Purchase of ocean patrol vessels for Uruguay escalates to diplomatic problem

The purchase of ocean patrol vessels (OPV) for the Uruguayan Navy, a promise that the current government and, remarkably, the Minister of Defense, Javier García, assured on multiple occasions that it would be fulfilled during his administration, is encountering more and more problems, generated in good part by terrible management of the purchase process.

This has generated diplomatic friction between China and Uruguay, which has even led the ambassador of the Asian country to express to García last week his country’s dissatisfaction with how the purchase process had been handled.

He planned to meet with the Minister of Foreign Affairs of the Republic and the Uruguayan President to inform them of China’s position.

THE CALL FOR PRICES, THE BIDDING DOCUMENTS, AND QUALIFICATIONS

On December 16, 2021, President Luis Lacalle Pou informed Garcia that Uruguay would start an OPV procurement process again, with multiple evaluation commissions, including representatives of all parties, to define which model would be chosen to be purchased.

The purchase would replace the two failed calls made during the previous leftist governments, resulting in the selection of the German company Lurssen as the winner, providing three 80-meter OPVs for some US$210 million to be paid with highly flexible and low-interest financing.

For this purchase, all political parties had given their support, including García himself, then Senator, who considered it favorable for the country and defended it on more than one occasion in the Senate defense committee.

However, for unknown reasons, the purchase was never carried out.

When the new government took office after the impact of the pandemic in 2020, a recent call was made with totally different conditions: a fixed hangar was added to the ships, organic 76 mm armament, state-of-the-art electronic systems, including shooting radars, optronic systems, data links, Tacan for naval air operations and long-term integrated maintenance.

Surprisingly, the Minister of Defense, on December 16 and after the President announced the call, hinted that the budget allocated for the purchase of the ships would be around US$100 million but that he would not give more information because he did not want to tell the suppliers the exact number.

This budget, in the first instance, was not going to be enough for the construction of ships with the requested characteristics, considering that each Lurssen OPV cost US$70 million without a hangar with 40 mm cannon and most of the electronics requested in the new call, added to the fact that the costs of ship construction, like everything else in general, had risen substantially after the pandemic.

In addition, the Minister decided that the call would be channeled only through embassies since his policy is not to negotiate directly with private companies.

This combination of factors led to only three shipyards submitting bids, the French consortium Kership, the Dutch firm Damen and the Chinese firm CSTS.

Once the proposals were analyzed, the technical advisory committee determined that the only offer that met all the requirements was that of CSTS, with two options:

One for US$200 million with an integrated logistics system for 15 years and Western electronic systems, and another for US$164 million with the same equipment but an integrated logistics system for five years.

The latter was the one selected by Uruguay with the support of all the commissions evaluating the offer, including that of the Economy.

It was May 2022, and everything indicated that the government would sign the purchase of the Chinese vessels so that the first one would arrive in the country during the current administration. However, nothing happened.

The government began to request extensions to the bid maintenance guarantees to the three shipyards, a situation that was systematically repeated until 2023, with interventions of the Court of Auditors – consulted by the Ministry of Defense – to confirm the legitimacy of the awarding process which the country’s official procurement regulator ratified.

This situation lasted until January 31, when the head of the Ministry of Defense publicly informed that the purchase would be canceled because all the options were considered not convenient for the country for being over the available budget (the famous US$100 million).

He said the country would probably opt for purchasing second-hand ships from Norway for a much lower amount, redirecting the rest of the budget to other purchases for the Armed Forces.

CHINESE ANGER

Although there was public communication, officially, the government did not close the call for prices, which generated the first annoyance of China since, until then, having been declared winners, they assumed that their ship would be the chosen one.

As a result, several e-mails sent to the Ministry were ignored.

However, China decided to double the bet, presenting a more economical offer of the same vessels, with some modifications of the electronics, Santa Barbara, data link, and firing systems to make it more economical.

Along with this offer, the Chinese representatives asked the Uruguayan government to activate clause 13 of the purchase terms, which enables the government to negotiate the terms of the purchase, something that, during his meeting with the Chinese ambassador, Garcia said could not be done.

The new offer was also ruled out, even though the ambassador mentioned to the Minister that although he was not a specialist in the matter, both the bidding terms and the Tocaf (Uruguayan government procurement regulations) enabled the government to negotiate.

Although China agrees that Uruguay, as a sovereign country, can decide what to buy and what not to buy, what is clear is that the whole procurement process was handled in a highly sloppy manner, with a lack of seriousness, generating economic losses as well as time losses for all those involved.

THE US FACTOR, ITS PRESSURES, AND THE NORDKAPP SHIPS

In addition to all this problem of the terrible management of the purchase, even worse than the other two failed attempts made by the previous governments, the United States – in a not very discreet way – expressed its disagreement with the purchase of the equipment from China.

China increasingly became a US military enemy, replacing the former Soviet Union, to generate a new kind of cold war, intermingled with deep commercial ties between the two nations.

The United States not only made clear its disagreement with this issue but also promised that it would make available special items for the sale of material at friendly prices for the three branches of the Armed Forces of Uruguay, with a specific package of US$30 million for the Aramda, which includes airplanes, helicopters, patrol boats, a support ship, light infantry weapons, and trucks.

In a way, this is a counterpart to suspending the purchase of Chinese OPVs.

Additionally, and in a process still unclear how it reaches Uruguay, the offer of three Norwegian ships, Nordkapp class, which would be sold under favorable conditions for the country, was received.

This offer, unofficially transcended that in the first instance would have been presented by representatives of Fincantieri in Uruguay, was rejected by the Minister because he does not receive private companies, and then was raised directly by the Ambassador of Italy in Uruguay, offering the Italian naval firm as the shipyard capable of modernizing the ships: engine replacement, hull overhaul and improvements in electronics and armament.

However, Garcia ordered to establish direct communication with Norway for those ships through the Uruguayan Embassy in Sweden to see the units’ situation and, at the same time, analyze what options exist for their modernization.

To date, although the Minister has stated that negotiations with Norway are well advanced, it has not been determined who will carry out the modernization works – if they are carried out – and how a vital issue for the acquisition of these vessels will be solved: their draft is larger than that of the naval dock of the port of Montevideo.

Although there has been speculation about undertaking structural modifications to the ships, there is a possible solution to this problem without altering them.

It depends on transferring the facilities currently used by the Navy in the Port of Montevideo to another area, particularly in the fishing port.

This area has a sufficient draft to receive the Nordkapp class ships.

The issue of deepening the access channel to the Navy dock, which also lacks the necessary dimensions to receive the Norwegian vessels, is still pending.

Thus, with more than half of the government’s term elapsed, the Minister of Defense finds himself in a very complex situation to fulfill a promise, both his own and the President’s, and risks leaving the Navy without blue water vessels.

Added to this serious problem is the diplomatic dispute with the primary buyer of Uruguayan products, China, with whom a possible free trade agreement has been under negotiation for a long time.

The Minister was supposed to appear yesterday, Monday, before the Senate Defense Committee, where members of the opposition are expected to strongly question the process and its consequences for the Navy and the country as a whole.

With information from Infodefensa