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Wednesday, April 4, 2012

Tatra vs Ural: Corruption and Competition in Military Exports to India

So, here is a little gem of a scandal for everybody: east Europeans, west Europeans, Indians, economic sociologists, aficionados of global issues, students of geopolitics, people working on representations, everybody.

A few weeks ago, the Chief of Staff of the Indian Army, V.K. Singh came out with the astounding allegation that he had been offered (and turned down) a bribe of "14 crore rupees" (for non-Indians: that's 140 million INR, i.e., 2.74 mUSD at today's rates; put differently, that's 1400 months' [!] worth of salaries for full professors at state universities in India, at least according to the Sixth Pay Commission's numbers from a few years ago) for which he was supposed to agree to buy 700 "substandard trucks" for the army. This created a furor in the Indian Parliament, not to mention the defense establishment, structured partly as a row between the government and the military, partly as a series of demands for Singh's "forced removal."

I read about this scandal while in India. I left a week or so ago, and have just checked the news again. There are a couple of interesting developments. First, as it turns out, the offer was recorded on tape, making denial quite a bit more difficult than otherwise.

More fascinating, the company whose "lobbyist" offered the bribe to Singh is none other than Tatra Trucks, more than 90% of which is owned by Tatra Holdings, a company registered in Kopřivnice, the Czech Republic. Tatra traces its origins into the mid-19th century; recently it was a state-owned vehicle manufacturer, one of the leading companies in the erstwhile Czechoslovak Socialist Republic. After the regime change, it was privatized, went "close to" bankrupcy, was transformed into a holding, and bought up by a series of other companies, with controlling interest in the hands of a UK-based Indian businessman Ravi Rishi. In other words, Tatra and its complex, and murky, ownership structure is a typical example of a privatized, foreign-owned, post-state-socialist, former-state-owned enterprise. Because of this history and the ownership structure, the European Union is deeply involved in this case.

So, to recap, the allegation made by General Singh is twofold. First, that Tatra Trucks--which has been selling vehicles to the Indian military since 1986--has been shipping vehicles that cannot handle some of the rough terrain in the Indian army's area of operation; and, second, that Tatra Truck's representatives tried to bribe him into continued purchases of the putatively defective trucks.

As always in cases of sudden revelations about bribery and corruption, it might be informative to learn who Tatra Trucks' competitors are. And here is the ironical twist. The main competitor is none other than a company called Ural. According to The Hindu, "Led by Kolkata-based businessman J.K. Saraf, Ural is a joint venture between Russian firm Uralaz and Mr. Saraf's Motijug ind., which manufactures heavy vehicles at Haldia, in W Bengal." To be remembered is that V K Singh is rumored to be close to the nationalist populist chief minister Mamata Bannerjee's Trinamul Congress party that has recently ousted the CPI(M) government of West Bengal after nearly 30 years in power.

So, we have a cut-throat competition between two former-Warsaw-Pact-based companies. One is located squarely in the EU; the other has the might of Russia, and some Indian capital, behind it. Both are working feverishly to supply India, the world's largest import market for military equipment. What a powerful story about the intertwining of the power of history, geopolitics and crime--in short: "business!"

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cover page of the book

cover page of the book
image used for the cover design by Anannya Dasgupta