From cheerleader to referee: The state and Slovak arms exports, 1993-2002

IN THE VIEW of weapons dealer Štefan Žiak, Slovak arms traders remain handicapped against foreign competition by the lack of political support for their business at home.
"The former [1998-2002] government offered only a minimal amount of [political] backing to the defense industry," said Žiak, president of arms exporter DMD Trade and former arms trade coordinator for import-export firm Kerametal.
"I got the feeling they were afraid to get engaged in the weapons trade... Our politicians should take their priorities from us as to where they should get involved. Where they should visit and which PM they should privately inform what is available, and under what conditions."

THIS BOEING 707 skidded off a Bratislava runway in 1999 with a load of weapons on board.
photo: TASR

IN THE VIEW of weapons dealer Štefan Žiak, Slovak arms traders remain handicapped against foreign competition by the lack of political support for their business at home.

"The former [1998-2002] government offered only a minimal amount of [political] backing to the defense industry," said Žiak, president of arms exporter DMD Trade and former arms trade coordinator for import-export firm Kerametal.

"I got the feeling they were afraid to get engaged in the weapons trade... Our politicians should take their priorities from us as to where they should get involved. Where they should visit and which PM they should privately inform what is available, and under what conditions."

In EU- and Nato-ready Slovakia, however, such open political lobbying is a thing of the past. Meeting Western arms control standards, in the eyes of many, serves the nation better than fighting for foreign weapons contracts.

SLOVAKIA sold 55 T-72 main battle tanks (pictured above) to Syria in 1993.
photo: TASR

Once bitten twice shy

If Slovak governments don't actually fear backing their arms exporters in foreign markets, they have certainly seemed more reluctant to do so after a recent series of arms export scandals.

Following allegations that up to 20 Slovak arms shipments had reached embargoed Sudan through Chad in the late 1990s, Slovakia's OSOS firm was fingered in 2000 as having helped to ship $683 million worth of weapons to Angola in 1994.

Economy Minister at the time, Ľubomír Harach, after reviewing almost a decade of official Slovak arms exports following the September 11, 2001 terrorist attacks on the US, said he "could not rule out" that some dual-use goods had reached terrorist countries from Slovakia in the mid-1990s, although authorities had foiled some attempts to export military hardware, such as the advanced Tamara radar system, to off-limits countries.

Less than a month later, a UN report said two helicopter gunships had come through Slovakia on their way to African war zones with false documents, and that while one had been intercepted by Slovak customs, other dubious Slovak arms shipments had reached African nations such as Uganda and Guinea in the 1990s.

For many Slovak arms control officials, the October 2001 UN report was the last straw, launching a drive to plug legal loopholes and - Štefan Žiak's views notwithstanding - take the politics out of the weapons business.

"Nowadays there is no longer any government involvement in getting contracts for arms factories," said Igor Kucer, who heads the Organisation for Security and Cooperation in Europe (OSCE) section at the Foreign Ministry.

"This has been a step forward, along with ensuring that arms control bureaucrats don't also hold private arms industry interests."

A tough beginning

Politics and weapons were first thrust together by the economic disaster that hit the defence industry after the 1989 revolution. While the Slovak arms industry employed 80,000 people and had peak production of 19.3 billion Czechoslovak crowns in 1988, by 1993 military production was worth one-tenth that figure, and job losses in the sector had hit 50,000-60,000.

Not only did defence-related Slovak factories lose their traditional suppliers and markets in Warsaw Pact countries and Africa (following embargoes on Iraq and Libya), but they were cut off from the kind of state aid they had enjoyed under communism.

The Slovak arms industry was also in a worse position than its Czech counterpart, adding to the political significance of its decline. Slovakia contributed about 60 per cent to overall Czechoslovak arms output in 1988, even though its population was only 33 per cent of the whole. The concentrated heavy manufacture of tanks and artillery in Slovakia also proved poorly suited to local economic conditions, and the drying up of contracts led to over 30 per cent unemployment in the central Slovakia 'arms triangle' between Detva, Martin and Dubnica.

Thus, while the Czechoslovak government, led by former dissidents, advocated 'economic disarmament', or turning arms factories into producers of civilian goods, Slovak politicians tried to slow the conversion programme and postpone the worst effects. The May 1992 decision from Prague that only arms firms that converted fully to civilian production would continue receiving state aid, handed a powerful weapon to Slovak nationalists who argued the Czechs were insensitive to the specific needs of Slovak industry.

