Warsaw cancels Airbus Helicopters deal

Poland's Development Ministry said late on Tuesday that the negotiating position of the two sides on the purchase of 50 Caracal helicopters for 13.5 billion zlotys (3.14 billion euros) was "so different that further talks are pointless."

The collapse of talks also shelves a major offset deal agreed under the previous Polish government.

The ministry said that offers made by Airbus Helicopters had "failed to properly secure Poland's economic and security interests." Polish officials had earlier indicated that the value of the deal should match the value of the purchase.

Offset agreements - where the seller of a product or service agrees to invest in sectors or goods on the buyer's side to compensate or enhance the value of the deal - are common in the military industry.

The decision to buy the helicopters from Airbus was made by the previous government, led by the center-right, pro-European party Civic Platform, as part of plans to modernize the military over the next 10 years, spending about 35 billion euros, and was triggered by regional tensions over Russia's annexation of Crimea from Ukraine.

The conservative Law and Justice (PiS) government had indicated it might cancel the deal after it won elections last year. Local media reported that Warsaw had actually scrapped the deal earlier this year, although Airbus said talks were continuing.

The original deal was criticized by trade unions in two Polish aviation plants linked to firms that were not chosen in the initial tender: one linked to the US producer of the Black Hawk, the other to a British-Italian consortium AgustaWestland, now called Leonardo Helicopters, which makes the AW149 helicopter.

A system by the Eurosam consortium - including MBDA France, MBDA Italy and France's Thales Group - was also in the running alongside US company Raytheon's Patriot system for the deal.

The Defense Ministry had wanted to buy eight missile batteries by 2025, with two to be delivered within three years of signing the contract. Poland had originally said it would buy 70 helicopters but reduced this to 50.

Poland's parliamentary committee of national defense in January approved a defense budget for 2016 of PLN35.9 billion (euro xxx), a rise of 9.4% over 2015, with the country increasing its annual budget by PLN2.9 billion as it commits to spending 2 percent of gross domestic product (GDP) on defense - NATO's guideline amount.

jbh/msh (AP, AFP, Reuters)