USA forbid Croatian-Israelian F-16 deal.

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It seems there is a grade A mess happening just now.

The director-general of the Defense Ministry, Udi Adam, will reportedly travel to Croatia this week, in a bid to resolve tensions over a $500 million arms deal being blocked by the US.Israeli and Croatian officials tell Channel 10 that Adam will arrive in Zagreb on Wednesday, where he is expected to apologize for the delay in the purchase of 12 used American-made fighter jets from Israel...
...However, Washington wants Israel to strip off the upgrades it installed, after acquiring the planes some 30 years ago.

It seems problem was that initially US accepted to greenlight the deal as it was assured that would be an one off case, a limited amount of old planes in order to allow an allied nation to retain an expertise in fast jet, but according to croatian sources, Israeli offered similar deals to Bulgaria and Romania and in perspective to Colombia and Poland.
Given that production of F-16 is still ongoing such a quantity (72 in total) being offered on the used marked could severely hamper future selling perspectives.
https://www.timesofisrael.com/liveblog-january-6-2019/

My own opinion: Croatia, being the nation that it is, should now cancel the deal and go back to the market and acquire any other plane available, even from Serbia before to order anything from these two countries.
And if US think to sell to one of the other nations above mentioned new F-16 block70 , it is high on something strong...

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Of cours, i guess USA decided that grounding on pseudo moralistic reasons?

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, Croatian Defense Minister already denied that US is blocking’s sale. There might be a Hangup over specific equipment. Whatever is going on, I want some of what your smoking if you think Croatia would buy weapons from Serbia.

"The United States has consistently said what the technical requirements are for more than two years, and everyone should have known that these are the technical requirements, and so it's a bit of a surprise to me that there is this slowdown right now," Kohorst said December 8 in Zagreb
.

Not to mention the U.S. has every right to be annoyed with Israel profiting off the sale of F-16's that were given to them as part of military aid. Most likely, the US want a piece of the upgrade pie for those F-16's.

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Not withstanding the usual “evil USA” comments, there are several layers to this issue.
having spent a bit of time looking into this, here are several of the issues (and heresay):
1. Croatian officials seem to be laying the blame entirely on Israel, Israeli news conveniently leaving out several key details:
US approved the transfer over two years ago contingent on Israel meeting the requirements.
2. The US agreed that Croatia could not afford new build aircraft and that the sale of used Israeli aircraft strengthened the air sovereignty of Croatia. But Israel could not offer the same deal to other nations without approval. (That’s stipulated in FMS)
3. Israel appeared to “pull a fast one” on contractual obligations for the overhaul and O&S. Basically, it would have to be an agreed upon division of work between the OEM (Lockheed now) and IAI. One part of this was also removal of some of the Israeli modifications to meet FMS rules (again most likely who would be responsible-profit- from upgrades and support)
4. The majority of F-16’s in service with the IAF were purchased with security assistance funds (or outright gifted) most of the F-16 C/D were purchased with defense security assistance through peace marble II/III. On other words, Israel is selling aircraft purchased with another nations taxpayer funded assistance, and made assurances to Croatia on the configuration of those F-16’s knowing it did not meet the conditions agreed upon by the US.

Opinion- considering the value of this contract, the US might have been willing to look the other way on Israel profiting from the sale to another US ally, but if the rumors of offers to Bulgaria et al are true, that cuts into possible US defense industry sales, violates FMS agreements. If the US was smart, they would “gift” a dozen F-16’s to Croatia with a contract to SLEP them and a separate support contract. That would avoid alienating Croatia which (at least according to what the government is saying) has been understanding of the disagreement. The added benefit would be giving Israel a rebuke as this isn’t the first time Israel has sold/attempted to sell weapons and technology subsidized by US taxpayers that could potentially hurt US industry or interests.

edit-deal looks dead, state blocked the sale this afternoon.