Slovak Prime Minister Vladimír Mečiar was in the vanguard of the 'protect-the-arms-factories' movement from the early days. On returning from a trip to the Soviet Union in March 1991, he told a crowd in Martin that he had been "for secret negotiations with Soviet generals to get their agreement that the weapons that used to be made in Martin can continue to be made. That they will stop protecting their own [arms manufacturing] licenses, and will let Martin workers get back to making what they have stopped making."

In January 1993, immediately following the break-up of Czechoslovakia, Mečiar said that "arms production will be resurrected wherever possible", adding in a meeting with Defence Ministry officials that "the Slovak army will get enough funds to guarantee its efficiency, even if these funds have to be provided at the expense of other budget items."

The new policy called for gradual rather than radical conversion, and for the support of defence industry firms that had export potential or that might prove attractive to investors.

To coordinate arms exports, the Armex firm was founded in March 1994, with Mečiar appointing the Slovak National Party's Víťazoslav Móric to the directorship, after approving the sale of two state railway car repair facilities to Móric's wife.

In October 1995, the Mečiar government formed the DMD Holding firm, uniting 26 large Slovak defence industry factories, again in an attempt to 'coordinate' production and sales at the state level.

However, neither DMD nor Armex lived up to expectations, with Armex being shut down in December 1998 after recording a Sk15 million loss, and DMD eventually undergoing a snap privatisation to supporters of the Mečiar government in October 1998, two weeks before the cabinet left office. Far from promoting the Slovak defence sector, as the Sme daily wrote on September 13, 2002, DMD Holding in the end channelled state firms and billions of crowns in public money into firms controlled by people like Július Tóth, the Mečiar government's special agent for restructuring the arms industry.

Old habits

Parallel to such state attempts to regulate and revive the defence industry, individual arms sector bureaucrats kept close links to the weapons traders, with several occupying both private and state roles at the same time.

To regulate the export of weapons, for example, the Mečiar government set up an arms export commission at the Government Office to study applications for export licenses.

The head of the commission, František Blanárik, occupied a seat on the supervisory board of Petina International, a Slovak arms and precious stones trader, since the firm's foundation on September 5, 2001, even while still formally a member of the arms commission. He remained in the firm with his former Government Office deputy, Ján Černák, until July 2002, and according to a source close to the arms trade managed to conclude a deal with a US customer in this time.

František Kubica, who sat on the license commission under the 1994-1998 Mečiar government, has had a seat on the supervisory board of weapons trader Slov-Dio since January 14, 2000. Army general Leopold Bilčík, another Mečiar-era commission member (there were five) sat on the board of DMD Holding from March 8, 1999 to June 13, 2000.

The final member of Blanárik's licence commission, Igor Furdík, was appointed Slovak ambassador to Moscow in October 1998 by the outgoing Mečiar cabinet.

The change in government in that month, however, brought little change in arms bureaucrats' private roles. New licence commission member Vojtech Pánik sat on the supervisory boards of three companies with Economy Ministry licenses to trade military material. Another commission member, Dagmar Repčeková, sat on the supervisory boards of two firms with weapons trade licenses.

While the cabinet eventually recalled the conflicted bureaucrats from their posts on the commission in February 2002, the cases highlighted the lax enforcement of the country's existing arms trade laws, and the need for more stringent rules.

For Ondrej Varačka, head of the export control section at the Economy Ministry, a 1998 law on trade in military materials - passed by the Mečiar government - contained many gross shortcomings.

Varačka singled out 'end-user certificates' - the documents on which national governments vouch for the firms importing weapons to their country - as having been especially poorly controlled and having on more than one occasion got Slovakia into trouble.

The problem, he said, was that the licenses were issued by the Economy Ministry's 'special production' (weapons manufacturing) section, which had conflicting roles as both industry cheerleader and referee.

"It was a very bad decision in 1993 to put the responsibility of export control in military material and weapons, including issuing end-user certificates, in the hands of the special production section, which at the same time as it was expected to control and check up on the trade, was also expected to promote Slovak arms exports," he said.

