Going For Broke -- or Just Broke?

Romania has something the U.S. wants: proximity to the oil-rich Caspian Sea basin. Romanian officials have tried to cultivate support for future NATO membership by developing corporate-friendly oil legislation, as well as proposals for constructing a pipeline to transfer oil to Western markets.

NATO membership would mean security and political prestige for Romania. For the U.S., Romanian participation would mean access to oil -- and millions of dollars in defense contracts. It is no coincidence that Bruce L. Jackson, president of the U.S. Committee on NATO -- diplomatically renamed from the U.S. Committee to Expand NATO -- also happens to be the director of global development for Lockheed Martin. Thus far the Clinton administration has sold or granted license to sell more than $800 million in arms to cash-strapped Romania, benefiting U.S. companies such as AAI and -- surprise -- Lockheed Martin.

U.S. arms sales in the Clinton years Direct government sales Government-approved sales (scale in millions of dollars)

Romania's economy has fallen on hard times while President Emil Constantinescu struggles to privatize banks and state enterprises, reform agriculture, and balance the budget -- steps mandated by the IMF and other Western institutions. In 1998 the International Monetary Fund suspended a $410 million credit to Romania, citing the government's failure to achieve its stated economic goals. Reflecting Romania's devolution to fiscal deadbeat status, Moody's downgraded the country's long-term foreign bond rating to B3 (16th place out of Moody's 21 categories), and last fall Standard & Poor's downgraded Romania's long-term currency rating from a B+ to a B-. These ratings mean the country is now widely perceived as a credit risk. However, none of this stopped the Clinton administration from backing a $20 million loan to Romania last year for arms purchases.

In 1995 the U.S. gave Romania four used Lockheed Martin C-130B Hercules transports -- free of charge. Apparently Constantinescu's administration liked the Lockheed Martin brand, because later that year it bought five Lockheed Martin AN/FPS-117 surveillance radars for $82 million total.

A $1.5 billion deal between Romania and Textron Bell Helicopter for co-producing 96 Bell AH-1 RO Dracula attack helicopters collapsed in 1997 after the IMF vetoed the project, noting that Romania needs infrastructure more than attack helicopters.

In February 1998, Romania became the first nation to close a loan backed by the Defense Export Loan Guarantee program (DELG), which was created by Congress in 1996 following intense defense-industry lobbying. Under the program, the U.S. backed 85 percent of the $20.1 million deal between AAI Corporation of Hunt Valley, Maryland (part of New York-based United Industrial Corporation), and the Romanian government. The five-year loan was used to purchase AAI Shadow 600 unmanned aerial vehicles and a short-range air-defense training simulator; it allowed Romania to pay just the $3.5 million fee participation fee up front. Concerns about Romania's creditworthiness didn't deter the U.S. government, which has written off more than $10 billion in bad loans for arms sales to other shaky countries in the past eight years.

On the human-rights front, the State Department says Romania "has made great progress in ... human rights" since the fall of communism. However, Amnesty International tells a different story, noting that "The change of government and other national authorities has not significantly affected the observance of basic human rights in Romania." In a country still reeling from the autocracy of Nicolae Ceausescu (who was ousted and executed in 1989), homosexuality is a punishable offense; the police are routinely accused of inhumane treatment, excessive force, and torture of civilians; and ethnic Romany citizens -- gypsies -- endure racist violence while authorities turn a blind eye.

Apparently, the Clinton administration doesn't care where Romanian arms end up, as long as the country is buying from us. Throughout the Bosnian war, Romania supplied President Milosevic with equipment, and last December the Romanian Ministry of Defense admitted to breaking the U.N. arms embargo on Iraq. The ministry issued a statement acknowledging that the Romanian military had supplied Iraq with long-range missile guidance systems between 1994 and 1996.

-- j.j. richardson

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