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The technical baseline for many of the F-16 systems and sub-systems are owned and controlled by the various US A&D firms and much of it directly by Lockheed Martin. Israel was practically gifted those aircraft, and any modifications to those aircraft which were not performed via a partnership/cooperation with the OEM would have involved payments made by the US government (on behalf of Israel) to compensate them for their IP. This does not mean that Israel can turn around and sell modified F-16's in an open competition without (it would seem) having worked out either A) a direct deal with the US OEMs concerned to licence the IP in order to sell the modifications or B ) Obtained a waiver from GOTUS to override US OEM's and their rights.

Israel applied and was approved to sell FMS F-16's to Croatia under the routine FMS terms and conditions which would require that Israel sell the F-16's in the same state in which they were originally sold to it and approved under the original sale. They never sought special approval prior to bidding and none was given. It turns out that Secretary Mattis upon learning of this, blocked the deal probably because it would have set a bad precedent (from a US industry and industrial base perspective) in future used F-16 sales where US industry is going to be very deeply involved in the coming years.

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The defence credits aspect of FMS is a mess and should be eliminated. If there is a desire to gife defence equipment to certain nations then something modelled on the old Lend / Lease system would seem more sensible; it's yours until you are finished with it, at which point you ship it back to the USA or scrap it. And that wouldn't affect the majority of FMS participants, since they have to actually pay. I can't say I have any sympathy for Croatia though, all of this was entirely foreseeable. As FBW points-out the manner in which Israel obtained the F-16s is a matter of historical record.

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I don't see how Croatia is at fault here. Israel had a right to sell them used F-16's, and Croatia was within its right to purchase them. Israel however could not have sold those aircraft with the domestic modifications and just like all other users who wish to sell their US gifted or FMS procured equipment to another user they would have had to convert the equipment to its original form by removing any Israeli specific modifications that had been done to them during their service life. Had they done this, the deal would have been approved but thein their bid would have been more expensive. They couldn't do it while still meeting what they bid and Croatia was not willing to pay anything above what they had agreed to. Israel probably thought it could secure a concession from the DOD and DOS but none was given. In that sense the title of the thread is rather misleading. It is naive to assume that Israel did not know of how they are contractually bound by third party transfer regulations when they either buy or accept gifted defense equipment. They took a risk and it did not pay off.

The US Congress OK'd the sale of Israeli F-16's to Croatia. The problem was not with them acquiring used F-16's. .Other users have successfully sold their used equipment to other; a recent example is the sale of Australian F/A-18 fighters to Canada. The problem was Israel trying to pull a fast one by offering to sell to Croatia a used F-16 in a form that Israel was not allowed to sell. Under other circumstances they may have well received a concession with the DOD and DOS looking the other way however, in this case case allowing them to skirt the rules would have negatively impacted the US FMS program as both the other entrants (Lockheed and SAAB) would have contributed to FMS. This would have also negatively impacted future used aircraft sales and set a bad precedent going forward.

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In bold terms, Israel was not allowed to sell anything but US stuff (in dollars)

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Halloweene, no one is allowed to do this. The rules require that they restore the aircraft back to its original configuration before completing a third party sale. They could sell as many upgrades to those F-16's to the Croatians that they want or that Croatia is able to buy but in order to do so they need to licence with the technical baseline holders of those F-16 which will be Lockheed Martin and its other industrial partners.

So to repeat, Israel can sell modifications to F-16's to Croatia or to anyone else but they can't sell gifted F-16's with those modifications nor sell modifications to F-16's without dealing with the OEM's who hold the IP rights and baselines to the aircraft and its primary systems. The problem here was likely that those F-16's would not have met the requirements for the competition sans those Israeli components and buying the required from the F-16 suppliers or licencing and selling the upgrades (Israeli stuff) separately would not have been great for competitive reasons.

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For what i could read from the vecernji list article (I understand croatian) the blame is put almost all on Israel,side given it was them that was not compliant to their previous assurances of having permission from the holders but above all to have offered similar contracts all around before to have completed the first one so spurring the USA reaction.
Only complaint in confront of USA is to have denied this option to Croatia also after that the deal was concluded following an international tender in which also USA made an offer i.e. to not have signaled the eventual problem in the proper moment but to have changed their own mind in a second time.
So, no need to fear any deterioration of bilateral relation Croatia/US for this while instead the official response to Israeli offers has been neat and firm.

