Discussing the Philippine Air Force's Heavy Lift Helicopter Project as Russia wins with the Mil Mi-171 Hip

The Philippine Air Force (PAF) has embarked on the acquisition of Heavy Lift Helicopters as part of its 2nd List of Horizon 2 Phase projects. This project aims to provide the PAF with larger helicopters than what it currently has, to fit certain combat and peacetime requirements in tactical airlift and heliborne operations.

As reported earlier by our extension Philippine Defense Resource, the Notice of Award (NOA) was awarded, although it remains to be seen if it was through SOVTECHNOEXPORT or ROSOBORONEXPORT. In any case, the Russians offered to sell the Russian Helicopters Mil Mi-171 Hip medium military helicopter.

The Mil Mi-171Sh helicopter. Photo taken from AIN Online.

Overview:

40 Years of Longing for a Heavy Lift Helicopter:

The Philippine Air Force has been eyeing heavy lift helicopters since the 1970s, with the Boeing CH-47 Chinook already being considered during modernization programs for the last 40 years.

In 1978, the US government actually considered selling the CH-47D Chinook, which was a new variant back then, in lieu of a request for 36 units of DHC-5 Buffalo medium lift aircraft. According to US declassified reports, if contract was signed for the CH-47D Chinook, they were projected to enter service with the PAF by 1981. But this did not push through due to the Philippine economy's poor performance.

The CH-47D Chinook of the Spanish Army. Photo credits to original source.

The 1995 AFP Modernization Program also listed a requirement for Heavy Lift Helicopters, with a total of 4 units requested to enter between 1995 to 2010. The CH-47D Chinook was also eyed by the PAF to meet this requirement. Again, due to the poor performance of the Philippine economy, the entire program did not push through, including the acquisition of  Heavy Lift Helicopters.

A requirement for Heavy Lift Helicopters again surfaced when the AFP Modernization Program was revised and extended to cover years 2013 to 2027. But it was programmed to be included in the Horizon 3 phase of the new project.

Since the AFP and DND have an option to frontload projects depending on requirements, the Heavy Lift Helicopter Acquisition Project was moved to the 2nd List of Horizon 2 phase, which is an offshoot of the Horizon 2 phase depending if the government has extra funds available to frontload Horizon 3 projects.

Again, the CH-47 Chinook family was in eyed by the Philippine Air Force, this time a newer variant called the CH-47F being available fresh from the factory. Other helicopters were also considered including the AgustaWestland AW101, as well as Medium Helicopters like the Airbus H225M Caracal, and the Russian Helicopters Mil Mi-171Sh Hip.

Also considered was the AgustaWestland AW101 Merlin. This example is with the Danish Air Force. Photo taken from Wikipedia.

Originally, the PAF's Technical Working Group decided that the CH-47F Chinook was the only helicopter that met the PAF's requirements for heavy lift helicopters, which made it closer for the PAF to acquire the CH-47F Chinook.

The CH-47F Chinook, these examples with the Indian Air Force. Photo credits to IAF.

But it appears that this was overturned by the Department of National Defense (DND), which asked the PAF to reconsider its specifications due to political reasons. As we have posted last year in our Facebook community page, the president himself was involved in the decision of the DND to push the PAF to reconsider.

The Russian Connection:

We reported that, according to our sources within the DND and PAF, Pres. Rodrigo Duterte was not in favor of the Philippine Air Force and DND's decision to select the Sikorsky S-70i Black Hawk for its Combat Utility Helicopter requirements, wherein 16 units were ordered for less than Php13 billion. But in the end, the president allowed the deal with Sikorsky to push through under one condition - that the PAF should also order helicopters from Russia, either transport or attack helicopters, or both.

With the PAF in a tight situation, the Heavy Lift Helicopter project was again re-evaluated with changes in the specifications, and it was recommended in the end that the Mil Mi-171 meets the PAF's revised requirements and is the most ideal due to the number of helicopters (quantity) the Russians have agreed to sell based on the Php12.8 billion budget.

While Russia agreed to sell 16 Mil Mi-171 helicopters, with a potential donation of 1 Mi-171 helicopter for VIP requirements, apparently Boeing was only able to offer 4 units under Foreign Military Sales (FMS) program, or 5 units under Direct Commercial Sales (DCS) program.

