Background of MORH's deal of the century

TPT can be called for after winning the tender for jet procurement, otherwise Croatia is not subject to TPT. The TPT specifies all elements of the offer, including parts, training, serial numbers of jets which have been chosen and are still operating in Israel and all other details. The Department of State approved delivering all technical details on F-16 BARAKs to Croatia on 20 September 2017 for possible sale of jets. The approval came before the approval for purchase of Greek F-16s, which was the option USA pushed for, while some candidates did not deliver technical documentation.

It appears that the last disagreements were overcome. There were slight tensions earlier due to the wide spectrum of equipment installed on BARAKs, which were resolved by agreeing to buy air-to-surface missiles from USA later, the whole spectrum that F-16s use. The main problem with the last hold-up is, of course, money. US Lockheed Martin aerospace and defense company knows the details about structural specifics of the jets, but did not know what sort of equipment was installed on BARAKs and what their capabilities are, which the company learned during negotiations on Croatia's procurement. What they did not know derailed their plans - they planned Croatia would have to modernize the BARAKs in ten years or so, where they would make a profit. However, upon inspecting the documentation and realizing capabilities of BARAKs, they saw that the jets are so advanced and sophisticated they would not need any modernization until the end of their service life.

Winning the tender in Croatia created an additional problem as four or five countries suddenly expressed interest in BARAKs, including Bulgaria and several countries interested in much larger fleets. This directly decreases chances of US F-16 Block 70 as BARAKs are significantly cheaper. US concerns of losing tenders in the future were not eased by the fact that Israel will no longer sell BARAKs to others because it would leave the country without enough jets to cover its needs. As we have been informed, Israel barely set aside 12 jets for Croatia.

The contract

Thanks to the government-to-government (G2G) condition, which was not met by all respondents to the tender, the price is fixed. Croatia will pay Israel just under USD 500 million, in line with the contract, and we do not care how much of that will go to USA. Croatia will not pay a cent more than that. We will know exactly how much was paid and the money will be traceable from Croatia to Tel Aviv via New York. The Defense Ministry (MORH) will not see the money, but will only inform the treasury about payment plans. This eliminates the possibility of malversation.

The contract has 22 articles on more than 400 pages and was agreed on after 11 meetings. The contract is to come into force with payment of the first installment and start of TPT. If any clause of the contract is violated, the contract is terminated and Croatia is to receive its money back in 180 days. Croatia will suffer no financial damage in all scenarios.

Guarantees

For the sake of transparency, it was demanded that offers which would be dismissed as invalid be examined as well, including those without guarantees or lacking. Our previous attempts to get an offer on used Block 50/52s from USA failed for two reasons: because US Air Force needs those jets and because this would present direct competition for Block 70/72s. Those jets are very expensive. Slovakia paid USD 1.3 billion for 14 unfitted F-16 Block 70/72s and US Congress predicted that training, infrastructure, logistics and armaments will up the final price to almost 3 billion! USA is offering only unfitted jets - hull and engine - and everything else is sold separately. Romania paid USD 300 million for 12 Portuguese F-16 AM/BMs, with final price including armaments, training and infrastructure almost reaching 1 billion.

Israel guarantees fixed price for Croatia. Expected budget in 2020 and 2021 is higher due to payment of value-added tax (PDV) to the State. Projections for said years include delivery of goods and services - jets, training, infrastructure and more. The G2G arrangement means that the Croatia's procurement is a turnkey project. Israel's responsibility, considering its huge experience with F-16s, is to deliver exactly what was agreed. Israel and USA have been bickering over every jet, missile and bomb for decades, and Israel knows how USA works, with everyone involved in the process from our side extremely optimistic.

Logistics

Another point of controversy for the media is the Service Life Extension Program (SLEP) for the BARAKs. It will guarantee service life of 10,800 hours for our jets. Reading some of the expert texts, one could easily conclude that the SLEP for the BARAKs is something the Israelis came up with on their own with the aim of swindling gullible Croats. However, our SLEP was jointly defined by Lockheed Martin as the original equipment manufacturer (OEM) and the Israel Aerospace Industries (IAI). Work will be performed by the IAI in Israel and is included in the price. The contract clearly notes that Israeli Defense Ministry is responsible for implementation and the SLEP is to be implemented in line with all bulletins and other documents as well as with original materials and service kits specific for BARAKs.

Israel is to cover all maintenance costs in the first three years, including supplies like regular and special lubricants, rubber seals and everything else. The only de facto cost for Croatia in the first three years is fuel. Israel is also responsible for maintaining fleet operability of at least 65%. Maintenance is taken so seriously that we will pay more than USD 1 million annually for maintenance bulletins only, for updating documentation with all new information from makers. One Croatian liaison officer will be permanently stationed at US Hill Air Force Base as the main logistics complex for maintenance of the global F-16 fleet is located there.

Geopolitics

It is necessary to stress that no elements will be removed from the BARAKs. The only adjustments that will be made are aimed at NATO compatibility - the Link 16 data link, the IFF identification system and secure communication. Installment of NATO compatible systems will be performed in Croatia as the end user because the components are not NATO compatible by design. NATO compatibility should be clarified. Croatian MiG-21s are fully NATO compatible. The F-16 Block 30s that Greece offered are not since their VHF/UHF communication systems are outdated and have not been modernized. Radio communication equipment becomes NATO compatible after addition of encryption elements. These must be handled in appropriate manner as they are top secret. The elements are in use in Zemunik, where Kiowa Warriors and related systems are kept, with USA regularly checking security measures.

USA showed its strength by halting the process, even against its reliable ally such as Croatia, and we have to keep in mind that open political issues exist such as the delayed construction of the liquefied natural gas (LNG) terminal, which is USA's key project for lowering Europe's dependence on Russian gas.

It comes as no surprise that Russian Ambassador pointed out that Russia still sees Croatia as a partner in the gas business when the project was halted. However, USA is surely aware that, if procurement of jets falls through because of USA, it would open doors to stronger Russian influence on Croatia as well as send a negative message to USA's allies around the world. On the other hand, the fact that the TPT was sent for adoption proves that differences were overcome and it is almost certain that Croatia will have some of the most sophisticated fighter jets in the world in two years as well as the largest air force in a very wide neighborhood.