Scorpene submarine project to miss target again as Spanish consultants quit

The Scorpene submarine project underway in Mumbai has suffered fresh troubles, with a new assessment showing another 18 months of delay even as its Spanish consultants have left the venture.

According to sources, Mazagon Dock Limited (MDL) has informed the Navy that the project would be delayed by another 18 months from the 2015 deadline announced by defence minister AK Antony in Parliament last year.

Going by the latest MDL projections, the first Scorpene submarine would be ready for induction only by 2016-end. When the contract was signed, the first submarine was to be ready in 2012. However, the delay could be worse, according to other developments over the last few days.

Consultants from Navantia, the Spanish shipbuilding company, left the project in the last few days. The technical assistance pact for Navantia and DCNS, the French partner in the consortium, expired on March 31, sources said. With MDL failing to get the defence ministry's approval in time, about 10 Spanish consultants working on the submarine project left India. This could further add to the delay, sources said.

Adding to the troubles over the massive submarine project, with a budget of over Rs 23,000 crore, is the fact that the DCNS leadership is expected to meet with MDL top brass this week in Mumbai and present their own demand for additional technical assistance fee.

The developments come at a time when India's submarine fleet is expected to dwindle to just seven or so in two years time. Presently, India operates 10 ageing Russian Kilo class and four German HDW submarines. Indian Navy also has a Russian nuclear submarine INS Chakra on lease.

The Scorpene project, among the biggest defence deals signed by India till now, was concluded in October 2005. Over the years, the project has run into several delays. Originally, the first submarine was to be delivered in 2012. However, because of the complications and two-year delay in concluding contracts related to material to be procured by MDL, the project got delayed by three years.

Delivery by end-2016

Hulls for all six submarines, made of steel supplied by French division of ArcelorMittal, are ready in Mumbai, and the outfitting of equipment and systems is underway. With the Spanish consultants quitting, work on the part of the hull that they were responsible for could be delayed.

According to the new estimates, the first submarine will be ready for commissioning by end of 2016. And then, a new submarine could be ready for induction every 9-12 months.

According to the present projections, the last two submarines would have air independent propulsion systems (AIP) that would help the submarine stay underway water for one to three extra weeks. Without AIP, a Scorpene submarine can stay underwater continuously for five to six days. DRDO is presently developing an indigenous AIP, with assistance from DCNS. Initial assessments about the indigenous AIP system is said to be very good though with only about two weeks of endurance.

Amnesty sees link between SUARAM shakedown, Scorpene scandal

SUARAM is pursuing a French investigation into alleged government corruption in Malaysia’s

Global rights watchdog Amnesty International raised suspicion today over the timing of Putrajaya’s sudden interest in SUARAM’s operations, noting that authorities began probing the group soon after it revealed that a close associate of Prime Minister Datuk Seri Najib Razak had sold Malaysian naval secrets to France.

The revelation was made by French lawyer Joseph Breham, who is acting for Suara Rakyat Malaysia (SUARAM) in the ongoing inquiry on the Scorpene submarine scandal in Paris, during a May 30 press conference in Bangkok.

“Amnesty is concerned that the recent government actions against SUARAM appear to be linked to the organisation’s legitimate work, in particular a corruption case which it has brought before the French courts.

“The government began these actions against SUARAM four weeks after the organisation disclosed new information from documents made available by the French public prosecutor’s office, which implicate Malaysian officials in the corruption allegations,” AI said in a statement here.

SUARAM recently came under close scrutiny of the Companies Commission of Malaysia (CCM) due to its foreign funding sources, and the government agency said earlier this week that it plans to charge the activist group for its “misleading accounts”.

The human rights NGO has been actively pursuing the Scorpene scandal in the French courts, determined to expose alleged government corruption in the multibillion purchase of the submarines in 2009 and possibly reopen the murder case of Mongolian model Altantuyaa Shaariibuu, which has been linked to the deal.

