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News 29 Aug 17

Bulgaria Acts to Take Over Troubled Arms Business

Bulgaria’s Economy Ministry has taken action to gain control over the Dunarit arms factory, which risks losing its licence to trade over various court battles.

Mariya Cheresheva
Bulgarian Economy Minister Emil Karanikolov. Photo: Economy Ministry press service

Following weeks of tension over the future of the Dunarit arms factory, Bulgaria has moved to pay off the arms producer’s debts and buy its assets, Economy Minister Emil Karanikolov said on Monday.

He noted that three members of the board of the company have been charged with embezzlement and money laundering and have resigned, putting the future of the firm at risk.

“We are working to pay off all the loans to prevent the insolvency or sale [of the factory]. Our main aim is to keep the enterprise and the workers going, and I guarantee that this will happen,” the minister said.

The biggest problem facing the company, which otherwise works very well, “comes from the CCB”, [the Corporate Commercial Bank], Karanikolov explained.

Dunarit was part of a range of companies linked to the former boss of the CCB Tsvetan Vassilev – who has been in exile in Belgrade since the bank collapsed in 2014.

After CCB’s bankruptcy, the factory was sold to EMCO, another arms producer, owned by businessman Emiliyan Gebrev, whose license to trade was taken away by the authorities earlier in August.

Around 800 workers from Dunarit, which employs around 1,300 people, protested against the action taken against the factory, which made a net profit of 29 million leva [around 14.5 million euros] in 2016.

The plant, which sells arms mostly to NATO countries and the US, is not the only arms producer in Bulgaria whose financial results have improved in recent years.

With the escalation of conflicts in the Middle East and Ukraine, Bulgaria’s arms sector, which was long suffering from a decline, has undergone a renaissance.

A recent investigation by BIRN and the Organized Crime and Corruption Reporting Project, OCCRP, revealed that since 2012, Bosnia, Bulgaria, Croatia, the Czech Republic, Slovakia, Serbia and Romania had agreed exports of weapons and ammunition worth at least 1.2 billion euros to four countries supporting Syria’s armed opposition.

The bulk of the deals, totalling 829 million euros, were made with Saudi Arabia.

“Over the past years the production and realization of defence products have scored record growth, reaching an annual turnover of over a billion leva in 2016,” Karanikolov noted in a report to the government published on August 25.

The minister has proposed setting up a new consultative council to the government, which would coordinate and develop the work of all of Bulgaria's arms traders and producers.

The country's largest state arms producer, VMZ-Sopot, saw its profits rise by a third in the first half of 2017 compared to the same period last year.

Kintex, a state-owned arms trade, has tripled its net sales over the same period from less than 50 million leva to 152.3 million leva.

If the state succeeds in acquiring Dunarit, it will add more successful arms company to its portfolio. 

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