Steps Toward Reform
The government that took power in 1997 has undertaken a number of steps that may help improve the country’s arms trade controls. Some of these steps seek to address problems identified above. For example, the removal of executives and managers that may have been associated with past arms dealing practices offers the opportunity for improved oversight of the arms industry, although the appointment of regulatory officials to the boards of arms trading companies constitutes a serious conflict of interest.
In addition, Bulgaria launched an ambitious anti-crime campaign that focused on organized crime and government corruption, as well as a judicial reform effort.189 To the extent that they are successful, such efforts may serve to reduce arms smuggling, enhance regulatory control over the arms trade, and help ensure accountability for violations of arms trade controls. In December 1998, the prime minister announced that his anti-crime initiative had sharply reduced the power of the country’s organized criminal networks.190
As noted above, the government has undertaken to tighten its arms trade regulations. It also has worked to improve its regulatory capacity. It has been especially active in the area of customs controls, engaging in several joint border-control programs with its neighbors and entering into customs cooperation agreements with the United Kingdom, France, and the United States.191
In early 1999 Bulgaria accepted assistance from the United States aimed directly at improving arms trade controls, including customs enforcement training and software designed to help different ministries maintain and share arms licensing information. Previously the United States had provided a customs advisor who worked with Bulgarian officials over five months in 1998 in the area of nonproliferation of weapons of mass destruction. That long-term cooperation and training program, U.S. officials maintain, strengthened regulatory practices more broadly.192
Bulgaria also has benefited from the arms trade information it obtains through contacts with other countries. Bulgaria has active intelligence cooperation agreements with Russian and the United States.193 Its also engages in regular information-sharing regarding arms deals through the Wassenaar Arrangement.194
Bulgaria has also worked to improve cooperation between government bodies. Planned changes in the country’s customs administration reportedly will facilitate coordination between different customs bureaus,195 and an official claimed in early 1999 that—by working together more effectively—the border police, the national security service, and the customs service had dramatically reduced the number of illegal arms transfers out of Bulgaria.196
A few examples suggest that Bulgaria’s efforts to improve its regulatory practices have met with some success. In one case, the government halted a suspicious arms transaction in October 1998 before it was completed. The deal, which involved a shipment of surface-to-air missiles (SAMs) which they presumed was destined for an embargoed party in Africa, was first described in the local press after an official reported it at a press conference.197 Several officials told Human Rights Watch that the deal was brokered by a U.S.-Ukrainian company registered in the United States, Miltex, which presented an end-user certificate showing Zambia as the final destination.198 An investigation showed that Zambia’s Ministry of Defense was not aware of the document, so authorities inferred that the SAMs might be diverted and therefore stopped the transaction before it could be completed.199 Miltex’s owner categorically denied his company’s involvement in the deal, denied ever providing a false end-user certificate in other deals, and asserted that Miltex’s deals were made on the basis of valid arms licenses.200
In a second case, authorities said they postponed consideration of an arms export application for a sale to an unidentified country in Africa in early 1999 after a review of the documents revealed that two official stamps did not correspond to each other.201 Neither case led to a Bulgarian criminal investigation or prosecution in connection with the submission of false documents.202 A final example offered by authorities was a shipment of military equipment for U.S. troops in the Former Yugoslav Republic of Macedonia that was held up in mid-1998 because documents were not in order.203
Privatization
In 1997 the government presented plans to restructure its defense-related firms, mostly through the privatization of arms production companies. A moratorium on the privatization of such firms had been in place since 1993 but was lifted by parliament in 1996. The new government hoped that the injection of private investment would bring in revenue and help modernize the arms industry. The declared motive behind the privatization initiative was to help the arms industry recover from its heavy debt and permit it to become more competitive in the export market. Importantly, the government also viewed privatization as an element in its strategy for joining NATO.204
Under the government plan, some twenty-one arms manufacturing companies are scheduled to be privatized by January 2000 in a process overseen by the privatization agency.205 The government has stated it plans to retain controlling interest (34 percent ownership) in five of the biggest arms producers, including Arsenal.206 As part of the restructuring of the defense ministry, twelve military repair plants also will be privatized.207 Sale of the major arms trading companies is not envisioned in the government’s privatization plan.208
Privatization of the arms industry has proceeded slowly.209 The process has been hampered by several constraints, including—most prominently—the need to modify the ownership structure of the arms manufacturing companies.210 In addition, the government must negotiate payment for Russian arms production licenses, adopt legislation enabling foreign companies to purchase arms companies, and address the problems posed by current secrecy laws, which treat commercial arms trade information as a state secret.211 It seems unlikely that the January 2000 deadline will be met, and expectations have been scaled back. The government, however, has affirmed its intention to privatize the industry as part of its overall economic reform plan.212
Contrary to claims by Bulgaria’s ambassador to the United States,213 privatization by itself is unlikely to improve implementation of arms trade controls. In fact, there are reasons to be concerned that privatization could weaken controls. Direct government oversight presumably would weaken, as the government would no longer name industry executives or board members for privately held firms. In addition, privatization may make it more difficult for regulatory authorities to adequately investigate companies that request arms trading licenses and to monitor their activities once licenses are issued.
