The Philippine Army (PA) is expected to receive the first shipment of Russian-made RPG-7V2 rocket propelled grenade (RPG) launchers in the next few days. These RPGs were delivered to the PA by Russia's defense export agency Rosoboronexport under a contract signed between the Philippines' Department of National Defense (DND) in late 2017.
This is despite the both the Philippine and Russian sides having problems on how to proceed with payments due to the US government's Countering America's Adversaries Through Sanctions Act (CAATSA) issues.
MaxDefense received this news last week, but needed to check on the matter since there are issues surrounding the deal. Knowing what's happening allows us to provide better information that just reporting its arrival.
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| The RPG-7V2 handheld rocket propelled grenade launcher on display in an arms expo. Photo taken from the collection of Vitaly V. Kuzmin. |
Overview:
The Philippine Army requested for the delivery of 744 units of Rocket Propelled Grenades under its Rocket Launcher Light (Phase 2) Acquisition Project as part of the Horizon 1 phase of the Revised AFP Modernization Program (RAFPMP).
This is to replace the remaining M67 90mm recoilless rifles (RR) still being used, while improving the overall firepower of infantry units by having them distributed to smaller units that did not have access to RRs before.
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| An M67 90mm recoilless rifle used by the Philippine Army against terrorists groups in 2018. Photo taken from Inquirer.net's report on a clash between the PA and BIFF terrorists in Maguindanao. |
The initial batch bought under Phase 1 of the project was acquired through US Foreign Military Sales (US FMS) program, delivering 250 units of ATGL-L rocket propelled grenades made by Bulgaria's Arsenal JSCo. The ATGL-L RPGs started arriving in late 2016 and have all been delivered by 2017, with some of the units used by the Philippine Army against Maute Group ISIS-inspired terrorists in the Battle of Marawi in 2017.
Further discussion on the Phase 1 of the project can be found on our earlier blog entry on the topic, which can be accessed through the link provided below:
"Philippine Army Receives Complete Shipment of ATGL-L RPGs, Immediately Puts into Service" - first posted on 16 July 2017
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| The ATGL-L rocket propelled grenade launcher from Bulgaria's Arsenal JSCo. Photo taken from Arsenal JSCo.'s website. |
For the second batch, the Department of National Defense decided to go for a Government-to-Government (G2G) procurement instead of tendering it. MaxDefense reported in the past the several proponents were interested in supplying these RPGs to the Philippine Army, including Arsenal JSCo. of Bulgaria, and several other arms manfuacturers from Europe.
As a G2G project, the DND decided to go with the offer from the Russian government, which promised to supply the required units plus unspecified number and type of RPG ammunition. A report by Russian state media agency TASS confirmed that a contract was signed between the Philippines and Russia by late 2017, with deliveries expected to commence by 2018.
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| A Philippine Army officer demonstrate the use the ATGL-L (RPG-7) rocket propelled grenade launcher during a training exercise. Photo c/o 33rd Infantry Battalion, Philippine Army. |
Delays and Issues on CAATSA:
But despite the quick movement from decision making to project awarding to contract signing, the project was stalled on the Opening of Letter of Credit (LOC), which is a requirement to support payment transactions.
The Letter of Credit is a document from a bank or financial institution which guarantees a buyer's payment to the seller will be received on time and for the correct amount. This gives Rosoboronexport guarantee that the DND or the Philippine government will pay for the products it ordered, in this case, the RPGs.
But due to CAATSA issues, no financial institution or bank based in the Philippines, or even from Russia are willing to transact the deal, which also includes guaranteeing for the payments. These banks and financial institutions fear that the US government may impose sanctions on them, which could be disastrous in a business' point of view.
Since the deal cannot move forward until this issue is settled, the project was stuck and the delivery scheduled was delayed. Considering the contract was for Rosoboronexport to deliver the RPGs by 2018, none arrived up until July 2019.
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| Different Russian ammunition types for the RPG-7, some of which may be among those included in the delivery for the Philippine Army. Photo taken from IPFS. |
Russia's Determination:
With the delays, there are some groups who are already pushing for the cancellation of the contract with Russia as the Philippine Army ends up receiving nothing. And this was taken seriously by the Russian side.
MaxDefense sources confirmed that Russia pressed-on with the production and delivery of the RPGs despite the Philippines not releasing payments for them. This is to make sure that the project proceeds and the Philippine side would not back out of the deal.
