certification."

Copyright © 2004, The Baltimore Sun

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