In April this year, the Tribunal de Grand Instance in Paris began its inquiry into SUARAM’s claim that the French naval firm DCNS had paid some RM452 million as a bribe to Malaysian officials to obtain a contract for two submarines. SUARAM had filed the complaint with the French courts in 2009.

In the May 30 press conference, Breham had revealed that a classified government document on the Malaysian navy’s evaluation of the Scorpene submarines it was then planning to buy had been sold by Terasasi (Hong Kong) Ltd to DCNS for RM142 million.

Abdul Razak Baginda, a former think-tank head who was at the centre of the 2006 investigation into Altantuya’s murder, is listed as a director of Terasasi with his father, Abdul Malim Baginda. Abdul Razak is said to be a close associate to Najib.

“It was a secret document by the Malaysian navy, an evaluation for the order of the submarines, which is a highly confidential report,” Breham had said at the conference.

Amnesty recalled that on July 3, a little past four weeks after the revelation by SUARAM’s lawyer was made, the NGO suddenly received a visit from the CCM with a notice of inspection.

A few months later, the group became the subject of much “harassment and intimidation” from the Malaysian authorities, it added.

Amnesty added that the harassment “appears to be a concerted, multi-departmental government campaign against SUARAM, one of Malaysia’s leading human rights groups”.

“The Malaysian government should respect SUARAM’s right as a human rights organisation to seek and receive funding, rather than abuse its power to intimidate human rights defenders,” the group said.

Singapore to start negotiations for 4 Scorpene SSKs with France's DCNS

According to rumors (infosdefense.com), the Republic of Singapore Navy is about to start negotiations with France for the possible purchase of 4 Scorpene class SSKs. The deal could include transfer of technologies.

Contacted by Submariners World however, a DCNS source refused to comment on the rumors.

                         

According to rumors (infosdefense.com), the Republic of Singapore Navy is about to start negotiations with France for the possible purchase of 4 Scorpene class SSK. The deal could include transfer of technologies.

Scorpene class SSK of the Chilean Navy

                         

About Scorpene class SSKs:

Already chosen by the Chilean, Royal Malaysian, Indian and Brazilian Navies Scorpene-Family submarines represent the state-of-the-art in submarine design and construction and benefits from the latest technologies developed for nuclear-powered classes operated by the French Navy, particularly as regards acoustic discretion and combat system performance. Scorpene can be fitted with an optional MESMA AIP section.

- The MESMA (Autonomous Submarine Energy Module) is an electrical energy production module designed specifically for conventional submarines. As well as supplying electricity to the vessel and to the propulsion system, it can also be used to recharge the batteries without the need to surface. Together with a MESMA section, a Scorpene will be able to carry out extended missions with an over 3 weeks submerged endurance.

Deep and Dirty: Malaysia's Submarine Scandal

Leaked prosecution documents show a pattern of official misdeeds in two countries

A two-decade campaign by the French state-owned defense giant DCN and its subsidiaries to sell submarines to the Malaysian ministry of defense has resulted in a long tangle of blackmail, bribery, influence peddling, misuse of corporate assets and concealment, among other allegations, according to documents made available to Asia Sentinel.

View the Documents Here

Some of the misdeeds appear to have taken place with the knowledge of top French government officials including then-foreign Minister Alain Juppe and with the consent of former Malaysian Prime Minister Mahathir Mohamad, according to the documents, comprising 133 separate files and hundreds of pages. They were presented to the French Prosecuting Magistrate at the Court de Grand Instance de Paris in May and June of 2011. French lawyers have begun preparing subpoenas for leading Malaysian politicians including Prime Minister Najib Tun Razak, the current Defense Minister, Ahmad Zaki Hamad and several other figures.

The documents were sent anonymously to Asia Sentinel via a circuitous route that took them to Brussels, Belgium; Lagos, Nigeria; Brazzaville,Congo; Libreville, Gabon; then to Leipzig, Germany and finally to Hong Kong. The documents, written in French, can be found in a collection in Asia Sentinel's Scribd account.

