Friday, 9 November 2012

The curious case of the Frigates and the Vulture - or the sad decline of the Argentine Navy


 
Freshly returned from his holidays, Humphrey has been catching up on the news and defence related matters which cropped up during his absence. Clearly a lot of interesting developments have occurred in recent weeks, and there is much to comment on and consider. As a brief start to taking stock of developments, the author was particularly interested in the strange saga of the Argentine Navy and the US ‘Vulture Fund’ known as NML Capital.

The strange story goes back to Argentine economic woes of the last decade, and the use of military vessels as collateral for loans. When Argentina stopped paying up, and defaulted on its debts, the suddenly a whole raft of Argentine assets, including naval vessels, have become legitimate targets in the eyes of NML Capital to try and recover their debt (estimated at some £230m).

In recent years the Argentinean government has been struggling to try and prevent loss of assets in this manner. Reportedly President Kirchner does not fly abroad in Argentine Air Force jets for fear that they may be confiscated on landing by authorities. Most recently the Argentine sail training vessel ‘Libertad’ (classed as a Frigate) pulled into Ghana on a routine training cruise. Whilst alongside the vessel was impounded, as NML tried to take possession of it, agreeing to return the vessel for a payment of some £12.5m.

Such a payment was not forthcoming, and the Argentine Govt evacuated the vessel, chartering a jet to bring them home for fear that any Argentine Air Force jets would also be impounded. The result is that the vessel remains in the hands of the company, and is now likely to be put up for sale on the commercial market.

More seriously, reports now indicate that an Argentine frigate docked for emergency repairs in Simonstown (the Espora) is also likely to be subject of an attempt to be impounded by the company. In reality it is unlikely that such efforts would succeed, as South African courts are reportedly no friends of vulture companies, but it does mark a significant precedent.
ARA Libertad in Ghana - Elena Craescu/European Pressphoto Agency

What does this mean?

There has been some discussion that the seizure of Libertad and possible seizure of Espora somehow mark an act of war against Argentina. This is errant nonsense – no matter how you look at it, there does not seem to be any way that a US company can engage in a form of conflict with a country. If followed to its logical conclusion, one would have to argue that Argentina is duty bound to declare war on the USA, as this is the home of the company. It is highly unlikely that this situation would occur, and in reality the key lesson that can surely be drawn from this is not to include military assets as collateral for a loan!

More seriously though, the case does highlight the many challenges facing the Argentine Navy at present. On a practical level, it is now becoming ever harder for Argentine forces to deploy overseas, and the list of countries where they can put into port is reducing. In effect this reduces the ability of Argentina to work with allied nations, or to conduct coalition exercises or operations beyond their own immediate neighbourhood. The Espora incident shows that even fairly ‘safe’ countries like South Africa will still see embarrassing court cases. As such, Argentinas’ navy now faces a slow decline into operational irrelevance.

International exercises are a key part of operating a modern navy. There are constant lessons to be learned from operations, basic issues to be ironed out and understanding built. One of the reasons why the UK is a relatively significant maritime power is due to the wide programme of international exercises it conducts each year. By working with different nations, capability is improved, understanding on interoperability increases and bugs can be ironed out. The result is that UK vessels can easily slip into multi-national groups, and the UK is often sought after as a contributing power – just look at how often the UK plays a key part in leading the multi-national coalition forces in both the Middle East and Horn of Africa. By contrast, when the French began to reintegrate into NATO following thirty years of Gallic temper tantrums, they were reportedly very rusty and unable to keep up to date with modern operational practise.

The ability to exercise, cross fertilise ideas and ensure that your own procedures work, or could be improved is a key part of being a credible maritime power. The problem Argentina now faces is that it will be increasingly difficult to do this. The lack of fleet replenishment capability, coupled with the inability to run forward logistics sites without them being subject to court action means it will be almost impossible to deploy warships outside their immediate neighbourhood.

More broadly, participation in wider international affairs, such as back in the 1990s when Argentine vessels served off Haiti, or the participation in the first Gulf War, are likely to be curtailed. While the current Argentine political leadership may not wish to take part in such activities anyway, the fact remains that Argentina is now unable to generate maritime capability to enhance its national standing with other powers. It would be a reasonable judgement to suggest the Argentine Navy will, in the medium term, greatly suffer from this reduced ability to operate with partner nations.  

