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Arms Trade: The Czechoslovakian Connection

23 November 1992 Croatia went on a panic arms buying spree in September and October last year, not caring who the supplier was or what the price was, not even caring much about the quality of the goods. Some of the operations were smooth and efficient, but many were amateurish, bungled and made in desperation.

Croatia's arms buying connections in Singapore, Hungary, Germany, Austria, Poland and South Africa are common knowledge. The Czechoslovak connection, however, is much less known, even though the Croatian Interior Ministry imported the first contingent of several thousand high quality CZ-75 pistols from Czechoslovakia in late Summer 1990. The import was legal and not controversial, even though the delivery was held up somewhat. What is not known is that Zagreb and Prague conducted business quietly and to the satisfaction of both sides throughout Autumn 1991 and Winter 1991-1992. One of the firms involved was Machina A.S., a mixed Swedish-Czechoslovak company with offices in Prague and Uppsala. Machina A.S. director Stjepan Udovic is a Swedish citizen of Yugoslav descent and a sociologist. VREME managed to acquire several documents which illustrate a part of Machina A.S. transactions concerning Croatia's arms buying from Czechoslovakia.

The documents illustrate two aspects of the transactions: Croatia's somewhat chaotic demands and the readiness of the Czechoslovak arms dealers to skin their customers thoroughly. On October 22, 1991 Machina A.S. sent an invoice for the sale of one complete "Strela 2M" anti-aircraft missile (launching module and three missiles) and four anti-tank "Malyutka" missiles. The bill was written out to the Croatian National Guard (ZNG-RH) in Rijeka and in the name of Ante Simic. The prices were interesting: a "Strela" set cost 45,800 DM, while the four "Malyutka" were priced 43,000 DM. Machina A.S. was the dealer and the prices, according to those in the know, were far too high. Namely, the currently very best U.S.-made TOW anti-tank missiles can be bought for 3,000-4,000 U.S. dollars apiece; this is what traders paid during the Irangate affair, while they sold them to Iran for 13,800 dollars apiece. The offer of "Malyutka", "Strela" and other arms systems from the Warsaw pact arsenal is enormous for the third year running, and prices are ridiculous both retail and wholesale.

There were plenty of opportunities for making big money. Asked to comment the documents obtained by VREME, Udovic could not hide his embarrassment. He gave the following explanation for the ZNG Rijeka invoice. "A friend asked for a blank invoice in order that a friend of his might cover up warehouse losses. I sent him one, and realize now that it was a mistake." If someone used a blank invoice to cover up "warehouse losses" totalling 88,800 DM, the Croatian government should have reason for concern.

The remaining documents are equally revealing. One is, to put it mildly, unusual. This is a contract under which Udovic is empowered to take over the sum of 30,000 dollars from the Croatian Defence Ministry "for the purchase of an End User Certificate (sic) and the undertaking of procedures for the buying of necessary goods." The contract was signed by Udovic on the one side and by Messrs. Mirko Zuzic and Davor Grcevic in the name of, as can be gleaned from the formulation, the Defence Ministry. An End User Certificate is a key document in the international arms trade: it binds the buyer to keeping the arms and guarantees that the arms will not be sold to a third party; no international commercial transactions are carried out without such a certificate because it ensures the honoring of eventual existing bans and embargoes. The cost of End User Certificates has lately gone up on the black market (they can generally be bought from the government organs of non-aligned countries and those of poor, faraway countries. There have been examples of End User Certificates reaching 130,000 dollars (Burkina Faso, for some of Croatia's Polish-German suppliers.)

Stjepan Udovic told VREME that Messrs. Zuzic and Grcevic were private persons without money and that they wished to earn something, adding, however, that "the Czechs knew the arms were going to Croatia, but that the political line was to exempt Croatia from the European Community embargo." This is why modalities with an noncontroversial End User Certificate were sought. The whole matter ended when the two went home without having done anything, and the End User Certificate (as VREME learned from another source) was finally acquired in Nigeria... The arms flow was not stopped. All knew how exports were being carried out and who was doing the buying. The bills were paid on time and there were no problems for the Czechs (and Slovaks, who, Udovic said, had exported in great quantities, but without Prague's blessing.)

The following two documents are interesting. The first is a shopping list. It asks for the prices and conditions for the buying of enormous quantities of arms: 20,000-odd anti-tank RPG-7 rocket launchers; 50,000 automatic rifles and 50,000,000 bullets; 40,000 "Scorpio" submachine guns and 400,000,000 (possible error!) bullets; anti-craft "Strela" missiles and SA-2 (1,000 pieces); CZ-75 and 85 pistols (10,000 pieces and 1,000,000 bullets); hand grenades, mines e.t.c. The date is November 6, 1991 and of the list Udovic says that he had negotiated with Czechoslovakia's leading arms exporter Omnipol, but that they had not "understood much." It is a fact that the list is chaotic and imprecise and was drawn up by an amateur. The second document is dated November 7, 1991 and concerns an offer made to Udovic by Unimpex, following a meeting and negotiations. The differences in prices between the two lists are interesting. Unimpex now priced RPG-7 rocket launchers 1,640 dollars apiece; RPG-75 were 520 dollars (carriage paid Budapest); in the initial order the prices expected were 450 and 260 dollars, respectively. Anti-aircraft missiles "Strela 2" and 3 and "Igla" were not far behind at 18,000, 25,000 over 50,000 dollars, respectively (carriage paid Sofia). In this deal Unimpex is the middleman, because the contract mentions "our supplier". If the prices are calculated according to carriage paid Budapest and Sofia, the suppliers can be guessed at without straining the imagination.

Russian President Boris Yeltsin visited Budapest on Wednesday and bowed before Imre Nagy's shade. Nagy was the leader of Hungary's 1956 rebellion, which was put down in blood. Yeltsin offered to meet a part of the Soviet owings to Hungary with 800,000,000 dollars worth of arms. The Hungarians agreed and asked to buy more Russian fighter jets in order to neutralize the Yugoslav threat from the South. According to Conference on Security and Cooperation in Europe (CSCE) standards, Hungary already has a surplus of arms, and will have to get rid of some 600 armored vehicles and 130 T-72 tanks. This means that the wars in the Balkans will have sufficient arms with which to be fought for quite a long time. Croatia continues to arm and the international community is aware of the fact. Information acquired by VREME has been known to the Security Council since mid June this year. Serbia, or rather, the Federal Republic of Yugoslavia, is not wasting time either. Its taxpayers are being robbed in concert by international con men, domestic middlemen, technical consultants with a highly patriotic profile and other gentlemen of the "20 percent" school. The only difference is that less arms in the literal sense of the word are imported, while the opposite holds true for spare parts and military-political electronic equipment. From the point of view of taxpayers, i.e. the population (or so called people), this just means more tapping, killing and deaths per capita. But, business is business.
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