Some observers also fear that companies linked to organized criminal networks, as well as past and current arms industry managers linked to arms trade abuses, could take ownership of arms manufacturing companies.214 It is not known what steps, if any, the government has in mind to prevent such a possibility.
The Prospect of Joining NATO
Bulgaria’s arms industry has also been affected by a military modernization program undertaken in the hope of improving its prospects of being invited to join the North Atlantic Treaty Organization (NATO). Bulgaria’s defense minister declared in March 1999 that: “We generally think the requirements [to join NATO] will be met by 2001 or 2002.”215 To meet that goal, Bulgaria is making changes to rationalize its force structure, obtain modern Western military equipment, and adapt its arsenal to conform to NATO standards.216 Bulgarian defense officials anticipate that these changes will generate a stock of Warsaw Pact-standard weapons that the country’s armed forces no longer require.217
For example, Bulgaria announced in 1997 that it was planning to reduce the size of the armed forces by one-third.218 This force reduction is likely to generate increased stocks of surplus weaponry. In addition, the planned procurement of Western military equipment will relegate some of Bulgaria’s outdated Soviet-era equipment to the surplus pile. The switch to NATO-standard calibers in its production lines, a process that is already underway, also can be expected to add to the stock of surplus weapons.
The surplus weapons created by these changes must be destroyed or stored at considerable expense, converted to civilian use, or disposed of through export. Beyond being the cheapest alternative, finding a market for such weapons offers Bulgaria the potential to recoup funds with which to finance its new arms purchases from the West. As noted above, Bulgaria has a long record of exporting surplus weapons to war-torn countries, and this practice has continued under the UDF government. Such sales demonstrate the potential for NATO-inspired military modernization to generate a dangerous “cascade” effect, providing a source of weapons to abusive military forces.219
189 See, for example, Tagarinski, “The Quality of Governance.”
190 “Bulgarian Premier Says Fight Against Corruption Successful,” RFE/RL Newsline, December 21, 1998.
191 In October 1998 the head of Bulgaria’s customs department announced that the country would soon initiate customs cooperation programs with those three countries. Pari Daily (Sofia), October 10, 1998, in Reuters Business Briefing, October 11, 1998.
192 Human Rights Watch interview with U.S. government officials, Washington, D.C., February 1999.
193 Human Rights Watch interview with Vladimir Tourtansky, Senior Advisor, Interministerial Council on Defense Industry and Logistics, Council of Ministers, Sofia, February 8, 1999.
194 Human Rights Watch interview with Dimiter Zhalev, Department of NATO, WEU and Security Issues, Ministry of Foreign Affairs, Sofia, February 8, 1999.
195 Pari Daily (Sofia), October 10, 1998, in Reuters Business Briefing, October 11, 1998.
196 Human Rights Watch interview with Col. Venelin Velikov, Deputy Director, National Service for Combating Organized Crime, Ministry of Interior, Sofia, February 8, 1999.
197 Pari Daily (Sofia), Reuters Business Briefing, December 23, 1998; and Demokratsiya (Sofia), December 23, 1998, in BBC Monitoring Service: Central Europe and Balkans, December 24, 1998.
198 Human Rights Watch interviews with Col. Venelin Velikov, Deputy Director, National Service for Combating Organized Crime, Ministry of Interior, Sofia, February 8, 1999; and with Plamen Radonov, Deputy Defense Minister for Logistics and Acquisition, Ministry of Defense, and Col. Hristo Stanimirov, Chief of Staff, Defense Economy Department, Ministry of Defense, Sofia, February 9, 1999.
200 The owner of Miltex, Inc., furthermore stated that the company has no dealings in Africa, and instead sells weapons—including firearms purchased in Bulgaria—to markets in the United States and other Western countries. He suggested that competitors may be responsible for the allegations or, alternatively, that people with whom he had worked in the past might be freelancing using Miltex’s name. The company, which had previously been based in La Plata, Maryland, relocated to Alexandria, Virginia, in 1999. Human Rights Watch telephone interview with Dale Stoffel, March 15, 1999. In 1998 Miltex, Inc., was Arsenal’s U.S. trading partner and helped it market a new version of the Makarov pistol. “Privatization at Arsenal on Hold,” Small Arms World Report, vol. 8, nos. 3 and 4 (Fall 1998/Winter 1998-1999), p. 12.