The Mil Mi-171, this example with the Russian Army. Photo taken from Avia Russia.

Negotiations with Russia's Rosoboronexport commenced in 2018, although issues related to the US' Countering America's Adversaries Through Sanctions Act (CAATSA) was deemed to be an obstacle to a deal being reached between the DND and Rosoboronexport.

It was noted that as of March 2019, a new Russian state shell company SOVTECHNOEXPORT appears to be the one handling the deal between the Philippines DND and Russia on the potential acquisition of the Mil Mi-171 helicopter.

As of 3rd quarter 2020, preparation was being made by the DND to release the Notice of Award (NOA) in favor of the Russian government, although it remains to be seen if it would be through SOVTECHNOEXPORT or ROSOBORONEXPORT.

What's Next?

Since the Mil Mi-171 is actually a Medium Helicopter rather than a Heavy Lift Helicopter, it remains a question as to why the Philippine Air Force decided to use the Heavy Lift Helicopter Acquisition Project as it means to acquire the Mil Mi-171, rather than frontload the Medium Lift Helicopter Acquisition Project, which is also slated under Horizon 3 phase, as it is more appropriate for the helicopter being sought after?

Also, since the PAF actually has requirements for helicopters that are larger than the Mil Mi-171, will they be raising a new Heavy Lift Helicopter Acquisition Project under the Horizon 3 phase, with specifications closer to than of the CH-47F Chinook rather than medium helicopters like the Mil Mi-171?

Other Possibilities:

Another possibility now is related to the Philippine Army, which was said to also have been offered both the Mil Mi-171 and the Boeing CH-47F Chinook for their own helicopter requirements.

Based on information MaxDefense got from sources from the Philippine Army, the Philippine Army leadership as well as the Army Aviation Regiment was said to be more in favor of the CH-47F Chinook, although it is currently not their priority as they wanted to build up their planned fleet of combat utility, scout, and attack helicopters, before they consider getting larger helicopters.

So it could be similar to the PAF's plan of potentially asking another batch of heavy helicopters under the Horizon 3 phase of the RAFPMP.

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Project Summary:

Heavy Lift Helicopter Acquisition Project:

Note: Edited as of 07 November 2020.

* End User: Philippine Air Force (still being determined if 205th Tactical Helicopter Wing or 220th Airlift Wing)

* Quantity: 16 military helicopters + potentially 1 VIP helicopter

* Modernization Phase: Horizon 2 Priority Projects of RAFPMP

* Project ABC: Php12,800,000,000.00

* Acquisition Mode: Government-to-Government (G2G) Procurement with Russian government (Sovtechnoexport and/or Rosoboronexport)

* Source of Funding: Multi-Year Contractual Authority for 3 years, using General Appropriations Act (GAA) from FY2020 to FY2022.

* SARO Release: SARO-BMB-D-20-0018320 worth Php1,919,626,490.00 (15% initial payment) dated 29 October 2020, released 04 November 2020.

* Winning Proponent: TBC

* Product for Delivery: 
    - 16 Mil Mi-171, exact variant still being confirmed although most like Mi-171Sh
    - unconfirmed report of 1 Mil Mi-171 in VIP configuration, most likely Mi-171A2

* Contract Price: Php12,797,509,932.00

* Residual Price: Php2,490,068.00

* First post by MaxDefense: 28 June 2019

* MaxDefense Searching Hashtag: #PAFHeavyLiftHelicopterAcquisition

* Status: DND has decided to award the project to the Russian government, with the Notice of Award (NOA) being prepared to be released in either to Sovetechnoexport or Rosoboronexport. SARO for initial 15% funding was released on 04 November 2020, awaiting for NOA release which is expected before end of 2020.

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First edit and release: 07 November 2020
Copyright MaxDefense Philippines

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Russian-made RPG-7V2 rocket propelled grenade launchers for delivery to PA soon

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.

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.

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

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.

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.

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).

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:

In a previous post MaxDefense made in our social media page, we mentioned that it appears that the RPG-7V2s being purchased by Russia seems overpriced.

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.

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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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