Polish election frontrunner eyes army tender shakeup, risks causing delays

By Wiktor Szary and Pawel Sobczak WARSAW (Reuters) - The expected winner of Poland's Oct. 25 parliamentary election aims to shake up the country's military procurement plans but such a move could delay the modernization of its armed forces at a time of increased Russian assertiveness in eastern Europe. A delay to Warsaw's military acquisitions could also harm its reputation as one of NATO's most active members and undermine its long-standing efforts to secure a permanent presence in its region for the Atlantic alliance, analysts say. A member of the U.S.-led alliance since 1999, Poland has earmarked $40 billion for military acquisitions by 2022 in a drive to bring its largely Soviet-era military hardware and equipment up to NATO standards. Russia's annexation of Ukraine's Crimea region in 2014 and its support for separatists in eastern Ukraine prompted Poland to speed up the modernization plans. In April, the center-right government provisionally selected French Airbus Group's utility helicopters and said it would buy Raytheon's Patriot missiles from the United States in tenders worth a combined $8 billion. But the nationalist-minded Law and Justice (PiS) party, tipped to win this month's election, said it would review the tenders as part of efforts to boost the share of Poland's defense budget spent domestically if it wins the election. "Each of these tenders will be subject to very careful analysis," Jaroslaw Gowin, the party's candidate for defense minister told Reuters. Gowin said that as defense minister he would seek to place more than 70 percent of defense orders with companies manufacturing locally. Officials say it would be illegal under European Union law to bar foreign companies from tenders, so the onus would be on local industry to be competitive in its offers. "Additional political scrutiny in defense tenders is never a bad thing," said John Louth, Senior Research Fellow at the Royal United Services Institute. But rewinding the process too far back could delay the acquisitions "by years", Louth said, adding: "Given the geopolitical situation, this should be a serious concern for Poland and its NATO allies." It would also probably weaken Poland's negotiating position at a NATO summit in Warsaw next year, where it will lobby for a permanent alliance presence in eastern Europe, Louth said. Poland agreed to raise its own defense spending to the required NATO target of 2 percent of gross domestic product (GDP) from next year to strengthen its case. Its demand faces resistance from Germany, wary of antagonizing Moscow by putting permanent NATO bases too close to the Russian border. PLAYING HARD BALL Asked if a PiS-led government would reconsider offers for the $3 billion helicopter tender made by U.S. aircraft manufacturer Sikorsky and Italian-British AgustaWestland, both of which already manufacture locally, Gowin said "the case is still open". Airbus said it planned to directly hire 1,250 people in Poland by 2020 and create a further 2,000 jobs in the sector in connection with the tender. Its offer was the only one that met all the tender's criteria, Airbus told Reuters in a statement. Poland's defense ministry said it would not comment on the opposition's plans, adding that the procurements were conducted independently of the political calendar. Last month, Poland's economy minister said that due to the complex character of the negotiations the contract was unlikely to be signed before the election. Sikorsky declined to comment on the PiS plans. AgustaWestland was not immediately available to comment. The $5 billion tender for a medium-range air and missile defense system will also be subject to review, PiS lawmaker and deputy chairman of the parliamentary defense committee Bartosz Kownacki said. "If we were to continue negotiating with Raytheon … then we would need guarantees that part of the manufacturing would be relocated to Poland," Kownacki told Reuters. A PiS-led government would also reconsider Lockheed Martin Corp's MEADS missile defense system, rejected by the current government in the earlier stages of the procurement, Kownacki said, arguing that it would be cheaper. Asked to comment on the PiS remarks, Raytheon said it was "committed to ensuring Poland's industrial participation (for the system) reaches as much as 50 percent of the contract value." A representative of MEADS International said its offer for Poland still stood. Tim Ripley, defense analyst at IHS Jane's, said the Polish opposition's announcements may simply be aimed at strengthening Warsaw's hand in future negotiations with Airbus and Raytheon. "Defense deal negotiations are always hard ball. That's the name of the game," Ripley said. But some political analysts said it could also be a part of PiS' election strategy, aimed at securing the support of employees and trade unions at Sikorsky and AgustaWestland's facilities, both located in the party's traditional strongholds. Combined, the sites employ more than 5,600 people and trade unions at both facilities said that if the tender were awarded to Airbus, the other two companies would have to scale back their production and lay off workers. (Writing by Wiktor Szary; Editing by Gareth Jones)