201 As of early February 1999, Bulgarian authorities had attempted to verify the authenticity of the documents by contacting the country named in the application as the purchaser through its embassy in Moscow. Human Rights Watch interview with a Bulgarian government official, Sofia, February 1999.
202 Human Rights Watch interview with Blagoy Guenov, Secretary, Interministerial Council on Defense Industry and Logistics, Council of Ministers, and Vladimir Tourtansky, Senior Advisor, Interministerial Council on Defense Industry and Logistics, Council of Ministers, Sofia, February 5, 1999.
203 Ibid. Under the proposed legislative changes, Bulgaria’s new arms trade controls would not apply to arms intended for use in peacekeeping and training missions (see National Arms Trade Controls, above).
204 Brooks Tigner, “Bulgaria Planning to Restructure State-Owned Industrial Sector and Implement a Modern Weapons Program,” Defense News, May 17, 1998. See also, BTA News Agency (Sofia), October 15, 1998, in BBC Monitoring Service: Central Europe and Balkans, October 17, 1998.
205 Some companies will be sold by an outside consulting firm, the Bulgarian-Russian Investment Bank (BRIBank). “Bulgaria in Talks with BRIBank on Arms Plants Sale,” Reuters, August 10, 1998.
206 Konstantinova, “Bulgaria Tries to Sell.”
207 Human Rights Watch interview with Col. Hristo Stanimirov, Chief of Staff, Defense Economy Department, Ministry of Defense, and Col. Todor Malchev, Head of Section, Procurement and Trade Department, Ministry of Defense, Sofia, February 5, 1999; and Georgi Ananiev, Defense Minister, Press Conference at the Bulgarian Embassy, Washington, D.C., March 3, 1999.
208 Capital Weekly (Sofia), Reuters Business Briefing, February 20, 1999.
209 The sale of one company reportedly was arranged in 1998. Nikolay Pavlov, “$750,000 To Be Paid for the First Defense Industry Plant,” 24 Chasa (Sofia), April 7, 1998, reproduced in Monitor of Privatization and Foreign Investment, issue 2 - 98, obtained via the Internet at: http://www.online.bg/econ/privatization/monitor/issue/2-98/. As of early 1999, the privatization of two arms factories had been halted. Kontinent (Sofia), January 4, 1999, in FBIS, East Europe, January 5, 1999.
210 The arms manufacturing companies need to be restructured so that shares currently held by Metalchim Holding, an industry consortium, are transferred to the government. Capital Weekly (Sofia), Reuters Business Briefing, February 20, 1999.
212 For example, Deputy Prime Minister Alexander Bozhkov announced in January 1999 that privatization mechanisms were being prepared for arms industry companies. “Bulgarian Press Digest,” Reuters Business Briefing, January 19, 1999, citing Standart News (Sofia) and Sega Daily (Sofia). Bulgarian officials confirmed in March 1999 that the government was committed to privatizing the arms industry. Georgi Ananiev, Defense Minister, and Philip Dimitrov, Ambassador to the United States, Press Conference at the Bulgarian Embassy, Washington, D.C., March 3, 1999.
213 Philip Dimitrov, “Letter to the Editor.” Mr. Dimitrov argued that privatization would help improve government control over the arms trade. Mr. Dimitrov made a similar statement in early 1999. Philip Dimitrov, Ambassador to the United States, Press Conference at the Bulgarian Embassy, Washington, D.C., March 3, 1999.
214 Human Rights Watch with a Bulgarian Embassy official, Washington, D.C., November 11, 1998; and with a representative of a Bulgarian civil society organization, Sofia, February 1999.
215 Georgi Ananiev, Defense Minister, Press Conference at the Bulgarian Embassy, Washington, D.C., March 3, 1999.
216 Bulgaria’s foreign minister, Nadejda Mihailova, stated in 1998: “We are already developing plans to reduce the size of the army, buy Western equipment and generally bring the military into line with NATO norms.” “Invest in Bulgaria?” Jane’s Foreign Report, March 26, 1998.
217 Human Rights Watch interview with Col. Hristo Stanimirov, Chief of Staff, Defense Economy Department, Ministry of Defense, and Col. Todor Malchev, Head of Section, Procurement and Trade Department, Ministry of Defense, Sofia, February 5, 1999.
218 “Bulgaria to Cut Personnel,” Jane’s Defence Weekly, September 10, 1997.
219 Concerns about the export of surplus weapons are described in Joost Hiltermann, “NATO as Weapons Proliferator,” editorial published in the International Herald Tribune (Paris), June 11, 1998. See also Musah and Castle, “Eastern Europe’s Arsenal.”