The next major challenge will be the long term future of the Argentine Navy itself. At present, the fleet comprises four destroyers and nine corvettes, plus a further three conventional submarines. All of these vessels are now approaching, or significantly over, thirty years of age. They are elderly ships, and haven’t been significantly updated for many years.

ARA Espora (from Wikipedia)
By now, most navies would have active replacement programmes underway for all these vessels. The debt crisis means it is almost impossible to see a situation where the Argentine Navy receives new first rate warships within the next 10-15 years. The problem of financing such an acquisition on the international markets is a major bar to proceeding. It is highly unlikely that any reputable shipbuilder would offer meaningful credit to the Argentine Government at present, and even if it did, there is no guarantee that any foreign built new hulls wouldn’t be seized in the yards by the Vulture Funds. That is even without considering the parlous state of the Argentine acquisition budget, which has been starved of funds for years, while a long list of items requiring replacement stack up. The only recent order for the Navy has been four patrol ships back in 2010, which will be indigenously built, although news on their status remains scarce.

From a prestige perspective, the recent confiscations have cost the head of the Argentine Navy his job, and the standing of the military, always low with Kirchner, is likely to be reduced further. It is hard to see the Navy having sufficient clout at present to justify funding for a large shipbuilding programme, when all it seems to do is get its existing ships confiscated!

So, at present the Argentines cannot afford new ships, cannot get credit to build them overseas and even if they could, they’d be likely to face confiscation in the yards. It is hard to imagine many foreign governments willingly entering into sales agreements with the Argentine Govt right now. This also more broadly highlights the problems facing all three armed services which have huge amounts of obsolete equipment needing replacement; for instance this article has not even begun to consider the cost of replacing the Argentine Navy etendards, nor updating the Skyhawk fleet.

This places the current Argentine Navy on a very steep path to decline. It normally takes 15-20 years to take a new major warship class from concept phase to being fully operational. Even if work started today, the earliest that we’d start to see new vessels entering service would be in the late 2020s – early 2030s. Even if they bought an existing design, it would still take 5-10 years to get everything sorted. In this timeframe the existing vessels will only get older and in an ever more fragile state.

It is important to remember that the financial challenges facing Argentina means that funding of upgrades, maintaining munitions stocks and ensuring that current warships remain credible is also likely to suffer. Missiles, munitions and radars need spare parts, need updating and need maintenance. Most Argentine escorts use foreign sourced munitions, and it’s likely that hard currency would be needed to pay for their updating. Therefore, the Argentine Navy is stuck with the vessels it has, and  is unlikely to be able to pay to update or upgrade them in the near future.

It is reasonable to assume that by the 2020s, the Argentine Navy is going to be reduced to a rump of escorts made operational by cannibalising others, and all of which are roughly 40 years old. While in the post war era, many navies could get away with running 30-40 year old warships, particularly the workhorses of the Fletcher and Gearing class, as their capability was similar to other vessels, todays navies do not have the same luxury. By the 2020s the Argentine Navy faces block obsolescence as it fields vessels which have not had an update to their weapon systems for years, and which are likely no longer supported by manufacturers. More worryingly, it is hard to see any credible replacement work going ahead for some time, so the Admirals will need to try to shepherd their resources as best they can.

Of particular concern will be the submarine fleet, which is getting ever older, and where replacement costs will be extremely expensive. Submarines have a limited life, and their performance will be ever more diminished over time – just look at the clusters of old Soviet era Whiskey and Romeo boats around the world. The Argentine Navy will face a real challenge to maintain its submarine capability in the medium term, and if not careful, could easily lose this capability forever.

One option for replacement could be to turn to the second hand market, although this would require hard cash. Argentina may be able to source some assorted hulls from Italy or other European nations as they downsize their fleets, or potentially look to acquiring cast offs from other navies in South America. Whatever solution is chosen though will require hard cash, and further increase dependence on a diverse source of spare parts, making it harder to sustain the vessels. Training overseas would be difficult, as vulture funds may try to seize assets, and many governments may be wary of doing business with a nation with such poor international standing.

