High-level corruption behind Croatia's deal to buy aged Israeli F-16 fighter jets

Photo: 123rf, FaH, Facebook

On 29 March 2018, the Croatian Government unanimously adopted a decision to purchase a dozen aging F-16 C/D Barak Block 30 fighter jets from Israel for 2.9 billion kunas (around $500 million), edging out the Swedish Saab's bid to sell Zagreb its JAS-39 Gripen aircraft. A week earlier, the Croatian National Defense Council issued a formal recommendation to select Israel's F-16s. "The defense council has accepted that Israel made the best offer and gave a recommendation to the government to decide on acquiring," the Croatian council said in a statement. Other competitors vied for the contract, including Greece and the United States, which also offered used F-16s. But according to local media reports, Sweden's Gripen offer was the second most competitive bid. The deal affirmed is Croatia's largest single military purchase since it split from Yugoslavia in 1991. NATO member Croatia faces a mini arms race with Russian ally Serbia, which recently received six used Russian MiG-29 fighter jets.

The deal to buy the F-16 Barak fighter jets includes the training of pilots in Israel, aircraft armament, a training simulator and the construction and equipping of facilities at Croatia's military airports. The sum will be paid in 10 annual installments. "The cost will be, at most, $50 million a year over the next 10 years,"  Prime Minister Andrej Plenković said. Of course, this does not include maintenance costs that are estimated at an additional $500 million. "We will be able to use the planes for at least 25 years," Plenković added. This is a very optimistic assessment, given that the producer clearly stated that F-16 has a life span of 30 years or 8,000 flight hours. Israeli F-16 C/D fighters arrived under Peace Marble II program between 1986-88, and are expected to be delivered to Croatia between 2020-22. This implies that Croatia will get 35-years-old aircraft and many have already accumulated over 7,500 flight hours. Jets were modified in the meanwhile by Israel Aerospace Industries (IAI) so they don't comply with NATO standards, which means that only Israel can be helpful for future maintenance.

Exposing conflict of interest

In commenting on the acquisition, Croatia's Defense Minister Damir Krstičević said "this is a historic day for the Croatian Air Force and an investment into the security of the Republic of Croatia." Krstičević showed himself as a fierce advocate of signing a deal with Israel, and passionately rejected all criticisms for the media. However, recent investigative journalism shows that his reasons go far deeper than the alleged concern for the security of Croatia. Between 2001 and 2016, this Vrgorac-born army officer held various high-level positions in the IT company M SAN and its subsidiary KING ICT, which has long-term cooperation with Israeli companies. After the Croatian Democratic Union (HDZ) won Croatian parliamentary elections and Andrej Plenković became new Croatian Prime Minister in October 2016, Krstičević was assigned to position of Croatian Deputy Prime Minister and Minister of Defence, and his name was deleted from the M SAN/KING ICT websites.

Only two months after the HDZ cabinet was formed, in December 2016 Croatian President Kolinda Grabar-Kitarović (another HDZ member) announced that the country's Air Force would select a new fighter, and in mid-July next year the Croatian Ministry of Defence sent a letter to four countries stating that Croatia is interested in buying their combat aircraft. In September 2017, the Croatian Ministry of Agriculture also issued the invitation to tender for Unmanned Aerial System (BZS), and joint bid by the KING ICT and Israel Aerospace Industries (IAI) confirms their direct connection. On 13 March, it was announced that their bid for $15 million contract was lost to Aeronautics Defense Systems, yet another Israeli company. Still, the IAI proved to be more successful in the fighters acquisition considering F-16 Barak is basically their product and they were leading negotiations with the Croatian Government.

A document which shows undisputable link between the KING ICT and IAI

In response to journalists' questions about the connections, Krstičević denied any conflict of interest and stated that KING ICT is not his company. This may be true only on paper, but it is hard to believe that he broke all contacts after 15 years of business engagement, just because of a short political career. His term started two years ago and ends in two years, after the next elections in 2020. At the same time, the first Israeli aircraft will arrive in Croatia. Some other 'coincidences' also do not support his denial. In September 2017, Planet IX was registered as a subsidiary company of KING ICT, and its services include the maintenance, repair, and overhaul of aircraft, spacecraft and aircraft equipment, as well as the production, transportation and procurement of firearms and pyrotechnic material. A person appointed as a director was Sendi Radić, a member of the KING ICT Management Board and Krstičević's fellow-citizen from a small town of Vrgorac. Furthermore, in January of the same year, Nikola Brzica resigned as Krstičević's assistant in the Ministry of Defence and only a month later he was employed in the M SAN company and went on business trips to Israel.

So indeed it was 'a historic day' as Krstičević stated. A historic day for himself, his family, Vrgorac clan, HDZ comrades, business colleagues from M SAN Group, and their Israeli associates. A monopoly on aircraft servicing in the next 25 years, worth hundreds of millions of dollars, has been secured. It should be emphasized that this corporate-political symbiosis between the M SAN company and the HDZ party has lasted for more than a decade. Between 2007 and 2012, during the prime ministership of Ivo Sanader and Jadranka Kosor, the HDZ government signed a total of 378 contracts with M SAN, of which 59 were settled by direct agreement, and the total value of all signed contracts was around a billion kunas (about $150 million). Later, when HDZ moved to an opposition, the company's owner Stipo Matić financially assisted them through sister lobbying organization. In defending the aircraft deal, Krstičević also stressed the need to create a strategic partnership with Israel, and announced their large investment in Croatia. Such examples already include Teva's acquisition of Croatian pharmaceutical company Pliva and the proposed golf mega-resort in Dubrovnik on top of Mount Srđ, but both cases were characterized by controversy and corruption.

Censorship of investigative journalists

Additional evidence that there's something murky and dirty beneath all this is an online attack on Gordan Malić, an investigative journalist who has published documents about Krstičević's business connections with Israeli companies. His Facebook post was deleted, and his emails were hacked. Here's a translation of his statement posted on 30 March:

For reasons I do not understand notwithstanding the utmost efforts, unless they have connections with our most influential IT company M SAN aka King ICT, Facebook has removed my status about cooperation between that company and Israel Aerospace Industries (IAI), the Israeli aircraft supplier to Croatia.

This morning I got the notice that it was inappropriate content, so Facebook removed it. I've been using social networks for years but nothing similar has ever happened to me. In the status itself, there was nothing that insults, hates or advocates any form of violence. I have published documents showing that the former company of Defense Minister Damir Krstičević and the Israeli state company IAI, as a strategic partner of the Croatian Government, are in business relationship and jointly participate at the tenders issued by the Government of the Republic of Croatia.

According to the documents, its also evident that name of the procurator of Aeropartner appeared at bid opening for the purchase of unmanned aerial vehicles in February this year, along with the representatives of above-mentioned companies. Ivica Josipović, an owner of the Aeropartner company, was investigated by the USKOK [Croatian State Prosecutor's Office for the Suppression of Organized Crime and Corruption] for corruption in the case of overhauling the Croatian MiG-21 fighter jets. Is anything bogus, insulting or inappropriate in documents that confirm the collaboration of these companies? Or is it a content of extraordinary public and budgetary significance? What's wrong with this Facebook? To all of you who have shared my text yesterday, I recommend to share this also.

Update: In the meanwhile, my emails were hacked. Someone really exerted an effort.

Marko Knežević

Marko Knežević is a historian and freelance journalist from Bar, Montenegro. He is a frequent traveller to the Middle East and East Asia.

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