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The Reconstruction of the National Defense Industry, a Historic Opportunity

The Reconstruction of the National Defense Industry, a Historic Opportunity

No. 5-6, May.-Aug. 2017 » BUSINESSance

Prior to 1989, the defense industry in Romania was an important contributor to the state budget, bringing in hundreds of millions of dollars and providing extensive employment. At that time, Romania ranked ninth in the world in terms of export of armament. In the early 1980s, Romania exported arms worth $670 million. More than that, two thirds of the armament and ammunition required by the Romanian Armed Forces were covered by internal production, which is an important security factor in a country’s ability to sustain a prolonged conflict.

After 1989, the defense industry has gradually declined on account of many factors including, but not limited to:

  • The decrease of internal demand (the reduction in military size decreases the internal demand for defense goods);
  • The accession of Romania to NATO and the necessity of adapting to its standards, while the defense industry was left adrift without technological renewal;
  • The improper management of some defense industry entities and bad policies and policy implementation on the part of decision makers.

 An ongoing concern 

Since 1989, the national defense industry has become a much-debated topic. If, in the early 1990s, the topic was associated with "piles of scrap metal" which were irrelevant to the nation’s future, decision makers have gradually come to the conclusion that an industry able to provide the national defense system with as much as possible of its equipment needs and specific services is necessary and it must be maintained and advanced.

If Romania does not have an industry capable to meet the needs of the Ministry of National Defense in case of crisis, then we cannot claim to ensure a viable security.

A recent document which obviously refers to the issues mentioned above is the "National Defense Strategy 2015-2019". According to it, two of the “lines of action and main ways to ensure national security” are:

  • "adapting the security industry to the equipment requirements of the Armed Forces and to the competitive business environment";
  • "developing cooperation in the field of security industry with states of the Euro-Atlantic space, by capitalizing on multinational cooperation opportunities, amid NATO and EU initiatives".

If Romania does not have an industry capable to meet the needs of the Ministry of National Defense in case of crisis, then we cannot claim to ensure a viable security.

The ability to produce your own military equipment and consumables is a great strategic advantage.

The ability to produce your own military equipment and consumables is a great strategic advantage. Considering the diversification of military requirements and the required technological specialization and capital investment, only a few states can strive to fully cover their own needs in a competitive manner. The best way for a country to reduce dependence on external markets and the consequent political and logistical risks in case of conflict is to use its own industry to the greatest extent possible. If our actual defense industry capability would be maintained, properly used and advanced, then we could benefit from the sustainability of a lowest equipment lifecycle cost program, we could implement mobilization plans, preparation plans for the defense economy including the necessities of raw materials for state reserves. 

A key example 

To exemplify the facts previously mentioned, we will analyze some factors which can affect the implementation of decisions regarding military endowment, by focusing on the armored troop carrier program.

During 1981-1991, the plant was producing produce 60-70 units monthly for export, while for the internal endowment the requirements were about the equivalent of a maximum of 5 units monthly.

First of all, we should notice that Romania has a history of important contributions and capabilities with regards to armored troop carriers. Romania has the appropriate infrastructure to produce and to run tests on mentioned product, as well as owning the appropriate technical and design capabilities. Considering the real level of Romanian Army endowment with appropriate armored vehicles, the "8x8 Armored Fighting Vehicle" program was initiated in 2005, which became a "National Strategic Interest Program" in 2011. Some of the main reasons for defining the priority nature of the program are:

  • The current armored amphibious vehicle fleet is distressed (most were purchased between 1977 and 1990);
  • Maintenance operations are becoming more and more expensive and difficult to complete due to the age of equipment used in the construction of the vehicles. We should consider that the cost-benefit assessment in case of a possible upgrade is weaker when compared to that of the option to acquire new vehicles;
  • International missions where the Romanian Army is involved, but especially the realities of the modern battlefield, impose a higher technical and ballistic protection level compared to the reality when the armored carriers in operation were designed and manufactured;
  • The national defense industry is able to ensure the integration of an advanced armored conveyor in accordance with the requirements of the Ministry of National Defense, so it behooves us to take advantage of this.

After 1998, Moreni was reduced to only receiving maintenance contracts for the existing carriers, and even that at a lower level than required. This situation caused a drastic reduction of the staff, the plant retaining only the employees required to meet the maintenance contracts and the assigned tasks of the national defense mobilization plan for the economy.

The qualitative and quantitative capability of the national defense industry to meet the requirements of the Romanian Army Ground Forces for "Armored Personnel Carrier APC 8x8" (TBT in Romanian) can only be assessed through the evaluation of the activity and the defense production capabilities of the state company "Automechanical Works Moreni" S.A. - the national producer of armored and amphibious personnel carriers.