The documents were compiled as a result of a raid on April 7, 2010, when scores of investigators from the anti-organized and financial crime unit of the French Directorate of Judicial Police swooped down on DCN’s offices at 19 rue du Colonel Pierre Avia in Paris’s 15th Arondissement, and four other locations, demanding that stunned officials give them access to safes, files and computers. They collected thousands of documents that form the bulk of the files delivered to Asia Sentinel.

Together, they present a damning indictment of Malaysian officials whose goal was to steer a €114.96 million (US$114.3 million at current exchange rates) payment through a private company called Perimekar Sdn Bhd, wholly owned by Abdul Razak Baginda. Razak Baginda was then the head of a Malaysian think tank called Malaysian Strategic Research, which was connected with the United Malays National Organization, the country’s biggest political party.

The payment appears to have been in violation of the OECD Convention on Bribery, which France ratified on June 30, 2000. On Sep. 29, 2000, according to document D00015, DCNI, a DCN subsidiary, “took corrective actions” after France joined the bribery convention. Contracts concluded after that date were to be routed to Eurolux and Gifen, companies held by Jean-Marie Boivin, DCN’s former finance chief, and headquartered in Luxembourg and Malta respectively Boivin is being investigated for having played a central role in the “corrective actions,” with what were described as “outlandish commissions” traveling through the welter of companies that he established in tax havens around the world. Among the documents is one that shows Boivin paid to send Razak Baginda on a jaunt to Macau with his then-girlfriend, Altantuya Shaariibuu, a Mongolian national who was later murdered by two of Najib’s bodyguards.

“A separate agreement sets other compensation consisting of a fixed amount independent of the actual price of the main contract,” one document reads in reference to the payment to Perimekar. “This has been made to be consistent with [DCN’s] internal rules and [its subsidiary] Thales and those of the OECD. The beneficiaries of these funds are not difficult to imagine: the clan and family relations of Mr. Razak Baginda. In addition, these funds will find their way to the dominant political party." Malaysia’s dominant political party was and is UMNO.

Malaysian Defense Spree

The story in essence began when Najib Tun Razak was appointed defense minister in Mahathir’s cabinet in 1991 and embarked on a massive buildup of the country’s military, arranging for the purchase of tanks, Sukhoi jets, coastal patrol boats – and submarines. That kicked off a stiff competition between French, German, Swedish, Russian and Dutch manufacturers, who in turn went looking for the most effective cronies of the Malaysian leadership to help them out. By 1995, according to document DC00078, DCN’s subsidiary Thales was losing out to the German manufacturer Kockums AB, which was represented by Amin Shah, dubbed “Malaysia’s Onassis” because of his business and shipping interests, who was close to then-finance minister Daim Zainuddin and was suspected of being a front man for Daim’s interests.

French authorities seemed to counter by paying a “consultancy fee” according to a handwritten document called a "Consultancy Agreement” signed in Kuala Lumpur on Oct. 1, 1996 between DCN International representative Emmanel Aris and a Malaysian Army major named Abdul Rahim Saad. The purpose was “to reintroduce DCNI in the short list of tenders after it was rejected by the Government of Malaysia” on Dec. 14, 1995, according to the French documents.

The remuneration was to be paid in two lots, US$20,000 before Jan. 31, 1996, and US$80,000 after acceptance. Apparently it was successful. Rahim is now managing director of a company called ARS Sehajatera Sdn Bhd., which supplies logistical equipment to the Malaysian armed forces.

However, there are questions whether Rahim was ever paid. A memo found in the DCN files said he “expresses discontent and proclaims his support for the Agosta [the Spanish manufacturer of the Scorpenes for DCN] submarines since 1996 but he ‘has not had any news from DCNI to date.’ He says he organized shady activities to promote the French bid…He complains of not having been paid for his services.”

