CPI(M): "Investigate the Israeli missile contract"

From People's Democracy;

The Polit Bureau of the Communist Party of India (Marxist) has issued the following statement on March 28, 2009

The Rs 10,000 crore [approx. 2,010,000,000 USD] missile production deal with an Israeli company, the Israel Aerospace Industries (IAI), has now been exposed as a deal involving massive kickbacks besides being an unnecessary contract. The Left parties had asked in a letter to the prime minister in March 2008 that the $ 2.5 billion deal for developing a medium range surface to air missile with the IAI should not be proceeded with, in view of the fact that the earlier Barak missile deal with the same company is being investigated by the CBI for kickbacks. The Defence minister replied to this letter that if there is any impropriety or violation of law, action would be taken (letters attached).

An investigative report by the DNA newspaper has exposed the fact that the Israeli missile deal involves a "business charge" which is six per cent of the total value (approximately Rs 600 crore). This makes it a scam of ten-fold magnitude compared to the Bofors Rs 64 crore kickbacks.

The Left parties had written to the prime minister again in February 2009 barely three weeks before the contract was signed once again urging the government not to proceed with the deal (letter attached). The reason cited was that the DRDO had already developed a missile system which was superior to the one being offered by the IAI for co-production. The letter also reiterated that IAI should have been blacklisted just like the South African firm Denel which is also under investigation for kickbacks.

Given the seriousness of the charges the government has to answer the following questions:

1. The IAI had got the contract for the supply of Barak missile in 2000 during the NDA regime. The FIR lodged by the CBI in October 2006 names IAI as an accused besides naming the Delhi-based arms dealer, Suresh Nanda and other family members as agents of the Israeli firms IAI and Rafael Corporation. Why was the IAI not embargoed from further supplies till the case was disposed off?

2. Was the government not aware that the Israeli authorities had investigated the IAI for malpractices in contracts with other countries? Such charges led to the head of the IAI stepping down in 2005.

3. Was the ministry of Defence not aware that an Indian agent of the Israeli company replaced by another petitioned the Israeli Defence ministry claiming additional commissions were due to him?

4. What does the Manmohan Singh government have to say about the DRDO having developed and field proven its Advanced Air Defence (AAD) missile capacity? Why was the DRDO compelled to enter into the so-called "joint development" of the IAI air defence missile when it already has its own superior AAD missile?

5. Was the Manmohan Singh government not aware of the fact that like in the Barak missile deal, there are middlemen and intermediaries involved who are being paid commissions/kickbacks? Was the government not aware of identity of these agents?

6. How does the Manmohan Singh government explain the six per cent "business charges" on the total value of the deal? Is this not contrary to the stipulations against engagement of agents and payment of agency commissions?

7. Why is it that the contract was signed on February 27, 2009 and the fact was kept a secret? The information about the date of signing has now become known from the IAI which has claimed that the Indian government wanted the signing of the contract to be kept secret.

8. Why did the government get the contract signed on February 27, 2009, just two days before the announcement of the Lok Sabha elections?

The Polit Bureau of the CPI(M) demands that the missile contract with the IAI be suspended and an investigation be ordered by the CBI into the contract with the IAI which should be a follow up of the investigations into the earlier Barak missile deal.

Statement annexures

Annexure 1

The following is the text of the letter dated March 17, 2008 to the prime minister, Manmohan Singh addressed by the general secretaries of CPI(M), CPI, AIFB and RSP.

We have been noting with growing concern the manner in which arms deals with Israel are being conducted. Israel is already the second largest supplier to India. It is now clear that Israeli arms manufacturers, including government-owned entities, have been blatantly violating Indian laws by using middle-men and by giving kickbacks to officials involved in the decision-making process.

The scam surrounding India’s acquisition of the Israeli Barak missile systems manufactured by the state-owned Israel Aircraft Industries (IAI) and Rafael corporations is the latest case in point. The original deal for ship-mounted Barak systems worth about Rs 1300 crore struck in 2000 during the NDA regime was rife with procedural violations and outright corruption as emerged during the Tehelka expose. CBI’s FIR of October 2006 names IAI as an accused, besides naming Delhi-based arms dealer Suresh Nanda and other family members as agents of the Israeli firms. The recent CBI raids and consequent arrests of the Nandas and their associates seem to have added more hard evidence.

Evidence has also emerged in Israel of the bribery and corruption, including payments to agents in India, indulged in by IAI and Rafael. An Indian agent replaced by another petitioned the Israeli Defence ministry claiming additional commissions due to him, and the matter has even been referred to the Israeli attorney general. All this has led to the arrest and impending prosecution of Moshe Keretz, who headed IAI for 20 years till 2005, and another agent whose name has been concealed under a gag order of the Israeli authorities.

Regrettably, despite all this evidence, the UPA government has shown a remarkable reluctance to take action against IAI, Rafael and other Israeli arms companies. The Swedish firm Bofors was blacklisted after the involvement of middle-men was proved in the notorious deal. The South African firm Denel was similarly blacklisted in 2005 for resorting to agents and kickbacks. But demands that similar action be initiated against IAI and other Israeli firms have been ignored. Some high authorities have bent over backwards to argue that the cases were not similar in some unexplained manner.