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the blame is put almost all on Israel,side given it was them that was not compliant to their previous assurances of having permission from the holders but above all to have offered similar contracts all around before to have completed the first one so spurring the USA reaction.

That is correct. Israel knew that as per the rules and regulations that govern third party sales of FMS hardware or free military assistance they can sell that military equipment to a third party IN ITS ORIGINAL CONFIGURATION after seeking approval. The US congress was informed of this and there was no objection as my linked article highlights. The objection came later from the US SecDef once it was determined that Israel was not selling aircraft in their original form but with the upgrades that Israel had done to them for its own use over the years. This is not allowed as per the terms of the sale/gift. Israel was unable to convince the US DOD or DOS hence Croatia is well within its right to be pissed off at them for bidding for a system that existed in a configuration that they could not sell without serious concessions from the US.

The bottom line is that the US department of defense cannot be seen to be setting precedent whereby an FMS customer or a military aid recipient can skirt rules and regulations and attempt to establish a competitive advantage for itself by offering equipment and systems it has not obtained licences or permission to sell commercially and thereby undercut the US FMS/DSCA program which the Secretary of Defense leads.

Only complaint in confront of USA is to have denied this option to Croatia also after that the deal was concluded following an international tender in which also USA made an offer i.e. to not have signaled the eventual problem in the proper moment but to have changed their own mind in a second time.

Nope. The US does not unilaterally provide approval for potential sales of weapons, it can only provide guidance and share regulations with current and future customers and provide clarifications if approached. An FMS customer has to apply for a third party sale permission and the application is then taken up. The information regarding this process is available online. There was no way for the US side to definitively know of what the Israeli position or bid was since they were competing with each other. In the absence of this the US would naturally assume that Israel, if selected would offer a deal and a configuration that it could legally sell after obtaining US approval which would have been straight-forward if Israel followed proper regulations just as Australia did when it concluded its deal to sell its Hornets to Canada.

https://www.total-croatia-news.com/p...ale-to-croatia

US ambassador to Croatia Robert Kohorst said earlier this month that Israel needed to accept the technical requirements so that the US could approve the sale of the 12 fighter jets, adding that this was about who owned the technology and intellectual property rights. "The Israelis need to accept the technical requirements and as soon as that's done we can move forward and the sale can go through," Kohorst said then.

According to Kohorst, "the United States has consistently said what the technical requirements are for more than two years and everyone should have known that these are the technical requirements and so it's a bit of a surprise to me that there is this slowdown right now."

He also explained that "the debate is who will pay for the conversion because the USA and its contractors Lockheed Martin have to do the work because they're the ones who own the technology and intellectual property."

Bottom line is that Israel is an F-16 customer, not an F-16 developer. When it received those aircraft it never paid to acquire technology rights or the technical baseline for that aircraft. While it can apply for and execute a third-party-sale in accordance with the laid out Third Party Sales process that makes up an FMS deal it CANNOT unilaterally sell modifications for or modified F-16's because it has no licence to sell modified F-16's in the commercial market. If it wants to play in this commercial space (modify and sell F-16's) then it needs to enter into a licence agreement with Lockheed and obtain the requisite legal authority to do so.

It would be the same for any western OEM that values its IP and is willing to legally protect it. A customer can't just randomly decide to begin selling modifications to those aircraft as a matter of profit without obtaining the rights to do that from those who hold those rights.

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It's kind of like if you bought an Iphone and tinkered with it. That's okay. But then if you start branding your modified Iphone the 'Iphone-RX' or something and selling them, you're going to have a problem with Apple.

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Prime minister Andrej Plenkovic has made a statement recalling how official delegation were send to both Israel than to USA as soon as deal was signed to define the matter so he can only wonder how something was changed ten months later, so effectively something has happened in the meantime i.e. what was presented as one exceptional deal made between a country that have a "special relationship" with USa and another considered of considerable strategical importance(and that has recently benefited of a quite exceptional US second hand handling from the states) has became the standard offer israeli do around the world.
So, it seems that an initial green light was given, albeit unofficially and that all the blame for the fail has been put to Israel reckless sale politics.
Now let see how the question will be settled: if things are in the terms bring-on-it have said i.e. that is LoMart that have to take back planes in the pristine status and not Israel we can consider the contract as well as defunct.