"Take the example of firm 'X', which comes to the Economy Ministry's special production section and says it wants an end-user certificate for an imported shipment of Czech weapons, stating that a Slovak state-owned military repair firm is the final customer. Before the rules were changed in February 2002, firm 'X' did not have to mention that the weapons were to be sent on, say, to Uganda.

"The special production section, regardless of the fact the shipment is to be sent on to another country, meaning the Slovak state firm is not the final user, issues the paper, the International Import Certificate [IIC], which the foreign partner of firm 'X' includes in its application to the Czech authorities for an export license.

"Anyone with half a brain can see the end-user certificate should be issued after the import license applications are filed and approved, not before, because the IIC contains certain commitments by the Slovak government towards the country from which the goods are to be imported.

"But in Slovakia, these certificates were given out even before the application for an import license was submitted. In cases where the applicant did not eventually submit the license request, or where he was turned down, the IIC remained valid, because those responsible at the special production section took no further interest in its fate. Thus it could happen that the IIC could be submitted to any country whatsoever with a license request for export to 'Slovakia'.

"In any case, an IIC with the original signature and stamp of the Slovak Economy Ministry could become a very interesting business asset in arms trading circles. And we issued them on a 'while you wait' basis, and left them in circulation without any control whatsoever! Whether they didn't realise, didn't know, or whether it was something else - I can't say. But in any case, the people who should have had the entire process under their control apparently weren't bothered by it."

Varačka added that issuing Slovak IICs for shipments that were in effect moving from one foreign country to another left Slovakia on the hook if anything went wrong - if, for example, the third country shipped the weapons on to a fourth nation that was under embargo.

"It was sick. It was a kind of concealed re-export trade, under which if the arms ended up in another country than the one on the certificate, we would get all the blame. Slovakia in this way was certainly covering its own weapons traders [by giving them access to more re-export business], but it took total responsibility on itself for these sensitive exports. Whether the risk was worth it, given the often very questionable economic benefits for Slovakia, is very, very dubitable."

Another lacuna in the 1998 arms law that has been closed this past February, the Foreign Ministry's Kucer said, was the rules governing 'refurbishment' of weapons. Until February 2002, Slovak firms importing military equipment such as fighter aircraft for repair work at a military plant did not have to obtain a license, and did not even have to return them to the original shipper.

This loophole allowed the Guinea-based Pecos company in 2000 to send an attack helicopter from Kygyzstan for repairs at a state-owned refit shop in Trenčín, LOT, and then send it on to an unknown African nation, according to the UN report tabled a year ago.

Under another arms trading law amendment that took effect this September, the arms license commission was abolished, effectively removing the 'human element' from the license approval process. For all that, the same state experts will scrutinise requests as before.

Conditions for holding an arms trading license were considerably tightened, notably excluding foreign nationals from license-holding firms.

And while a rule allowing transit of weapons across Slovakia to proceed without an arms import license was not eliminated, as urged by arms control NGOs such as the New York-based Human Rights Watch, both Kucer and Varačka said the Customs Office was given greater authority to investigate any shipments it regarded as suspicious.

"Customs now has the authority to stop or restrict weapons transits through Slovakia, and to verify abroad whether the shipment was approved for export," said Varačka.

The changes, the bureaucrats say, have returned the state to its rightful position - as the controller, rather than the promoter, of weapons shipments. Nevertheless, they admit, the process could have been swifter.

"The problem in the past was that nothing was investigated, no one was responsible for anything, and that even if everyone knew the rules were being broken, the business somehow went on," said Varačka.

"People like [Economy Ministry special production director] Mr. Pánik can say that Mečiar passed a bad law [in 1998], but he has been responsible for it for four years, and has not lifted a finger to improve it.

"The original law was totally bad. This one is less bad, but we're going to rewrite it soon based on a totally new philosophy."

1991: Federal Czechoslovak Prime Minister Marián Čalfa convinces the Israeli government to let ailing Slovak heavy weapons manufacturers sell 260 tanks to Syria.

March 1994: The state firm Armex is established to coordinate trade in weaponry. The firm becomes Slovakia's largest arms exporter, but is scrapped in 1998 after it ends up as an empty shell of highly paid sinecures.

October 1995: DMD Holding Trenčín is formed by the Slovak government to convert the country's dying arms production industry to civilian production. DMD Holding owns between 5 and 34 per cent stakes in 26 huge Slovak factories affected by the conversion, collectively known as DMD Group. DMD Group provides jobs to over 25,000 people.