To add insult to injury, the UPA government has further cemented the alliance with IAI by signing a massive $2.5 billion (Rs10,000 crore) deal for co-development of more advanced Barak NG (new generation) and Barak-8 missiles with longer range and for land-based anti-missile applications. How can India proceed with this deal in the face of evident wrong-doing by Israeli firms?

By turning a blind eye to systematic violation of Indian laws by Israeli firms, India is sending out wrong signals to international arms manufacturers at a time when India is embarking on huge overseas military acquisitions, with the potential to corrupt and derail the entire system. These developments also underline the importance of self-reliance in defence production which has been given low priority of late.

The Left parties urge the UPA government to immediately take strong action against the errant Israeli firms, and also ensure that the CBI pursues the Barak scam case to its logical conclusion and brings all the guilty to book.

Annexure 2

The following is the text of the letter from A K Antony to Prakash Karat

This has reference to your letter dated March 19, 2008 enclosing a copy of your letter dated March 17, 2008, addressed to the prime minister expressing concern as to the conduct of arms deals with certain Israeli companies.

As you are aware, the ministry of Defence carries out its procurement activities in accordance with the Defence Procurement Procedure that contain mandatory stipulations against engagement of agents, payment of agency commissions and use of undue influences. Moreover, Integrity Pacts are being invariably signed with vendors for procurement schemes of over Rs 100 crores. These stipulations empower the government to cancel the contract as well as debar the vendor from entering into any supply contract with government of India for a minimum period of five years in addition to imposition of penalty in the event of breach of any contractual provisions. After filing of a FIR by the CBI in Barak Anti Missile Defence case, the ministry of Defence had obtained legal advice through the ministry of Law as to whether it would be appropriate to debate a party in terms of the above provisions. The advice received was that it would be advisable to await the charge-sheet or the investigation report and an embargo only on the strength of a FIR may not be justified. The matter is presently under the consideration of the government.

Similarly, when newspaper reports appeared regarding alleged irregularities on the part of Israel Aerospace Industries (IAI) in defence contracts including payment of commissions in the procurement of Airborne Warning and Control System (AWACS) aircraft, the ministry of Defence took steps to ascertain the facts through the Israeli Ministry of Defence and the latter conveyed that they had contacted the offices of the Israeli State Comptroller and their State Attorney’s office and both of them had made clear that their investigations focused on alleged IAI procedure and practices without any reference or connection whatsoever to the Indian transaction or Indian citizens. The Israeli ministry of Defence has further informed that the Israel State Comptroller issued no report on his inquiry and the police investigations ended with no charges pressed against any person.

I may assure you that all necessary action would be taken whenever any impropriety or violation of laws is established or brought to notice and that such cases would be pursued to their logical conclusion.

Annexure 3

The following is the text of the letter addressed to the prime minister, Manmohan Singh on February 9, 2009 by the general secretaries of CPI(M) and CPI. A copy is also addressed to A K Antony, minister for Defence, government of India.

We are writing to you regarding the contract for Air Defence Missile Systems placed by the MoD on Israel Aircraft Industries (IAI). The amount involved is around Rs 10,000 crore for the supply of around 12 such systems. This is surprising considering that such a contract has been given when IAI is already under investigation of the CBI on charges of bribery and corruption for the anti-ship, ship-mounted Barak missile system. We had brought this to your notice in our earlier letter dated March 18, 2008 about the kickbacks and use of middleman in the Barak deal, which are in violation of Indian laws. In the past India has blacklisted firms such as Bofors, Sweden and Denel, South Africa for similar cases of kickbacks and middleman.

The deal with IAI is also surprising on other counts. First, it involves systems that have yet to be even developed by IAI, let alone manufactured and test proven. Secondly, our Defense R & D Organisation (DRDO) has already developed and repeatedly field proven DRDO’s Advanced Air Defense (AAD) missiles capacity. This missile is capable of destroying incoming enemy missiles as well as aircraft whereas aircraft the proposed IAI missile can deal is only with enemy aircraft. The DRDO (AAD) missile is capable of intercepting even ballistic missiles at altitudes upto as high as 18 kilometers. Thus the proposed missiles sought to be developed by IAI appears to be inferior to the DRDO developed missiles AAD on the counts of technical, cost and operational readiness.

Thirdly, to give a “cover” of indigenous involvement and content, DRDO has been forced to enter into a so-called “joint development” of the IAI Air Defense Missile even when it already has its own superior AAD missile!

This deal again brings out the unfortunate influence that Israeli arms manufacturers including government owned entities assert on India’s arms purchases. Nothing else can explain why IAI, which is seriously implicated in corruption in India and in Israel, should be favoured in this way.

We urge you to get the contract stopped and see that the DRDO’s indigenous missile programme is not subverted in this way.