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From what I have read, there are claims from Israeli sources that the US initially gave a green light for selling a squadron of the Israeli aircraft with Israeli mods to Croatia (turning a blind eye of sorts), but when Israel afterwards started offering the same aircraft to other countries as well (Romania, Bulgaria, Columbia are mentioned, 6 squadrons in total), the US changed their stance as this would jeopardize their F-16V sales (of which Croatia couldn't afford a squadron anyway).

It was a cheap way for Croatia to get modernized F-16's, but then they would depend on Israeli spares and weapons and it's questionable in which condition these airplanes really are (i.e. any potential savings might be relatively quickly negated over the planned 20 years of use).

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From what I have read, there are claims from Israeli sources that the US initially gave a green light for selling a squadron of the Israeli aircraft with Israeli mods to Croatia (turning a blind eye of sorts), but when Israel afterwards started offering the same aircraft to other countries as well (Romania, Bulgaria, Columbia are mentioned, 6 squadrons in total), the US changed their stance as this would jeopardize their F-16V sales (of which Croatia couldn't afford a squadron anyway).

The objection came from the US SecDef. The US SecDef is responsible for the FMS/DSCA and the team working on those report up to him. The US too in the future will be playing in the used F-16 space. As a matter of fact, the USAF may decide to at some point in the near future begin offering used F-16's for sale. If it has to compete with an country in the commercial market who is skirting regulations and by-passing IP rules then it is incumbent on the SecDef to do as much in its power to prevent that from happening.

The sale could still have gone through as long as Israel converted those aircraft back to a compliant sale. If Croatia could not accept those in that state, Israel could offer very cheap or even free modifications that Croatia could then ask Lockheed Martin to incorporate into their aircraft. It will be expensive than the $500 Million it was paying originally but that deal involved skirting rules and regulations and praying that the US granted a concession with disregard to how it impacts its own FMS programs and industrial base.

That $500 Million deal was not a fair value for those aircraft, as bidding that low involved an active decision on Israel's part to skirt the rules and break the third-party-sales agreements that it must adhere to when it buys US defense equipment or receives it as an assistance.

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Last act for now:
https://www.vecernji.hr/vijesti/izraelski-i-hrvatski-duznosnici-razgovaraju-o-spornoj-nabavi-borbenih-zrakoplova-1293747
Udi Adam, General Director of Israeli minister of defence has come to Croatia to formally announce the failure in obtaining TPT permission, taking full responsability for the bid's failure and offering a last minute alternative solution in the sense highlighted by bring-on-it.
However, such a solution was not even taken in consideration by a croatian government in full "mali smo al'nas ima" attitude...

So here's the actual outcome :
the deal is now undone,
we are back to square one,
but we'll bow head to none
and will not quit on trying
and we'll keep'em flying...

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Something tells me if they had wanted to sell some used F-15s, the SecDef would not have an issue with it. :rolleyes:

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I think the actual contrary, Boeing want to keep it's own assembly line open at all cost so any TPT of their own hardware is a bane for them.

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Then again, Croatia would never buy new F-15s or F-18s, so Boeing might actually not mind. Better make some money on support than no money at all.
But since the Israeli F-15s are really old and more expensive to run, this will not happen anyway.

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[ATTACH=JSON]{"data-align":"none","data-size":"large","data-attachmentid":3846965}[/ATTACH]cedc7e713f178cec694c.jpeg

This letter dated from 3 december by Lockheed-Martin to Croatian MoD show how almost until 3 december all thing were proceeding fine and that there was no objection from their part to the deal, so it seems that objections were on state, not company level and surfaced quite late.

Attachments

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The objection came from the US SecDef. The US SecDef is responsible for the FMS/DSCA

And that is a perfect example on how US are dependable towards NATO allied : until they may lose a single penny...