Romania Undertakes Naval Modernization Program (Part Two)

*To read Part One, please click here.

Less than two weeks after ringing in the New Year, the Romanian government halted its naval modernization plans due to legal and administrative delays (MAPN, January 11, 2019). This suspension deals a huge blow to Bucharest’s efforts to address the security of the Black Sea region, particularly while Russia has been consolidating its position there and begun building warships in occupied Crimea for its Black Sea Fleet.

According to former Romanian defense minister Mihai Fifor, 2018 was to be the “year of the navy” in acquisition terms (RRA, August 16, 2018). Two major initiatives for the Naval Forces should have been kicked off last year: the corvette program and the coastal defense program. The corvette program, arguably the more important of the two, involved the building in Romania of four multirole corvettes. The winner of the tender was initially supposed to have been announced in October 2018, but then the date was postponed twice: the first time for November 15 (see Part One, EDM, November 14, 2018), and the second time for January 12, 2019.

However, on January 11, the Ministry of Defense suspended the acquisition program because of unspecified irregularities that may have “compromised the national security interest,” and it handed over the matter to the Military Prosecutor’s Office (MAPN, January 11, 2019). It was further revealed that, on October 26, 2018, the joint venture between the French state-owned company Group Naval and the Romanian privately owned shipyard SN Constanța, filed a lawsuit asking for the cancelation of the acquisition process (Digi24, January 11, 2019).

It must be said that since October 2018, the Romanian media had been circulating stories alleging that the entire corvette acquisition process was skewed in favor of a competing firm, Damen Schelde of the Netherlands (Newsweek Romania, October 4, 2018). According to some reports, Romania’s Social Democratic Party (PSD) leader Liviu Dragnea tried to manipulate the acquisition procedure in favor of Damen (Adevărul, November 20, 2018), presumably in order to induce the Dutch government to acquiesce to Romania’s membership to the Schengen Area. However, no hard evidence was ever unearthed to substantiate these allegations. Moreover, Damen Schelde is a private company, not a state-owned shipyard, and the Netherlands has long objected to Romania’s joining of the Schengen Area because of the high level of corruption in the country and distrust in Bucharest’s ability to secure its borders. In addition, the Romanian corvette program is not really a major international arms contract in terms of value, so there is little economic incentive for The Hague to grant political concessions to Bucharest in exchange for favoring a Dutch company.

Group Naval faces an uphill struggle for the Romanian contract as it does not own a shipyard in the country. Another competitor, Italy’s Fincantieri, owns two Romanian shipyards through its subsidiary Vard; while Damen owns the Galați shipyard and manages the Mangalia shipyard for the Romanian government. In order to participate in the Romanian corvette program, Group Naval had to partner with SN Constanța, a local privately owned shipyard. Furthermore, compared to the other two shipyards competing for the contract, SN Constanța has no experience building military vessels. Damen Galați is the most experienced shipyard in Romania in terms of naval shipbuilding, constructing, in 25 years, more than 30 vessels for the navies and coast guards of at least 30 states (Adevărul, January 12, 2019). Fincantieri (Vard) has less of a track record when it comes to building military vessels in Romania compared to Damen Galați; but even so, it is significantly more familiar with the process than SN Constanța. The only military work undertook by Constanța shipyard in the past two decades has been the overhaul and repair of several Romanian naval ships.

It is not clear why Group Naval and SN Constanța are contesting the acquisitions procedure. But it can be surmised that they feel one of the other two bidders, Damen Schelde or Fincantieri, has been unduly favored by the Romanian authorities. Their initial complaint asked the court to annul the government decision that launched the acquisition process. Both Damen (Digi24, January 12, 2019) and Fincantieri (Digi24, January 11, 2019) have denied any wrongdoing, asserting that they abide strictly to Romanian law.

The other major naval acquisition program to have been suspended involves coastal defense, a contract valued at $155 million. Although no official announcement has been made by the defense ministry, the media has obtained confirmation from representatives of the companies involved in the acquisition process (Jurnalul Național, November 29, 2018). The Romanian Naval Forces wanted to renew their land based anti-ship capabilities based around Soviet/Russian 9K51 Rubezh mobile systems and SSN-2C/D missiles with modern, mobile coastal defense systems compatible with North Atlantic Treaty Organization (NATO) standards. MBDA, Boeing, Kongsberg and Saab have all shown interest in the Romanian program (Hotnews, July 16, 2018).

Before the coastal-defense tender was launched, MBDA complained to the Romanian defense ministry that one of the pre-conditions necessary for qualifying in the initial stage of the competition favors Kongsberg (Global Defense News, August 15, 2018). The Romanian government demanded that any potential bidders must have, since 2000, delivered coastal-defense systems worth $155 million. However, after the acquisition procedure began, the Romanian authorities clarified that any manufacturer of anti-ship missiles qualified for the program if it could show that it previously delivered orders of at least $155 million (Romtehnica, October 1, 2018). Any allegations of bias is therefore farfetched, but suspicions linger that the program was suspended in order to avoid another embarrassing lawsuit.

The suspension of both naval modernization programs could not have come at a worst moment for Romania. Russia has tipped the military balance in its favor in the Black Sea region and has escalated its confrontation with Ukraine over Mariupol (see EDM, November 6, 26, 28, 2018; War on the Rocks, August 15, 2018 and January 9, 2019). Romania needs to modernize its navy in order to deter potential Russian aggression and to shore up NATO’s eastern flank. Moreover, the public scandals associated with these two programs raise question about the way Romania allocates its 2 percent of GDP on defense and risks delegitimizing the entire effort in the eyes of the public.