US embassy cable - 03COLOMBO1529

C O N F I D E N T I A L SECTION 01 OF 02 COLOMBO 001529 
 
SIPDIS 
 
DEPARTMENT FOR SA, SA/INS, PM, NEA 
NSC FOR E. MILLARD 
 
E.O. 12958:  DECL:  09-03-13 
TAGS: PGOV, MASS, PINS, ECON, CE, IS, Political Parties 
SUBJECT:  Proposed weapons deal involving Israeli 
company stirs controversy 
 
Refs:  (A) SA/INS-Colombo 09/02/03 class e-mail 
-      (B) Colombo 1522, and previous 
 
(U) Classified by James F. Entwistle, Deputy Chief of 
Mission.  Reasons 1.5 (b, d). 
 
1.  (C) SUMMARY:  A proposed weapons deal has sparked 
public accusations that Sri Lanka's Defense Ministry 
favors an Israeli bid because it has worked out 
kickbacks with the company.  The Defense Ministry denies 
the charge.  At this point, the proposed deal is 
extremely tangled, as a potential U.S. FMS offer to 
purchase the systems for the government undergoes 
further review by the GSL.  The case highlights the 
continued mess in the GSL military procurement system 
and the government's evolving relationship with Israel. 
END SUMMARY. 
 
2.  (C) DISPUTE OVER PROPOSED WEAPONS DEAL:  A proposed 
weapons deal has stirred controversy in Sri Lanka.  The 
dispute revolves around an Israeli company's offer to 
meet the requirements of a Sri Lankan Navy (SLN) tender 
for cannons to fit onto the SLN's fast attack craft.  As 
Mission understands the situation, the Israeli company 
in question, Rafael, is acting as agent for ATK Ordnance 
and Ground Systems, a U.S. company based in Arizona that 
manufactures the Bushmaster 30mm cannon.  In the Cabinet 
and in the press, the Defense Ministry has been 
pilloried for publicly supporting the Israeli bid to the 
exclusion of a possible U.S. FMS procurement, which 
potentially would cost less.  (Note:  The Rafael offer 
is said to be worth about USD 12 million.  Various 
figures have been bandied about in the press regarding a 
possible U.S. FMS procurement, but the USG has not, in 
fact, submitted a "price and availability" letter as of 
yet.)  Taking a lead in the criticism, Rajitha 
Senaratne, Minister of Lands, has publicly accused the 
SLN of supporting the Rafael offer, although it is 
"inferior."  Senaratne, who has taken a lead role in the 
government as a sort of "Mr. Clean," has also directly 
insinuated that Defense Ministry personnel and others in 
the government stood to personally benefit from 
kickbacks from Rafael.  Feeding off Senaratne's 
comments, there have also been several recent press 
pieces accusing the Defense Ministry of corruption in 
the proposed sale.  Commenting on the accusations, D.K. 
Dassanayake, a retired rear admiral, who sits on the 
Cabinet board now reviewing the deal (see below), told 
poloff that, in his estimation, Defense Ministry and 
other GSL officials recommending the Israeli offer are 
most likely doing so for personal benefit.  Dassanayake 
was not sure whether this included Defense Minister 
Marapana himself. 
 
3.  (C) For its part, the Defense Ministry has 
vociferously denied the charges.  In a recent public 
statement, Defense Minister Tilak Marapana stated that 
the public is being misled and there has been no 
impropriety on the part of his ministry or the SLN. 
Marapana said the tender had been completely transparent 
and there was no thought of corruption.  He noted that 
the GSL was continuing to review its options regarding 
the sale. 
 
4.  (C) DEAL REMAINS TANGLED:  As the political 
controversy swirls, the deal itself remains extremely 
tangled.  Rafael is still believed to be in the ballgame 
to sell the system.  However, the political accusations 
that are flying about may make it gun shy to go forward, 
according to observers. 
 
5.  (C) At the same time, the potential U.S. FMS offer 
to supply the ATK-manufactured Bushmaster cannons needs 
further review by the GSL.  The Sri Lankan Navy has told 
the U.S. that the weapons system potentially being 
offered is too heavy for SLN boats.  During an August 29 
meeting with Milinda Moragoda, the Minister of Economic 
Reform, DATT corrected the GSL's misimpression that the 
"too heavy" determination was a joint SLN-USN one, when 
it was in fact only a SLN determination.  DATT informed 
Moragoda that the U.S. Navy does not have enough 
technical information regarding the SLN's fast attack 
craft to evaluate the technical feasibility of the U.S. 
system.  In reply, Moragoda has asked the U.S. to 
determine the feasibility of the weapons system.  DATT 
replied that the USG would review this request, noting 
that the GSL would be financially responsible for 
undertaking the study. 
 
6.  (C) There are also other elements in the mix:  The 
U.S. manufacturer, ATK, has also recently submitted an 
unsolicited offer to sell a MK 44 (Bushmaster 30mm 
cannon on a "typhoon" mount) weapon system directly to 
the GSL through their agent in Israel.  The structure of 
their proposal is aimed at keeping them from being in 
direct competition with a potential USG FMS deal.  There 
are also reports that the GSL is looking into other 30mm 
weapons systems from Israeli sources for its fast attack 
craft. 
 
7.  (C) NEXT STEPS:  At an August 25 Cabinet meeting, 
Prime Minister Wickremesinghe deferred the MOD decision 
in favor of the Rafael offer and ordered a total 
reevaluation of the proposal.  The PM also tasked a 
board to report to the Cabinet on the proposal.  Per 
DATT's meeting reviewed above, we also understand that 
Minister Moragoda has been asked by the Prime Minister 
to look into the matter and try to untangle it. 
 
8.  (C) COMMENT:  The case highlights the continued mess 
that the GSL military procurement system is in.  The 
system has long been rife with corruption and other 
inefficiencies.  To his credit, the PM has made it a 
priority to try to clear up the situation, but it is not 
clear whether he has the political muscle to do so.  In 
the meantime, the ramifications of the procurement mess 
for the Sri Lankan military are serious, and are hurting 
the GSL's effort to maintain the balance of power with 
the Tamil Tigers during the peace process. 
 
9.  (C) COMMENT (Continued):  Re Israel, while the two 
countries share long-standing diplomatic ties, the GSL- 
GoI relationship has run hot and cold through the years. 
There seems to have been some warming of relations of 
late, however.  In a rare event for a high-level Sri 
Lankan official, Defense Minister Marapana visited 
Israel earlier this year, for example.  Marapana's 
apparent connection to the controversial Rafael offer, 
however, may complicate relations, and, as has happened 
in the past, Sri Lanka's large Muslim population might 
work to put a brake on closer ties.  END COMMENT. 
 
LUNSTEAD