January 1996: A Bratislava court adjourns a case of three people who allegedly stole 50 tank machine guns from the VOP Moldava nad Bodrou state refit facility with the intention of selling them.

April 1997: Russian Premier Viktor Chernomyrdin visits Slovakia. Among the 12 deals he signs with the Slovak government is a 'Treaty on Mutual Military and Technical Assistance" on the future joint production of new conventional weaponry.

March 1998: A Russian cargo plane is detained in Baku, Azerbaijan with six MiG-21 fighter jets on board. The crew of the detained plane first says that the final destination of their flight is Yugoslavia. Later, they change their statement and say they were bound for Pyongyang, North Korea. Finally, however, Russian officials say that the plane was actually heading to Bratislava. Altogether, 34 people are detained.

April 1998: Christian Democrats leader Ján Čarnogurský accuses the LOT aircraft refit plant in Trenčín of repairing aircraft for Libya, which is then under UN embargo. LOT does not directly deny it, with LOT director Anton Zigo saying that "in the 1980s and early 1990s LOT through its business institutions in Prague was an efficient partner for Libya."

April 1998: The State Defence Council, under the leadership of then-PM Vladimír Mečiar, approves the sale of 35 Mig-21 fighter jets from army stock to the Perun firm of Košice for Sk52,000 (now $1,200) each. Similar aircraft are selling in Ukraine and Belarus at the time for $10,000-$30,000 each. The Dzurinda government later nixes the deal.

August 1998 - Peter Švec, president of Association of Slovak Soldiers, says the new Army generals created by the Mečiar government participated in illegal arms trade, particularly through paying down Russia's debt to Slovakia by sending weapons from Russia and Ukraine through Slovakia to third countries. "The greatest immorality and corruption at the ministry of defence is hidden behind settlement of the Russian debt," says Švec. In one of the most controversial cases, Slovak firm Katrim Stella is to be paid a 10 per cent cash commission on the $210 million worth of MiG 29s it imported in 1995, many of which didn't even work.

December 1998: Shareholders of the state-owned Armex, which trades in Slovak defense equipment, decide to liquidate the company.

February 1999: The Economy Ministry recalls Július Tóth, president of DMD Holding. The event is part of a long attempt to win back state control over DMD Holding, where on October 15, 1998 - two weeks before the outgoing Mečiar government left office - the state's 60.72 per cent stake in DMD Holding was reduced to 18.8 per cent when the FNM state privatisation agency inexplicably transferred 42 per cent of shares to a new private firm called DMD Progress. DMD Holding is a major shareholder in all large machinery firms in Slovakia. At the beginning of 1998, DMD controlled 20 large Slovak engineering companies with cumulative revenues of Sk11.7 billion ($325 million) in 1997.

February 1999: A Boeing 707 freighter carrying Slovak arms for Chad crashes at Bratislava airport. International newspapers such as the German Handelsblatt point at Slovak firm Slov Trans Air of Piešťany, owned by Mohamed Ahmad Saad, as having been involved in shipping several such consignments of weapons that ended up in embargoed Sudan, according to UN official Brian Johnson-Thomas, who had been following the deals.

March 1999: Slovak and Russian officials agree that weapons and armaments will no longer be accepted as a means of paying down Russia's debt to Slovakia.

May 1999: Defence Minister Pavol Kanis decides to sell 35 MiG-21s and 205 T-55 main battle tanks, in what he says is a drive to reduce Slovak tank stocks from the nearly 450 allowed by international treaties to 240-270. The sales contract on the tanks is later given to the Hermes company, which sends them to Angola.

Year 2000: The Guinea-based firm Pecos, part-owned by Slovak citizen Peter Jusko, applies to export 5,000 AK47 submachine guns to a South American country, but the transaction on investigation proves fraudulent.

January 2000: A French newspaper names Slovak firm OSOS in an international scandal surrounding supplies of $683 million worth of arms to Angola in 1994. The daily La Liberation claims weapons supplied by the son of former French President Francois Mitterand, Jean-Christophe, had come originally from OSOS through the firm Brenco owned by Pierre Falcon, an arms dealer.