And since the amount is not significant (project cost is said to be Php408 million), it appears that Russia has agreed to settle the payment issues later on as both sides continue to find ways. Sources mentioned that both parties are looking at having payments made in Euros or another currency instead of the US dollar, and this would allow a 3rd party financial institution to assist in the payments.
The same is being eyed in case the Philippines pushes through with larger defense acquisitions from Russia including the planned acquisition of 16 to 17 units of Russian Helicopters Mil Mi-171Sh medium lift helicopters for the Philippine Air Force (PAF).
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| Using other means to pay for the goods acquired from Russia are eyed by both Russian and Philippine governments to go around CAATSA issues. This is the same route being made by several countries including India, and may allow the Philippines to fulfil its plans to purchase Russian helicopters like the Mi-171Sh. |
Issues of Overpricing:
This is based on the contract price for the Bulgarian-made ATGL-L RPGs bought under the Rocket Launcher Light Phase 1 Acquisition Project wherein 250 launchers and 3,272 rounds of assorted RPG ammunition.
Below photo taken from an DND RAFPMP Status Report used during a Senior Leaders Meeting last year shows that the RPG-7s acquired by DND from Bulgaria's Arsenal JS Co. numbered 250 launchers and 3,272 rounds of assorted HE and HEAT ammunition with a total worth of Php81,726,230.00.
In simplistic calculation,
* There are 13 rounds of ammunition for every 1 launcher. This can be made by 3,272 rounds / 250 launchers = 13 rounds. The DND paid Php326,905 for each launcher and 13 rounds. These are the same RPGs used by the Philippine Army during the Marawi campaign.
* For the ammunition price, we'll take this from PhilGEPS website which posted a bidding for RPG rounds acquisition for the Philippine Army. Based on the bidding for RPG ammo, the cost of High Explosive (HE) RPG round may cost around Php249,000,000 for 31,150 rounds, or an average of Php8,000 each. For for 13 units of HE rounds, it will cost around Php104,000.
* If the cost of the Bulgarian ATGL-Ls with 13 rounds ammunition averages at Php326,905, it means the launcher's average price is approximately Php222,905 each. This is within the quoted price provided by suppliers to MaxDefense earlier, which is between Php189,000 to Php240,000 each depending on the supplier. Not bad actually.
* Based on the contract price between the DND and Rosoboronexport, the value is worth Php408,000,000.00 for 744 launchers and unspecified number of ammunition rounds, or an average of Php548,387 for each Russian RPG-7 plus unspecified rounds of ammunition.
It now remains to be seen if how much ammunition and what type were provided by the Russians as part of the deal. Initial information MaxDefense received from sources is that there isn't much ammunition included since the Philippine Army already acquired several thousands of rounds of different types, including high explosive anti-tank (HEAT), anti-personnel rounds, and thermobaric (bunker buster) high pressure rounds.
MaxDefense will try to provide the latest news on the arrival of these RPGs from Russia, which we will be making on our community page @ Facebook. Further updates will also be made on our resource page, which MaxDefense will be posting on our AFP & PCG Modernization resource portal soon.
Project Summary:
Rocket Laucher Light (Phase 2) Acquisition Project:
Note: Edited as of 14 July 2019.
* End User: Philippine Army (multiple units)
* Quantity: 744 units total plus unspecified quantity of ammunition
* Modernization Phase: Horizon 1 Phase Priority Projects of RAFPMP
* Project ABC: Php408,000,000.00
* Acquisition Mode: Government-to-Government (G2G) Procurement
* Source of Funding: GAA Funds through AFP Modernization Program Trust Fund
* SARO Release: SARO-BMB-D-18-0013668 dated 13 June 2018
* Winning Proponent: Rosoboronexport (Russia)
* Product for Delivery:
- RPG-7V2 rocket propelled grenade launcher
- Unspecified number and type of RPG ammunition
* Contract Price: Php408,000,000.00
* First post by MaxDefense: 05 November 2016
* MaxDefense Searching Hashtag: #PARLLPhase2Acquisition
* Status: Awaiting delivery from Russia's Rosoboronexport. Reported to MaxDefense as arriving by July 2019.
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First edit and release: 14 July 2019
Copyright MaxDefense Philippines
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