So, the outlook for the Argentine Navy is increasingly grim. Isolated from traditional partners, unable to steam to locations that previously welcomed Argentine vessels, and working with an ever more unreliable fleet of elderly vessels, while funding for replacements is unlikely to be found. Currently it is hard to see the future of the Argentine Navy as being anything other than a sad decline into strategic irrelevance, particularly when one looks at the reinvigoration of the Chilean, Brazilian and Peruvian fleets. The early 20th Century saw huge competition between the major powers of South America in order to be the leading naval power. For many years Argentina presented probably the second most potent navy on the continent, but now it is hard to see it as being anything other than an also ran.

 

25 comments:

  1. I am crying hard over this article. It may sound like laughter, but I promise you I'm actually crying. Cheer me up Sir H - how's their air force doing?

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    Replies
    1. Almost the same/worse...

      The A4-AR fleet is probably the most dangerous modern piece of equipment they have. 1990's era ex USMC airframes with credible-ish avionic and attack kit.

      For training, they have had to borrow tucanoes from Brazil, and are withdrawing their Mirage III types (some of the '82 veterans are still flying operationally) and the 'finger'/dagger types soldier on.

      A lot of the FJ capability is being replaced by their Pampa II jet trainers.
      The pucara COIN aircraft is still the most numerous type in service, and is going through a very modest upgrade in avionics... plans call for new engines, but nothings' been done.

      The only FAA (the air force acronym!) purchase outside of Argentina has been a pair of Russian Mi-17's for Antarctic duties...with a hope for follow on orders.

      Argentina has long since been looking at the French Mirage 2000C's and the Spanish Mirage F1's that are soon to be retired, and its here where if they had the money, they'd buy.

      There is little information regarding the ARMADA's SUE fleet, apparently only 3 aircraft remain airworthy, their navy has also been looking at the old french etendards to replace them.

      Its almost in as much a perilous state as the Navy... and when you look at the transport/support aircraft fleet its the same story... still something to keep an eye on, but definitely no immediate threat to anyone.

      That is, unless some funky trade deal is met with china/Russia... the FAA looks set to follow their Navy.

      Oh! And WB Sir H, hope the break went well, looking forward to reading your posts.

      Delete
  2. My first reaction to this news was, I won't lie, laughter. This was followed by wondering why anyone thought they could threaten the Falklands. Followed by a bit more laughter. Thanks very much Sir H for a more serious look at the issue than I could bring myself to do. Very interesting stuff indeed and the main lesson really does have to be that you don't use warships as collateral!

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    Replies
    1. It's not that the Argentines have offered ships as collateral specifically. The funds are just going after anything belonging to the Argentine state, that isn't nailed down and is located in a jurisdiction where they think they can make a claim. Warships are one of the few assets of a state that end up in other countries.

      I'm not laughing - I just think it's desperately sad that such a rich country with close historical ties to Britain has been reduced to this state. 100 years ago Argentina was in the top 10 countries by GDP, it's got huge mineral and agricultural resources, and yet the ruling class has systematically looted the country.

      Delete
  3. Amusing of course, but looking increasingly desperate - perhaps though perfect opportunity for China to get a foothold in the continent by offering military aid?

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  4. why does it take so long 15- 20 years to introduce a new ship? I can understand a maximum of 10 years. 20 seems an awfully long time. can you give me a short break down of were all the time goes? I can only think off:

    Ship schematic design and technology integration phase ~ 1 year.
    decide were it will be built ~ 1 year.
    build ~ max 5 years.

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    Replies
    1. Robert - thanks for your comment.
      I think you significantly underestimate the timelines required to design and build a new class of warship these days, even before you consider financial issues, government interference and so on.
      Couple of examples for you - the RN started the T42 replacement planning in the mid 1980s, and it went through multiple hoops. The Horizon CNGF frigate which we pulled out of formed much of the design for the T45. The T45 was launched as an official design in 1999, having adopted many years of work on the previous design. Even so, it was only in 2012 that we saw the first operational deployment of a T45 - some 12-13 years later.
      Similarly, the USN began the design of the DDG51 in the very early 1980s, and first ones only commissioned in the early 1990s.

