Bosnia Investigating a Defense Firm Accused of Supplying Iraq

Bosnian officials expect in the coming days to complete an investigation into U.S. allegations that a profitable Bosnian Serb defense manufacturer is supplying the Iraqi military with technical expertise and parts.

U.S. officials would say only that they believe the company, which they did not name publicly, is violating the United Nations arms embargo on Iraq and that the U.S. Embassy here asked the Bosnian government to look into the charges.

The investigation, which opened last week, is being conducted by the government of Republika Srpska, the Serbian majority entity that constitutes half of Bosnia-Herzegovina. The company is located in the Serbian area; the other half of the country is run jointly by Muslims and ethnic Croats.

If the allegations are true, “this is in violation of United Nations resolutions, and that’s a very serious concern,” Bosnian Deputy Foreign Minister Ivica Misic said.

Bosnian officials identified the company as Orao Air Force Co., based in the town of Bijeljina near the border with Yugoslavia.

The company has denied the allegations. “In its long tradition, the factory has never produced either weapons or arms,” director Milan Prica said in a statement.

Company officials did not respond to the accusation that its engineers were working in Iraq, and refused requests for interviews.

Military analysts, Bosnian government officials and others note that the company was once part of the Yugoslav armed forces, which had a long relationship with Iraq. Iraqi President Saddam Hussein’s government was one of the Yugoslav military’s biggest trading partners outside Europe into the 1990s.

The historical links between Iraq and Yugoslavia are a reminder of the many connections that Hussein can use to bolster his military.

“It is certainly true that the Yugoslav army had great relations with Iraq,” said Bratislav Grubacic, a political analyst in Belgrade, the Yugoslav capital. “They were always sending their engineers there to work on their planes and to build military objects and airports. Iraq needed weapons, and Yugoslavia needed oil. And both countries use a lot of Russian military equipment.”

Orao Air Force Co. manufactures parts for airplanes, both civilian and military, and has extensive expertise in overhauling both Russian-and Western-made jet engines. Bosnian government officials say privately that they believe the alleged breach of the U.N. sanctions involved work on Russian MIG-21 fighter jets, which are thought to be part of Iraq’s arsenal.

Several local media reports say the company sold its products to other firms, both domestically and abroad, that in turn may have sold them to Iraq. Company officials told local news organizations that it does not know whether its business partners could have sold its goods to Iraq.

That possibility, however, raised questions about whether the company filed required paperwork on its sales--an issue the international peacekeeping force in Bosnia has asked the investigators to examine.

Manufacturers of military products in Bosnia are designated Government Ordnance Factories, or GOFs, and operate under an agreement with the peacekeeping force. Before a company can ship such products to a customer, the deal is reviewed by the international force, which determines the end-user of the items. The international force then issues permission for the export.

“Orao appears not to have been operating under a GOF agreement even though they may have produced equipment that is military-related,” said Lt. Cmdr. Yves Vanier, a Canadian spokesman for the peacekeeping force.

Among the company’s biggest customers are military-related industries in Yugoslavia, according to government officials and local media reports, which has led many here to think that the road from Bosnia to Baghdad ran through Belgrade.

“It seems they had these contacts with Iraq through lines of communication with Iraq established by the Yugoslav military,” said a Bosnian government official. “It is our understanding that the Bosnian engineers are still in Iraq.”

The company says its last business with Iraq was in 1989 and its last contact with Iraq was in 1997, when it was trying to collect money owed from the period before the Bosnian war.

Before vicious wars tore the Yugoslav federation apart during the 1990s, the country had a large army and a sophisticated military-industrial complex that included manufacturers of weapons and equipment as well as technical institutes where scientists and military experts created new weapons technology.

The relationship with Iraq, which flourished under President Slobodan Milosevic, has roots that go back to the post-World War II era of President Josip Broz Tito. He cultivated government, business and cultural contacts with a number of nonaligned countries, particularly in the Middle East and Africa.

Today, Iraq is one of the few countries for which Yugoslavs do not need a visa. The most common route from Belgrade to Baghdad is to Amman, Jordan, and then by road to Iraq.

Since the fall of Milosevic in 2000, both the Yugoslav and Republika Srpska militaries have had barely enough money to keep themselves going and have always looked for income opportunities to help them keep their soldiers paid and fed.

But despite its impoverishment, the Yugoslav military in particular remains a powerful and independent force within the government, and largely uncontrolled by civilian leaders.

“Most likely the relations with Iraq are driven by business and not ideology, although they have similar interest in irritating Americans, embarrassing them,” said Misic, the Bosnian deputy foreign minister.

U.S. officials first raised their concerns about Orao on Sept. 5 with Bosnian Foreign Minister Zlatko Lagumdzija, said ministry spokesman Amer Kapetanovic. The U.S. officials said they had information that both equipment and military expertise were being transferred to Iraq, Kapetanovic said.

The main concern appears to be that the company may have sent military experts to Iraq, said several Bosnian officials, speaking on the condition that their names not be used because the official investigation is ongoing. “As far as we know, the engineers are still in Iraq,” one Bosnian government official said.

Orao, which means Eagle and is the name of one of the two types of planes that the company worked on for the Yugoslav military, is one of several military firms in Republika Srpska that specialize in the repair of military hardware and airplanes. In the past, its main area of expertise was the overhaul of jet engines.

After the 3 1/2-year war that saw Bosnia break away from Yugoslavia ended in 1995, Orao shifted its focus to civilian projects. Its partners include Rolls-Royce, which is also a maker of airplane engines, according to reports in Slobodna Bosna, an independent weekly magazine in Bosnia.