Austria to sue Airbus over Eurofighter deal

The first Austrian military jet fighter "Eurofighter Typhoon" lands on the military airport in the small Styrian village of Zeltweg, Austria, in this July 12, 2007 file photo. (Reuters)
Updated 16 February 2017

Austria to sue Airbus over Eurofighter deal

VIENNA: Austria said Thursday that it will sue European aerospace giant Airbus over a $2-billion sale of Eurofighter jets that has long been plagued by allegations of kickbacks.
A government probe concluded that the Airbus and Eurofigher consortium had “deliberately misled the Austrian Republic on the real price, delivery capabilities and its equipment” of the deal signed in 2003.
“Austria would have never decided to buy the Eurofighter jets in 2003 without the fraudulent deception by Airbus and Eurofighter,” Defense Minister Hans Peter Doskozil said.
EU member Austria is seeking damages of up to €1.1 billion ($1.16 million) for its largest-ever defense deal, worth around €2 billion.
According to the “Task Force Eurojet” report presented in Vienna, Eurofighter knew that it would not be able to meet the delivery deadline of the 15 planes.
The five-year-investigation also found that Austria had been overcharged for costs that allegedly included backhanders.
“The two companies never informed Austria that the 2-billion-euro deal would include 183.4 million euros of legal but also criminal fees,” Doskozil told reporters.
Ahead of the report’s release, Airbus said in a statement sent to AFP that it was not aware of the Austrian findings and had received “no details” regarding the lawsuit.
However it said that Airbus has been “cooperating with the authorities in recent years, for example through its own enquiries.”
In late January, Airbus had already agreed to pay tens of millions of euros in additional taxes over an allegedly shady 90-million-euro payment linked to the Austrian Eurofighter contract.
Austrian and German authorities launched the current corruption probe into Airbus, then called EADS, to investigate whether officials had been paid millions of euros through advisory firms to secure the contract.
Prosecutors in Munich are set to publish their preliminary findings later this year.
The Eurofighter deal was first announced in 2000 by Austria’s then conservative-run government despite fierce opposition from its far-right coalition partner and the Social Democrats.
The government had initially ordered 24 jets but later dropped the number to 18 and then to 15 because of budgetary constraints.
The purchase of the military fighter jets also stirred public unease in non-NATO neutral Austria.
Shortly after the contract was signed, allegations started to circulate that politicians and others involved in the deal were receiving kickbacks.
A probe was set up in 2007 to look into possible bribes, but came to no firm conclusion.
The Eurofighter Typhoon is a major prestige product for the European defense industry. The first prototypes were made in 1989.
The four founding nations in the consortium — Germany, Spain, Britain and Italy — all use the aircraft in their own air forces.
Austria saw the first sale outside of the four consortium members, and since July 2007 the 15 Austrian jets have clocked up more than 5,000 flying hours, according to the consortium.
In 2006 Saudi Arabia agreed to purchase 72 Eurofighter Typhoons. Other contracts have been signed with Oman and Kuwait.
As well as Airbus Defense and Space, representing Germany and Spain, the consortium includes British group BAE Systems and Italian firm Leonardo.
Eurofighters were used in combat missions in Libya in 2011.

Iran sanctions shadow falls on smaller German banks

Updated 27 May 2018

Iran sanctions shadow falls on smaller German banks

  • Some German companies plan to press on with Iran dealings
  • German exports to Iran rose 15.5 percent last year

Germany’s biggest lenders have shied away from business with Iran after past penalties for breaching US sanctions, but smaller banks have leapt on opportunities afforded by the nuclear deal rejected by Donald Trump.

There are just months to go until a November deadline issued by Washington after the US president abandoned a hard-fought agreement that loosened business restrictions on the Islamic Republic in exchange for Tehran giving up its pursuit of nuclear weapons.

But some firms plan to press on in their dealings with Iran despite the looming threat of penalties.

“We will continue to serve our clients,” for now, said Patrizia Melfi, a director at the “international competence center” (KCI) founded by six cooperative savings banks in the small town of Tuttlingen in southwest Germany.

The center, which supports companies operating in sensitive markets like Iran or Sudan, has seen demand “rising sharply in the last few years, from firms listed on the Dax (Germany’s index of blue-chip firms), from all over Germany and from Switzerland,” she added.

German exports to Iran have grown since the nuclear deal was signed in 2015, adding 15.5 percent last year to reach almost €2.6 billion ($3.0 billion) after 22-percent growth in 2016.

Such figures remain vanishingly small compared with Germany’s €111.5 billion in exports to the US — its top customer.

Nevertheless, the KCI will “wait and see what the sanctions look like” before turning away from Iran, Melfi said.

Already, firms dealing with Tehran must take great care not to fall foul of US restrictions.

Transactions are carried out in euros, and the KCI does not deal with businesses that have American citizens or green card resident holders on their boards.

What’s more, products sold to Iran cannot contain more than 10 percent of parts manufactured in the US.

One of the most important inputs for the business is “courage among our managers” given the high risks involved, Melfi said.

Germany’s two biggest banks, Deutsche Bank and Commerzbank, avoid Iran completely after being slapped with harsh fines in 2015 over their dealings there, with Deutsche alone paying $258 million in penalties.

DZ Bank, which operates as a central bank for more than 1,000 local co-op lenders, is withdrawing completely from payment services there, a spokesman told AFP.
That left KCI to seek out the German branch of Iranian state-owned bank Melli in Hamburg.

Even that linkage could break if Iran’s biggest business bank appears on a US list of barred businesses as it has before.

Meanwhile, among Germany’s roughly 390 Sparkasse savings banks, business with the regime is mostly limited to producing documents linked to export contracts.
“We will be looking even more closely at those” in the future, a person familiar with the trade told AFP.

Elsewhere in the German economy, the European-Iranian Trade Bank (EIH) founded in 1971 is another conduit to Tehran.

Also based in Hamburg, it for now remains “fully available to you with our products and services,” the bank assures clients on its website, although “business policy decisions by European banks may result in short term or medium term restrictions on payments.”

Neither does the Bundesbank (German central bank) believe that much has so far changed for business with Iran.

“Only the European Union’s sanctions regime will be decisive,” if and when it is changed, the institution told AFP.

Any payment involving an Iranian party would have to be approved by the Bundesbank if things return to their pre-January 2016 state.

German banking lobby group Kreditwirtschaft has called on Berlin and other EU nations to clarify their stance — and to make sure banks and their clients are “effectively protected against possible American sanctions.”

KCI’s Melfi said time is running out for EU governments to act.

“Many firms just want to stop anything with Iran, since they can’t calculate the risk of staying,” she noted.

On Friday for the first time since the Iran nuclear deal came into force in 2015, China, Russia, France, Britain and Germany gathered in Vienna — at Iran’s request — without the US, to discuss how to save the agreement.