AP Exclusive: Accusations dog Russian copter deal

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Associated Press

Posted on December 9, 2013 at 7:07 AM

Updated Monday, Dec 9 at 1:01 PM

WASHINGTON (AP) — U.S. military officials insisted a top-secret Pentagon study proved the need to buy Russian helicopters for Afghanistan's security forces. But the study actually recommended an American-made rotorcraft, according to unclassified excerpts obtained by The Associated Press.

The excerpts show the U.S. Army's workhorse Chinook, built by Boeing Co. in Pennsylvania, was "the most cost-effective single platform type fleet for the Afghan Air Force over a 20-year" period.

The finding has triggered allegations the Defense Department misled members of Congress and improperly cut U.S. companies out of competing for a contract that has swelled to more than $1 billion.

More than two years since DOD announced it was acquiring Russian Mi-17 helicopters, a veil of secrecy still obscures the pact despite its high-dollar value, the potential for fraud and waste, and accusations the Pentagon muffled important information.

The unprecedented arms deal also serves as a reminder to a war-weary American public that Afghanistan will remain heavily dependent on U.S. financial support even after its combat troops depart.

Sen. John Cornyn of Texas, the Senate's No. 2 GOP leader, said DOD "repeatedly and disingenuously" used the 2010 study to justify the Russian helicopter as the superior choice for the Afghans.

Congress only recently received a copy of the document.

"So why are we buying Russian helicopters when there are American manufacturers that can meet that very same requirement?" Cornyn asked.

As recently as September, Deputy Defense Secretary Ashton Carter cited the study in a letter to House members defending the Mi-17 decision. Carter left his job last week.

Last year, Frank Kendall, the Pentagon's top acquisition official, and policy chief James Miller pointed to the study in a written response to questions posed by Cornyn.

Just a few weeks after the secret study was completed, Army Secretary John McHugh wrote in a 2011 memo "that the Mi-17 stands apart" when compared with other helicopters.

The Pentagon denies it misled Congress.

A senior department official said the study was focused on long-term requirements and not the immediate needs of the Afghan military, which were best met by the Mi-17. Also, U.S. commanders in Afghanistan wanted the Russian helicopter because it is durable, easy to operate and the Afghan forces had experience flying it, according to the official, who was not authorized to be identified as the source of the information.

The war in Afghanistan, now in its 13th year, has been full of paradoxes.

What was once President Barack Obama's "war of necessity" has become a race for the exits. Hopes of eradicating the Taliban and transforming Afghanistan into a viable state have been dialed down. U.S. combat forces are scheduled to depart by the end of next year, leaving the Afghans responsible for ensuring the country doesn't collapse into the pre-Sept. 11 chaos that made it a terrorist haven.

There's no dispute that heavy-duty helicopters capable of quickly moving Afghan troops and supplies are essential to accomplishing that mission. But the decision to acquire them from Russia has achieved the rare feat in a deeply divided Congress of finding common ground among Republicans and Democrats.

Why, lawmakers from both political parties have demanded, is the U.S. purchasing military gear from Russia? After all, Russia has sold advanced weapons to the repressive government in Syria and Iran, sheltered NSA leaker Edward Snowden and been criticized by the State Department for adopting laws that restrict human rights.

On top of all that, corruption is rampant in Russia's defense industry, heightening concerns that crooked government officials and contractors are lining their pockets with American money.

"We're not dealing with a corrupt system. Corruption is the system," said Stephen Blank, a Russia expert at the American Foreign Policy Council, a Washington think tank. "This is not a world we're familiar with."

Overall, 63 Mi-17s are being acquired through the 2011 contract. It was awarded without competition to Russia's arms export agency, Rosoboronexport, even though the Pentagon condemned the agency after Syrian President Bashar Assad's forces used Russian weapons to "murder Syrian civilians."

Rep. Rosa DeLauro of Connecticut, a high-ranking Democrat on the House Appropriations Committee, said the arrangement has put American taxpayers in the intolerable position of subsidizing a company complicit in the atrocities occurring in Syria.

"The lack of straightforward information from the Pentagon on the ability of American-made helicopters to meet the mission in Afghanistan is but another factor severely undermining their credibility and justification for pursuing this sorely misguided procurement," DeLauro said.

No Pentagon official was made available to speak on the record for this story.

The AP also requested in late October that the department release unclassified portions of the 2010 study and other records supporting the decision to buy Mi-17s instead of Chinooks or other helicopters. The department provided only a one-page summary of a report that provided no new information.

Afghanistan's mountainous terrain demands a helicopter capable of operating in the most rugged conditions at altitudes well in excess of 15,000 feet. The Mi-17 met all these requirements, Carter and other U.S. military officials told lawmakers in correspondence and in testimony.

But so could the heavyweight Chinook. The Boeing helicopter is larger than its Russian counterpart, carries up to a 26,000 pound payload, which is twice as much as the Mi-17, and can operate at nearly the same high altitude.

The armed Mi-17s being purchased for Afghanistan from Rosoboronexport will replace older and less capable Mi-17s that the U.S. and other countries had purchased from brokers and contractors through the open market and then donated or loaned to the Afghans.

The fact that the Afghan forces had years of experience flying the Mi-17 figured prominently in the Pentagon's decision.

Carter and other U.S. defense officials contended that adding the Boeing helicopter to the mix would unnecessarily burden the Afghans with having to learn how to operate and maintain an unfamiliar helicopter.