      The problem is ship design takes a long time to work out, unless you are buying off the shelf. The UK has rightly realised that shipbuilding is easy (relatively speaking), but ship design is a critical national asset which is irreplacable. In the case of the Argentine Navy, they have no indigenous ship design capability for Frigates, and no funds or credit with major warship yards to get an off the shelf design adapted.
      You need to allow 5-10 years for the design phase, from the initial drawing up of the staff requirements and tendering, through to placing of contracts and construction commencing. This is pretty standard for any navy procuring a high end warship.
      The construction - work up phase will take longer for first of class, and then speed up for later vessels, but will still be measured in multiple years.
      15-20 years seems about spot on for a nation with challenging financial issues and no history of designing or ordering major warships for over 30 years.

      Delete
    2. Sir Humphrey
      thanks for your reply. that has cleared things up a bit. hope you enjoyed your holiday

      Delete
    3. I'd just caveat that timeline with the comment that significant elements of it comprise the Govt / Navy navel gazing over the requirement. It has nothing to do with ship design, which can be executed relatively quickly once the "requirement" and "budget" have stabilised.

      It does depend on whether (as for T45) a developmental weapon system core to the capability the ship is to deliver is part of the project. Where that is not the case, the driving factor tends to be decision-making delay in government.

      The first requirement for what is now T26 was endorsed in 1999 (as FSC) and the current T26 requirement is substantially unchanged from that. Funnily enough the concept designs, while not identical are of similar size and arrangement.

      However, the delays in requirement and budgetting tend to be more severe and are the result of a scrutiny & approvals process that is designed to apply ever more rigorous "scientific" methods to what is not always a scientific problem. This is common across both UK and US projects and it may be worth questioning whether the desired effect si actually being achieved.

      All that said, based on the state of the ARA I would not argue with 15-20 years.

      Delete
  5. @Mike - thanks for the thoroughly entertain...I mean informative update on their air force.

    I wonder, what would the US response be if China gained a toehold in S. America? Perhaps look to establish a joint base with a nearby ally? Cease providing spares for old kit, perhaps. The arrival of China in the area would certainly raise this up from a purely local concern.

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  6. Hope the holiday went well, Sir H and good to see you back.

    So much for the Argentinians being a threat to the FI, as someone else has mentioned above. At the moment their navy isn't a credible threat to anyone really.

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  7. Could someone tell the National Defence Association?

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  8. A British Court ordering, and some form of HMG power enforcing, the seizure of a US Carrier would be an act of war in its most blatant form.

    What was the UK and Frances response to Egypt nationalising the Suez?
    Pretty sure it involved the largest amphibious assault since Overlord and the occupation of roughly a fifth of Egypt.

    Nations will be presented with a choice, burn their relationship with Argentina, or burn their chances at accessing international capital.

    South Africa will likely choose Argentina, because it has a history of screwing over outside investors.

    Most will choose to burn Argentina

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  9. Back to work you slacker :)

    The plight of the Navy mirrors that of many of the institutions in Argentina. Lets hope the prosperity that sensible cooperation with the Falkland Islands Government would bring is a result of these economic problems.

    At some stage, Argentina will wake up and realise that jingoism and antagonising your neighbours doesn't put bread on the table.

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  10. Sadly it is the leadership which over the years had led to Argentina's decline and unfortunate policies.

    The resources, people and history of the country itself has much going for it. Not sure what I'd do to resolve the situation internationally, but stealing foreign company's assets Repsol etc. isn't right.

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  11. Foxbat said: " This was followed by wondering why anyone thought they could threaten the Falklands."

    While I agree with what he said I wonder "what if" there is nobody to stop them?

    It doesn't matter how old and decrepit you are, if there is nobody to stop you doing something, then you will be able to do it.

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  12. Things aren't looking good for them at all. I happened to come across this today:
    http://en.mercopress.com/2012/11/22/argentine-navy-short-on-spares-and-resources-for-training-and-maintenance
    The chronic lack of sea time is a disaster for them and doesn't look the situation is going to improve anytime soon.

    ReplyDelete
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  14. Sir Humphrey,

    Could you not use your influence in the corridors of Whitehall and make the upgrade of the main gun on RN ships a priority?
    - that would scupper what remains of the capability of the Argentinian navy (no source for rounds left, would leave helicopters and Exocets)

    ReplyDelete
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