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Wednesday, June 26, 2013

Framing the problem

The Inside Story of Russia's Fight to Keep the U.N. Corrupt
When U.N. Secretary-General Ban Ki-moon and Russian President Vladimir Putin met in Sochi, Russia, they were supposed to discuss the civil war in Syria. But the Russian leader -- joined by his top diplomat, Sergei Lavrov, and defense secretary, Sergei Shoigu -- suddenly changed the subject to more mundane matters. A series of U.N. reforms aimed at streamlining billions of dollars of spending on U.N. peacekeeping was posing a threat to Russia's commercial interests. Putin and his national security team politely but firmly pressed the U.N. leader to back off, according to several senior U.N.-based sources briefed on the meeting.

Since the end of the Cold War, Russian entrepreneurs have turned the Soviet-era air fleet into a thriving business, supplying the U.N. and other international agencies with low-cost surplus aircraft, including Antonov transport planes and Mi-8 and Mi-26 helicopters. The low-cost aircraft -- which Russian factories continue to produce -- have largely dissuaded Western air operators from competing for U.N. contracts, which must go to the lowest bidder. Russian companies now account for about 75 percent of all contracts for commercial helicopters, the most lucrative segment of U.N. peacekeeping's multibillion-dollar marketplace.

The dispute provides a textbook example of the difficulties of implementing basic financial reforms at the United Nations when major powers have conflicting commercial interests in the outcome. The United States and European powers like Germany, France, Italy, and Spain are also looking for new business opportunities as the NATO mission in Afghanistan winds down. Those countries have privately raised concern with the U.N. about the integrity of its procurement process. They claim that the U.N.'s purchasing system is rigged to favor Russian aircraft; its bidding specifications -- for instance, requirements of seating capacity for more than 20 passengers -- are tailored to exclude most competitors. "Procurement is done in a way which directly specifies a Russian helicopter," said one senior European diplomat. "We have asked for more transparency; we want to change to a new [bidding] system as soon as possible."

But a spokesman for the U.N. peacekeeping department, Kieran Dwyer, dismissed those concerns. "The secretariat has a system of management checks and balances that mean that no one individual can unilaterally set the procurement specifications for aviation requirements," he said. "It is true that helicopters from the Mi-8 family of aircraft do play a leading role in peacekeeping aviation assets and operations. These helicopters have key features which make them suitable to peacekeeping needs, including their flying range and payload capacities and the fact that they are economical."

Despite Dwyer's claim, the U.N.'s internal corruption watchdog, the Office of Internal Oversight Services, said that the failure to open up the bidding to a broader range of aircraft has exposed the U.N. to a "high risk of acquiring air charter services at a higher cost than necessary," according to a confidential internal audit. The audit does not mention which aircraft get preferential treatment. Nor does it name the favored vendors or identify their nationalities. But it does raise concern about the fairness of the U.N. bidding process, which, for instance, fails to measure fuel efficiency in determining a helicopter's cost.
This is a long article with more turns and wrinkles than reported here, so you should read the whole thing, at the link above. Some of the comments are interesting, too.

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