Established in 1968, as a result of a new threat perception after the Soviet invasion of Czechoslovakia, Moreni has produced and delivered over the time to the Armed Forces:

  • Over 3.800 troop carries, of different types and configurations;
  • over 700 military trucks;
  • over 1.000 other wheeled equipment.

Moreni has also produced and delivered to external clients:

  • Over 7.500 amphibious armored troop carriers type BTR 70 (during 1981-1991) - the beneficiaries being post-Soviet States and the German Democratic Republic;
  • Over 1.200 armored intervention vehicles to Algeria.

It must be mentioned that, since 1981, production for export, namely the production under license of the BTR-70 armored amphibious carrier, has played an important role in the Moreni Automechanical Plant production program. During 1981-1991, the plant was producing produce 60-70 units monthly for export, while for the internal endowment the requirements were about the equivalent of a maximum of 5 units monthly. 

The ebb and the flow 

This solution falls entirely within the concept of "essential security interest", as defined by Art. 346 TFEU, and is justified by the opportunities offered by integrated lifecycle logistics for APC 8x8 products.

During the later period, because of the great number of armored personnel carriers present in inventory at the time, it was decided that its production was no longer necessary, without having been considered the advancing technology levels and the future requirements. As a result, between 1996 to 1998 there was only a single, low unit count, program for the manufacture of the B33-Zimbru (bison) carrier. It was the indigenous version of the BTR-80 Russian transport project, only with motorization, transmission elements, communications and chemical research equipment produced in Romania.

After 1998, Moreni was reduced to only receiving maintenance contracts for the existing carriers, and even that at a lower level than required. This situation caused a drastic reduction of the staff, the plant retaining only the employees required to meet the maintenance contracts and the assigned tasks of the national defense mobilization plan for the economy.

It is necessary to make some clear political decisions which stipulate the military capabilities to be financed from the state budget until 2027 and the programs for which the national security argument will be invoked.

The only solution for the preservation and modernization of the company is the resumption of the basic activity - the production of armored personnel carriers, a task for which it has proven itself to be capable of by internally designing two prototypes SAUR-1 and SAUR-2. These were especially well received by renowned companies in the field, who became interested in the integration of production at Moreni and providing the Ministry of National Defense with products made according to the specifications. This solution, of partnering with an established foreign company to locate production at Moreni for internal consumption and even export, falls entirely within the concept of "essential security interest", as defined by Art. 346 TFEU, and is justified by the opportunities offered by integrated lifecycle logistics for APC 8x8 products. We mention that, on the 14th of June 2017, the Moreni Automechanical Plant and the German supplier of military technology Rheinmetall signed the constitutive act of the Romanian Military Vehicle Systems joint venture.

The ceremony took place in the presence of the Minister for Economy and of the President of the Chamber of Deputies. Mainly, RMVS will manufacture, sell and maintain an 8x8 APC produced by the Romanian-German joint venture. 

Conclusion 

As a nation, we are in the stage of taking a political decision based on the analysis of the advantages and disadvantages of the two integration options (licensing or creating our own intellectual property) of the armored troop carrier in Romania, at Moreni and at the Bucharest Mechanical Plant.

At the national level, we must resume the development, research and design activity for defense products. Relevant issues are complex, interconnected, and with a multitude of political, social, economic, and last but not least, defense implications.

It is necessary for the Ministry of National Defense to draw up the Defense Strategy for the period after 2019, taking into account that, for the period 2017-2019, eight main programs were nominated and received for approval (Multipurpose Corvette, Mobile Antiship Missile Systems - SIML, Modernization of MLI-84M, 8X8 and 4X4 Armored Carrier - Stage 1, C4I Systems with ISTAR Integration Capabilities, HSAM High Speed Missile Systems, Integrated Weapon Systems SHORAD-VSHORAD - Stage 1 and a Multiple Launcher System of Long-range Rockets). It is necessary to make some clear political decisions which stipulate the military capabilities to be financed from the state budget until 2027 and the programs for which the national security argument will be invoked, and the start of negotiations with the countries with which Romania intends to conclude "Government to Government" type agreements for giving more substance to the economic side of bilateral relations and greater consistency to political-military partnerships.

At the national level, we must resume the development, research and design activity for defense products. Relevant issues are complex, interconnected, and with a multitude of political, social, economic, and last but not least, defense implications.

The modernization of the Romanian Armed Forces must be accomplished in conjunction with the revitalization of the defense industry of Romania.

Essentially, the example used can be extrapolated to fit the majority of the eight programs mentioned above, which leads us to the conclusion that the modernization of the Romanian Army must be accomplished in a full, harmonious and consolidated relationship with the revitalization, development, refurbishment and affirmation in the military equipment market of the defense industry of Romania. And the defense industry must remain the principal priority of Romania's investment in defense.

 
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