US embassy cable - 05WARSAW1521

C O N F I D E N T I A L  WARSAW 001521 
 
SIPDIS 
 
 
STATE FOR EUR/NCE TARA ERATH AND MICHAEL SESSUMS 
 
E.O. 12958: DECL: 03/16/2015 
TAGS: PREL, MASS, MCAP, PARM, ECON, IZ, PL, Iraq Contracts 
SUBJECT: POLISH HELICOPTERS YET AGAIN 
 
REF: BAGHDAD 01072 
 
Classified By: Charge Cameron Munter. Reasons: 1.5 (a), (b), and (d). 
 
1. (C) Summary.  The Polish state-owned holding company, 
Bumar, continues to work with the Iraqi Ministry of Defense 
on helicopter contracts.  Bumar understands that the 
contracts were amended at the insistence of U.S. military 
advisors, who Bumar believes were pressured to do so by 
American and British helicopter manufacturers.  Bumar 
confirmed that funds for the canceled contracts are being 
reprogrammed.  However, the company views the amending of the 
helicopter contracts as a net loss, as it believes it would 
have won contracts for additional military supplies in any 
case.  While Bumar will profit from the remaining contracts 
for 34 Russian-built MI-17 and 2 Polish-built Sokol 
helicopters, the Polish manufacturer of the Sokol W-3 
helicopter, PZL Swidnik, will lose money and is upset with 
the cut of the 18 Sokol helicopters.  End summary. 
 
2. (C) On March 15, Aleksander Jadko, the deputy director at 
Bumar overseeing the helicopter deal with Iraq, confirmed 
Iraq requested the cancellation of the contract for the 18 
Polish-built Sokol helicopters, which his Iraqi contacts told 
him was done at the request of U.S. advisors. Jadko suspects 
that the reason for the cancellation is that American and 
British helicopter manufacturers were pressuring the U.S. 
military to force the Iraqi MOD to cancel the deal for Polish 
helicopters.  Jadko confirmed that Bumar was reprogramming 
the money to other contracts.  He said that some of the money 
already received for the Sokol is being shifted to pay for 
the MI-17 contracts and that the rest of the money will go to 
procure other equipment for the Iraqi MOD.  Jadko emphasized, 
however, that he views this reprogramming of the money as a 
net loss to the company because "Bumar would have sold the 
other equipment to Iraq anyway."  He understands that the 
Iraqi military is very pleased with equipment provided by 
Bumar and that additional orders had already been discussed. 
 
4. (C) Jadko commented on the remaining contracts for the 34 
Russian-built MI-17 helicopters, saying that he has heard 
unsubstantiated rumors from Baghdad that there is some 
pressure to cancel these as well.  According to Jadko, one of 
the contracts calls for 24 used MI-17s.  Bumar's partner in 
Russia has procured these, and Russian companies are 
currently overhauling them.  Jadko expects to be prepared to 
deliver the first twelve overhauled aircraft in June and the 
final 12 in October.  Bumar signed another contract with Iraq 
for ten new MI-17 helicopters, which are being produced and 
outfitted by two Russian companies.  Jadko said that the 
helicopters are immediately available and that Bumar will 
most likely deliver them in the coming months.  Jadko 
emphatically stressed that Bumar would not cancel or amend 
these contracts as the company already has sunk costs that 
could not be recovered. 
 
5. (C) Jadko said that from Bumar's perspective, it doesn't 
matter if it sells Russian-built or Polish-built helicopters. 
 Bumar is able to make a profit regardless of the country of 
origin, and Jadko offered his opinion that the MI-17s are 
superior aircraft.  However, the directors of the Sokol 
helicopter manufacturer, PZL Swidnik, are extremely upset by 
the cancellation of the contract for 18 Sokol helicopters and 
have written protests to various levels of the Polish 
government, including to the PM.  A Swidnik director related 
that the company has already spent money on the production of 
Iraq's 20 Sokol helicopters and will end up with a loss if it 
only delivers two of them.  The state-owned company is 
prepared to drop Bumar and negotiate directly with the 
Iraqis.  Jadko believes that it is only a matter of time 
before the issue hits the Polish press. 
 
6. (C) Comment.  Post appreciates Baghdad's details 
concerning the changes to the helicopter deal (reftel).  We 
would appreciate any further background behind the contract 
cancellations, which could be useful in countering Bumar's 
impression that contracts were canceled at the insistence of 
U.S. advisors.  We believe this misconception, possibly 
conveyed to Bumar by its Iraqi MOD contacts, has led the 
company to extrapolate that U.S. and British helicopter 
manufacturers were ultimately behind the decision to cancel 
most of the Polish-built helicopters while retaining the 
Russian-manufactured aircraft.  So far, this issue has not 
become public.  Protests by Swidnik or Bumar, however, could 
 
change that quickly, particularly as Poland heads into a 
general election.  End comment. 
Munter 
 
 
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 2005WARSAW01521 - Classification: CONFIDENTIAL