Military miscellaneous - February 2020

Before the draft of the relevant regulation was released, ideas of its absorption by the newly created PGZ Armament Agency appeared in the public debate. All in all, this was to secure the control of the Ministry of National Defence over the state-owned arms industry and probably to contribute to better coordination of purchases of the Armed Forces. A serious threat and practical exclusion of the private industry would be to create a monopoly, which would cause purchases of the military equipment only in the state armaments industry. A possible advantage would be the possibility of direct export support, especially in directions where state participation is necessary. In my opinion, however, this solution has more disadvantages than advantages. The interview recently given by the Minister shows that this idea has not died and can be implemented in a somewhat truncated version, i.e. to the Armaments Agency will be transferred the best and most related to the Ministry of Defence PGZ’s companies. It was confirmed by Minister Sasin, saying that the arms industry will be supervised by Minister Maciej Małecki. He also mentioned that "in PGZ, there are some factories that do not have much in common with the army [...] We must consider whether to create a strictly defensive [industrial - ed.] group".

And now we have to wait to see, if the most interesting thing happens – the need for the current exercise of power – filling managing positions with "their people". In the past four years, the state-owned arms industry has demonstrated incredible ability to survive. Let's hope that if these constant changes in management boards and swarms of arms export specialists did not destroy it, it will survive this change as well.  In the worst case scenario, the state will give financial support, and new, talented staff, with experience in the pharmacy, will eagerly develop cooperation with the industry of our most important ally.

But because everything is great, the best in history, the Ministry of National Defence should be praised for the ammunition order. Sincere congratulations. These orders will be useful for both the military and industry. On their basis, we can finally think about the production of ammunition for Krab with a range of 40 km. Modern Rak’s ammunition would also be useful by the way. It remains to be hoped that the production of gunpowder will start soon, and the PLN 400 million capital injection will not be wasted, as it probably happened with part of the funds allocated for modernization of Leopards. At least, the Prime Minister's office promises so.

And praise continues, this time it concerns not the arms industry but the human treatment of soldiers and their families. Those injured as a result of activities abroad as well as those affected by other random cases. In the human aspect, during the reign of current minister there was a huge breakthrough - for the better. None of his three predecessors had this approach. Both in legislative changes and practical approach. In this matter I have some experience, because pro publico bono I run several cases of injured soldiers and their families. However, it would still be worth equating the rights of soldiers who suffered injuries or died during exercises in the country, with those affected abroad.

And now sad news, there will be no offset for F35. Politics dictates a quick campaign purchase, and offset would slow and complicate everything down. It is a pity, because, that is practically the only way to force transfer of technologies which is necessary to maintain the equipment purchased on a foreign supplier. And here disappointment - according to the article on www.defence24.pl, industrial cooperation agreements will be concluded on the model of agreements concluded between Belgian companies and the supplier Lockheed Martin Corporation. Unfortunately, it is just appearances. In order to win the Belgian contract, LM had to submit a better offer than the other three competitors. In Poland, it does not have to compete with anyone, everything is prepared without any company’s effort. It is enough that it only shows the appearance of negotiations. Recently, I studied the corporate history of LM - great professionals. They now how to run a highly effective defence business. They have developed a strategy and tactics to deal with foreign governments and politicians like hardly anyone. There is hope that something will be achieved from this "industry cooperation" and that they will increase orders from Polish companies included in the global supply chains. There are several of them and let’s hope there will be even more. On the other hand, counting on the fact that LM will order something from Polish industry by itself just because of good will is a great naivety. It will do what will pay off for them. From the LM’s point of view, the current position of Poland, which must order even the smallest part, paying the dictated price, gives it both an advantage and a stable earning perspective.

It is worth to remember that on average military equipment price is paid 30% on purchases and 70% during its life cycle. An experienced negotiator like LM can get better proportions and move some of his earnings to a later date for exchange of a much bigger profit in the future. And may F35 meet our hopes for a rapid improvement of Poland's defence capabilities, and we can only hope that it will not to block other modernization projects.

And we already know - USD 4.6 billion for 32 planes plus one engine, logistics and training package. So it will come out 143 million US dollars per unit. The Ministry of Defence insists that the cost of one piece is 87 million and is at the level of other suppliers. In my opinion it's fiction. The cost of one item, taking into account the costs of infrastructure modernization, purchase of utilities - but at the earliest in 2026-2028 - will amount to USD 250 million or even more. Earlier, it makes no sense to buy those planes, because they will not be in Poland, and they will be flying on parades in a manner allowing them not to lose the properties of "invisibility." Of course, this estimate does not take into account the normal life cycle costs of the aircraft.