Poland buys U.S. fighters, rankles Prodi

Poland and the United States finalized a contract April 18 on the supply of 48 F-16 jet fighters worth $3.5 billion from Lockheed Martin to the Polish Army in 2006-08.

The signing ceremony took place in Deblin, southeast of Warsaw, at a local air base and aviation school, with Prime Minister Leszek Miller in attendance.

"We can call this the contract of the century," commented Defense Minister Jerzy Szmajdzinski, one of the signatories on behalf of the Polish government.

The contract actually involves four separate deals: a sales accord, an accord on the financial servicing of the deal, a package of offset investments in Poland, and an agreement on a low-interest U.S. government loan to finance the purchase.

The deal was initialed in December, after the Polish government announced that Lockheed Martin with its F-16 multirole jet fighter won a supply tender, which involved also Dassault Aviation S.A. of France (Mirage) and a combination of Saab AB of Sweden and BAE Systems PLC of Great Britain (Gripen).

Both the decision of the U.S. government to grant a loan of $3.8 billion to Poland for the purchase and a U.S. offset offer seem to have essentially contributed to Warsaw's choice of the F-16 over Mirage and Gripen.

Under the contract, Poland will obtain 48 F-16 CD Block 52+ (until now, a prototype version) jet fighters from 2006 through 2008. The purchase will be directly financed by the U.S. government loan, which Poland is to repay between 2011 and 2015.

Finance Minister Grzegorz Kolodko estimates that the servicing costs of the loan will amount to some $1.2 billion.

Lockheed Martin and a number of other U.S. firms (including General Motors and Motorola) have committed themselves to investing more than $6 billion in Poland in 2003 - 2013, in 43 offset projects involving the purchase of Polish commodities (70 percent of total sum), direct investments in Polish production capacities (20 percent), and transfer of U.S. technologies (10 percent).

Miller said after the signing ceremony that the value of the offset deals was certain to exceed $6 billion and could rise to $10 billion in several years, thus boosting the job market and making the Polish economy more competitive. U.S.Ambassador to Poland Christopher Hill told journalists that if the offset scheme proved to be successful, U.S. investments in Poland might double in the several coming years. Poland attracted some $65 billion of foreign investment in 1989-2002, with the U.S. share amounting to $8.7 billion (13 percent).

The finalizing of the F-16 deal came two days after Poland signed the EU Treaty of Accession in Athens, thus emphasizing Poland's "special relations" with the United States not only in the political sphere (Poland was the only European country aside from Great Britain to join combat in Iraq) but also in the economic one.

Other EU countries, notably France, have criticized Poland for sidestepping the European arms industry and awarding the contract to a U.S. company.

The latest acrid comments came from EU Commission President Romano Prodi, who said in an interview on 18 April that "there is no joy in the fact that a day after signing the (EU accession) treaty in Athens, Poland signed a huge contract for the purchase of American fighters," the Polish news agency PAP reported him as saying.

According to Prodi, the states joining the EU must now realize that "whoever enters Europe is being accepted into a family" and be aware that "having your wallet in Europe, you cannot entrust to the United States the guaranteeing of (your) security."

"I regard Romano Prodi's statement as highly ill-considered," Szmajdzinski said in a statement. "Poland has held an honest, transparent tendering competition and its European participants have not questioned the outcome or appealed against it. It was not a politico-geographical criterion — as Roman Prodi would want — but a merits criterion that was decisive in selecting a multirole aircraft for the Polish air force."