Eventually, according to the documents, Amin Shah began to lose his influence with the government after Daim Zainuddin left his position as finance minister. DCN and its subsidiaries began casting around for other sources of influence within the Malaysian government.

An attempt to woo Tan Sri Razali Ismail, one of Malaysia’s most distinguished diplomats, failed. “It was ultimately unsuccessful and Mr. Abdul Razak Baginda was chosen in his place,” the documents note. “The role of the latter was to facilitate the submission procedure to the Malaysian government and the responsible ministers, in particular the Minister of Defense, with whom he claimed to have a close relationship.”

According to Document D000112, “…Razak Baginda has maintained excellent relationships with the Defense Minister and Prime Minister. Moreover, his wife, Mazlinda Makhzan, is a close friend of the Defense Minister’s wife. Thus, Baginda has become the center of the network. Both companies are at the center of this network: Terasasi, related to Baginda, and Perimekar, which was initially controlled by Mohamad Ibrahim Mohamad Nor,” who was also close to Daim Zainuddin. However, with Daim stepping down as finance minister after a spat with Mahathir, Razak Baginda took over sole proprietorship of that company through his wife.

“The major defense contracts in Malaysia as in other countries require substantial money transfers to individuals and/or [political] organizations,” the document noted. “In Malaysia, other than individuals, the ruling party [UMNO] is the largest beneficiary [rather than Perimekar, the company to which the commission was directed]. Consultants [agents or companies] are often used as a political network to facilitate such transfers and receive commissions for their principals.”

The Heart of the Deal

Over the next few years, the documents show, as the contract came closer to fruition Razak Baginda and Najib maneuvered in France to get the best possible deal for themselves and UMNO, establishing a tangle of companies through which funds would ultimately pass.

Their activities included the founding of several companies including Perimekar in 2000 as a vehicle to funnel the €114.9 million commission to Razak Baginda and others, with Razak Baginda’s wife the principal shareholder. The plan appears to have had the approval of Mahathir. A diplomatic cable to Foreign Minister Juppe said, “The company chosen by the government for the submarine project is…Perimekar. This choice is the subject of an official notification from the Malaysian Ministry of Finance to the Ministry of Defence... Note that this decision of the Ministry of Finance was taken while the Prime Minister himself held the post of Minister of Finance, after the departure of Tun Daim.”

The French company appears to have had no illusions as to Perimekar’s function. Documents note that “Perimekar was a limited liability company with a capital of MR5 million (€1.4 million) of which 1 million is available. It was created in August 1999 … it has no record of sales during 2000. Its ownership is in the process of restructuring.”

As Asia Sentinel has previously reported, document D00087 shows that Najib demanded a US$1 billion “condition” for Perimekar Sdn Bhd’s “stay in France.” The notes, however, don’t make it clear exactly what that means. The information is contained in a note faxed from Francois Dupont, the Asian representative of Thales International Asia, to his bosses but the notation in the documents presented to the court doesn’t elaborate. Dupont indicated that a meeting with Najib on July 14, 2001 would take place with the above mentioned “condition” but it was not known if the meeting transpired.

Along the way, Jasbir Singh Chahl, one of Razak Baginda’s associates at Perimekar, decided he hadn’t been paid enough. In several memos to DCN, Jasbir Chahl demanded a full fourth of Perimekar’s total €114.96 million. Despite several demands, there is no indication that Chahl has ever been paid. He has been subpoenaed as a witness in the case, but after first indicating to French lawyers that he would cooperate, he has since said he knows nothing of the affair. He is said to be extremely ill and suffering from some form of cancer.

Other documents made public by Asia Sentinel earlier show that at least €36 million flowed from the DCNS subsidiary to Terasasi Hong Kong Ltd., whose principal officers are listed as Razak Baginda and his father. Najib was defense minister from 1991 through the time when the submarines were delivered in 2002. Terasasi only exists as a name on the wall of a Wanchai district accounting firm in Hong Kong.