The 2010 study "specifically analyzed the opportunity for DOD to provide a U.S. alternative to the Mi-17 for Afghanistan," according to the excerpts.

It outlined a transitional approach in which Chinooks being retired from the U.S. military's fleet would be available in late 2013 to be refurbished and then replace older Mi-17s in the Afghan fleet, according to the excerpts. A combination of Mi-17s and renovated Chinooks, known in the Army's nomenclature as the CH-47D, could work as well.

The 2010 study advised proceeding cautiously. Shifting too quickly away from the Mi-17s already in use could undermine progress made in training the Afghan air force, the excerpts said. But it recommended a plan for converting the Afghan forces from a "pure" Mi-17 fleet to one that uses U.S. helicopters.

The Chinook option never materialized.

An extensive analysis of both helicopters concluded that a refurbished Chinook would cost about 40 percent more overall to buy and maintain than the Mi-17, said the senior defense official.

That's hard to fathom.

Boeing executives informed congressional staff during a meeting held in late September that the cost of a refurbished CH-47D would be in the $12 million to $14 million range, according to a person knowledgeable about the discussion but not authorized to be identified as the source of the information.

That would make an overhauled Chinook $4 million to $6 million less than what the department is currently paying for Mi-17s, according to figures compiled by the Joint Rapid Acquisition Cell, the Pentagon office that fills urgent requests for equipment from battlefield commanders.

Boeing spokesman Andrew Lee referred questions about Chinook costs to the Defense Department.

The figures also show the average cost of each new Mi-17 has increased with each successive order — from $16.4 million to $18.2 million. The Pentagon has assured Congress that the prices were "fair and reasonable," and in line with what other countries have paid.

But an internal Defense Contract Audit Agency document shows that the department could not conduct a comprehensive cost comparison because Rosoboronexport wouldn't allow U.S. auditors to look at its books.

Army negotiators omitted a provision standard in government contracts that permits pricing reviews. In examining the contract, the audit agency noted that Rosoboronexport "is arguably an agent or instrumentality of a foreign government and is therefore exempt from most cost accounting standards."

Rosoboronexport's director general, Anatoly Isaykin, said in statement late last month that his agency was "completely transparent" in negotiating Mi-17 prices with the U.S. He provided no details on costs or any examples of transparency.

"In our opinion, this contract is most acceptable to the U.S. Department of Defense in terms of quality/price ratio," Isaykin said.

The roots of Rosoboronexport's involvement reach back to 2010 when the U.S. and Russia were engaged in high-stakes diplomacy aimed at fulfilling Obama's goal to reset relations between the two former Cold War foes.

Dmitry Medvedev was Russia's president, not Vladimir Putin, and the talks resulted in agreements to expand cooperation on global security issues and strengthen economic ties.

Among the breakthroughs: The U.S. terminated penalties against Rosoboronexport that the Bush White House had imposed in 2006 after the State Department determined the export agency had provided Iran and Syria sensitive military technology. The sanctions had barred the U.S. government from entering into any contracts with Rosoboronexport. Russia agreed to support a U.N. resolution to punish Iran over its nuclear program.

Headquartered in Moscow, Rosoboronexport is the only Russian agency authorized to export and import military hardware. The agency is controlled in turn by Russian Technologies, a state holding company that includes the country's top arms manufacturers. The chief executive of Russian Technologies is Sergei Chemezov, a longtime confidant of Putin, who returned to the Russian presidency last year.

U.S. officials long have known corruption in Russia's defense industry is widespread.

William Burns, then the U.S. ambassador to Russia, wrote in a 2007 classified cable later published by the Wikileaks website that "it is an open secret that the Russian defense industry is an important trough at which senior officials feed, and weapons sales continue to enrich many."

Nothing has changed, but figuring out who is personally profiting is nearly impossible, said Russia expert Clifford Gaddy.

Only a small circle of investigators close to the Kremlin know who is involved in various schemes.

"Since the information they have is one of the most powerful instruments Putin has to control the individuals who run Russia on a day-to-day basis, they protect that information," said Gaddy, a senior fellow at the Brookings Institution and co-author of "Mr. Putin: Operative in the Kremlin."

With the penalties lifted against Rosoboronexport, Russia's ministry of foreign affairs wasted little time informing U.S. officials that new Mi-17s could be purchased only through the arms export agency because the helicopters were military gear intended for another country's armed forces.

After lengthy deliberations, the U.S. agreed. Pentagon officials no longer would permit third parties to acquire Mi-17s. They would deal with Rosoboronexport directly.

Last month, the Pentagon changed its mind. After re-evaluating, officials decided to cut 15 copters out of the 78 they had planned to buy from Moscow. Isaykin, Rosoboronexport's director general, said the decision won't hurt the export agency's bottom line.

"Rosoboronexport's order book is sufficient to ensure the steady utilization of Russian defense industrial complex's production capacities, especially in the helicopter sector, for the next three-four years," he said.

The move was a bittersweet victory for the program's opponents.

"There was no redeeming value, no redeeming feature to this sale," said Sen. Richard Blumenthal, D-Conn. "An inferior product bought with American taxpayer money from a Russian export agency that was unconscionably selling to Assad. If you made it up, no one would believe it."

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Associated Press writer Vladimir Isachenkov in Moscow contributed to this report.

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Follow Richard Lardner on Twitter: https://twitter.com/rplardner

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