The Air Force is revoking a big bomb-making deal from a company linked to a Russian oligarch
- The Air Force plans to rescind a contract for bunker-busting bombs that was issued to a US firm.
- The arms maker in question is partially owned by a foreign company, which makes it ineligible for the award.
- That foreign company is partially owned by a Russian billionaire who has been hit with US sanctions.
The Air Force is to ditch a nearly half a billion dollar contract issued to a Chicago-based company to make bunker-buster bombs after complaints by lawmakers about the company's ties to a Russian oligarch.
The Air Force awarded a contract worth $419.6 million to A. Finkl & Sons Co. to produce bomb bodies for the 2,000-pound BLU-137 penetrator warhead, which is meant to replace the BLU-109.
Finkl's contract was slightly smaller than the $467.9 million award given to Ohio-based Superior Forge and Steel Corp to make 300 bomb bodies in the first year with the potential for as many as 3,500 more over four years.
However, according to Bloomberg Government, a group of lawmakers protested the decision, saying Finkl was not eligible for the award because its foreign parent company, Swiss steel-maker Schmolz + Bickenbach, is partially owned by Viktor Vekselberg, a Russian billionaire and aluminium magnate who has been hit by US sanctions.
By awarding the contract to Finkl, Pennsylvania Republican Rep. Mark Kelly told Bloomberg, the Air Force had "turned their back" on Ellwood National Forge, a longtime bomb-maker that employs 2,000 people and is based in Pennsylvania. Ellwood had worked on every previous generation of the bunker-buster warhead.
Vekselberg, born in Ukraine and based in Switzerland, is worth more than $15 billion and holds an 11.34% stake and 1.25% stake in Schmolz + Bickenbach through two holding companies, both of which have been hit by US sanctions against Russia over that country's actions in Crimea and Ukraine. (His stakes in Schomlz + Bickenbach were not large enough to draw sanctions on that company.)
Earlier this year, the US imposed sanctions on Russian individuals and entities over Moscow's suspected meddling in the 2016 US election - including assets worth between $1.5 billion and $2 billion belonging to Vekselberg and one of the holding companies in question.
Kelly and nine other Republican members of Pennsylvania congressional delegation protested the decision in an July 27 letter, saying they were "so surprised" Ellwood has missed out on the contract "despite submitting the lowest cost bid and possessing far more experience than either of the companies that won a contract."
"Perhaps more troubling is that one of the companies that was awarded a contract is the subsidiary of a foreign-owned conglomerate, even though the request for proposal explicitly barred foreign owned, controlled or influenced companies from applying to this contract," the letter said.
In an August 30 letter seen by Bloomberg Government, the Air Force appeared to concur, saying Finkl should have been ineligible because of foreign ownership and that it had sent "a notice of termination" to the Chicago-based firm. The Air Force's letter did not mention Vekselberg.
Ellwood also filed a protest of the contract award, on which the Government Accountability Office has yet to rule. It is not clear whether the Air Force will reassign the contract or open it to a new round of bidding.
US sanctions on Russia over alleged meddling in the 2016 election have created other headaches for the Pentagon and lawmakers.
Under the Countering America's Adversaries Through Sanctions Act, which President Donald Trump signed into law in August 2017, the US can put secondary sanctions on entities and individuals doing business with the Russian intelligence or defense sectors.
That provision has worried US partners in countries like India, Vietnam, and Indonesia, who still use Russian weaponry and need to make future purchases to maintain their arsenals. India's looming purchase of Russia's advanced S-400 air-defense system has been a particular sticking point.
The latest defense authorization bill contains a waiver process for US partners that buy Russian weapons, but the Pentagon has said allies aren't certain to be spared "from any fallout" from Russia sanctions.