December 2000: The LOT aircraft refitting plant in Trenčín celebrates its 50th anniversary, declaring it has served 40 countries and now works, apart from EU states, with Angola, Kirgizstan, Thailand, Bangladesh, Peru and Algeria. The firm's biggest business partner is Egypt, for whom it services L-29 Delfin and L-39 Albatros training planes. LOT repairs Su-22 supersonic fighter-bombers for Angola.

December 2000: The VOP military refitting plant in Moldava nad Bodvou is suspected of illegally importing 20 howitzers of the self-propelled 122mm 2S1 model.

February 2001: Slovak customs officers seize a helicopter gunship from Kyrgyzstan that Slovak citizen Peter Jusko's Pecos firm bought from a renegade Kyrgyz army general. An earlier gunship bought by Pecos was repaired at a Defence Ministry site in Trenčín and then exported to an unknown destination in August 2000.

March 2001: Armoured vehicles produced by Slovak military hardware manufacturer DMD are exported to Germany for modifications. They are due to be returned directly to Slovakia, but instead reappear some weeks later at an arms fair in Saudi Arabia.

September 2001: Economy Minister Ľubomír Harach admits that until 1996 some goods were traded from Slovakia to states with possible terrorist links. He declines, however, to name the firms.

September 2001: Customs officials at Bratislava airport seize almost three tonnes of anti-tank missiles as police foil an attempt to transport the arms from Iran to Angola. Airport authorities seized the cargo, 504 missiles, after discovering the falsely declared goods when checking transport documents. Customs finds that the end user is the Angolan Defence Ministry, care of Slovak arms trader Hermes, but that the shipment does not have the necessary Economy Ministry papers.

October 2001: A United Nations report on arms trading to embargoed Liberia identifies Slovak citizen Peter Jusko as part of an international arms smuggling network shipping weapons to the African nation. On December 6, Jusko is arrested and taken into custody, but is released on December 13.

November 2001: The Slovak Spectator discovers that three out of nine members of Slovakia's arms export licensing commission currently sit on the supervisory boards of arms trading companies.

November 2001: Customs investigates an unknown perpetrator for allegedly illegally altering an arms trading license for the Hermes firm, involving abuse of power as a public official and money laundering.

January 2002: Arms firm Unimpex Martin has a Sk31 million ($632,000) shipment of hydraulic presses for making artillery shells, destined for embargoed Myanmar, impounded at the Slovak-Hungarian border after customs officers find the firm has no license for the shipment, and had declared the machines as equipment for making shoes. Customs police became suspicious because the arms firm had never before been involved in the shoe trade.

February 2002: Police begin an investigation into reports that a Russian arms dealer with known Slovak contacts supplied the Al-Qaida terrorist network with much of its weapons.

February 2002: The arms export licence committee is shaken up by the cabinet, with commissioners having seats on the boards of arms traders being removed and oversight roles given to customs and the secret service.

May 2002: Three Irish terrorists arrested in Slovakia in 2001 for trying to buy weapons are sentenced in a London court to 30 years in jail each. Michael MacDonald, Fintan O'Farrell and Declan Rafferty receive the verdicts after unexpectedly confessing the week before to having been planning a bombing in Ireland or mainland Britain, for which they attempted to buy weapons in western Slovakia's Piešťany. The list of weapons included 5,000 kilogrammes of semtex explosive, 2,000 detonators, 200 rocket-propelled grenades, 500 handguns, a wire guided missile and sniper rifles capable of penetrating British army vests.

May 2002: Amnesty International accuses the Slovak government of ignoring EU guidelines on arms exports to sensitive areas. Slovakia exported arms to Angola and Zimbabwe in 2001, countries whose troops were actively fighting in the Congo conflict, and where AI said human rights abuses had occurred. AI is also critical of Slovak arms exports to Belarus, which re-exports military equipment to countries such as Liberia, Iraq and Iran.

May 2002: A report by the country's secret service (SIS) claims that Slovakia has become a conduit for exports of Russian arms to combat zones. According to the SIS annual report for 2001, Slovakia remains a transport corridor for weapons smuggling due to legal loopholes. SIS Director Vladimír Mitro tells MPs that Russian and Ukrainian Mafia are using their links to the Slovak underworld to smuggle small arms such as machine guns and rifles to countries embroiled in military conflict.

August 2002: A South Korean citizen is expelled from Slovakia under suspicion of illegal trading in arms, particularly in dual-use goods and material for weapons of mass destruction.

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