ERIK PRINCE BUYS A NAVY IN MOZAMBIQUE
Erik Prince, founder of Blackwater Security Consulting, a controversial private military company, has taken control of a private navy in the Indian Ocean, with its own air force and sophisticated weaponry.
Prince, a war entrepreneur and former Naval seal, has been active as a private military contractor in Africa for more than a decade, and helped set up an anti-piracy force in Somalia in 2012.
He was recently in the sights of U.S. special counsel Robert Mueller, who is investigating Russian interference in the 2016 presidential election, for setting up a secret back-channel on the island of Seychelles between incoming President Donald Trump and the Kremlin, using a Russian banker as a go-between. Prince’s sister, Betsy DeVos, is the Secretary for Education in Trump’s cabinet.
Now, Prince is implicated in a murky loans saga that saw Mozambique forced to sell off its control of what amounts to a private navy.
Prince is best known for the activities of Blackwater, which acquired notoriety in 2004 when four of its operatives were ambushed and strung up in Fallujah during the Iraq war, and again in 2007 when Blackwater staff guarding a U.S. government convoy opened fire on Iraqi civilians in downtown Baghdad, killing 17. The incident became known as the Nisour Square massacre.
Facing unfavorable media attention in the U.S., Prince sold Blackwater and moved to Abu Dhabi where he set up Reflex Responses, a company tasked with recruiting and training the elite Emirati Presidential Guard. The Guard effectively acts as Abu Dhabi’s foreign legion, employing veteran military officers from South Africa, Australia, Colombia, France, and the UK, among others, to fight the kingdom’s wars. The Presidential Guard has been at the forefront of fighting in Yemen alongside Saudi Arabia.
The United Arab Emirates is a key ally of China, which has significantly increased its investments in the kingdom.
Mike Hindmarsh, the current commander of the Presidential Guard, was recruited with an annual salary of US$ 500,000, tax-free, plus expenses. Hindmarsh previously commanded the Australian Special Air Service.
In 2014, Prince found himself in the headlines again when it emerged that he had modified crop-dusting aircraft into ground attack machines, placing armor around the engine and cockpit and equipping the craft with the ability to launch missiles and rockets, drop bombs, and fire machine guns.
His plan was to sell the aircraft to countries like South Sudan, which did not have enough money to buy purpose-built warplanes to suppress its opponents.
Prince used an Austrian company, which he acquired 25 percent of, to do the conversion of the crop-dusters. After the Austrian company, fearing legal repercussions, ended its relationship with Prince in 2014, Prince moved his operations to China, where he founded Frontier Services Group along with the Chinese government-owned CITIC Group.
Frontier Services Group modified more crop-dusters and registered them in San Marino.
According to its own promotional literature, FSG aims to provide security and logistics services throughout Africa in support of Chinese investments.
And as of April 2018, FSG also has a navy with half a dozen warships, drones, and high-tech surveillance radar, originally purchased by the Mozambican taxpayer.
Prince acquired the fleet after the Mozambican government defaulted on billions of dollars of loans that the Mozambican public and international investors were misled into believing would revitalize the Mozambican national tuna fishing fleet.
While the public were told that a loan of US$ 850 million had been signed off on for the purchase of 24 new tuna fishing vessels, they were not told that, in addition to the tuna fishing vessels, a whole raft of defense equipment was also on the shopping list.
Instead of just two dozen trawlers, the loans, secretly signed off on during the last days of President Armando Guebuza’s presidency, were used to buy naval vessels, surveillance radar, and drones – which were to become the property of a private company, ProIndicus, rather than the Mozambican Navy.
Over and above the naval vessels another loan was taken out to set up a ship repair and maintenance company called Mozambique Asset Management.
Although the loans were signed off on in 2013, the Wall Street Journal has reported that Iskandar Safa, a Lebanese-French defense contractor, lobbied Credit Suisse to provide loans to Mozambique that would enable the country to buy vessels and radars from his company, Privinvest, the owner of Construction Mécanique de Normandie, a French shipyard.
António Carlos do Rosário, a senior official of the Mozambican secret service, Serviço de Informaçãos e Segurança do Estado (SISE), was appointed CEO of all three companies: ProIndicus, Empresa Moçambicana de Atum (EMATUM, the state fishing fleet) and Mozambique Asset Management.
According to a recently retired South African navy officer, Construction Mécanique de Normandie is “hardly known for its fishing vessels. I think the Mozambican trawlers must be the first fishing boats they have built in many years.” Regardless, with the loans signed off on, CMN was hired to build the naval warships and 24 fishing vessels.
The fishing boats and high-speed patrol vessels duly arrived in Maputo. However, the loans taken out to purchase the equipment were so large that there was simply no money left over to operate the fishing vessels, which have been sitting in Maputo harbor for years.
The initial idea behind ProIndicus was reportedly to charge foreign oil and gas companies for providing security to their oil rigs. ProIndicus also planned to charge merchant vessels transiting Mozambican waters. However, with no proven track record, the company had no clients, and not a single company signed on with ProIndicus, which was supposed to be making a profit after two years.
In March 2016 Mozambique defaulted on its debt to Credit Suisse and the investors that Credit Suisse had enrolled for the Mozambican tuna fishing fleet loan learned that the reason for the default was that Mozambique had borrowed nearly US$ 2 billion and not US$ 800 million for the tuna fishing fleet upgrade.
The International Monetary Fund immediately halted aid to Mozambique, and many investors pulled out of the country. In a matter of weeks, the Mozambican currency, the metical, had dropped in value by 40 percent, making it even less likely that the loans could be repaid.
Negotiations between the government and lenders began with the aim of finding a solution to the massive debt crisis. But Mozambique simply did not have the money to pay off its debts. All through 2016 and 2017 the country struggled to make payments sufficient just to cover the interest.
In addition to the IMF, many charities and donors pulled the plug on loans and assistance to Mozambique, leaving the country in dire financial straits. It was at this moment that Erik Prince and his Frontier Services Group came to the rescue, offering to recapitalize the Mozambican tuna project and take care of the US$ 2 billion debt.
The exact details of the deal are not known, but it appears that Prince became the majority owner of the Mozambican tuna fleet as well as a ready-made navy. The deal was signed in December 2017, a month after the FBI announced it had begun an investigation into the Mozambican deal.
BNP Paribas, Credit Suisse and VTB Bank of Russia, the U.S. Department of Justice announced, were under investigation for possibly aiding corruption in Mozambique by arranging to finance the US$ 2 billion deal of 2013. VTB Bank was also revealed to have been in negotiations with Donald Trump to finance the construction of a Trump Tower in Moscow.
The negotiations between Trump and VTB took place in 2016 – nearly two years after VTB was added to a list of Russian companies sanctioned by the US government.
Although the Erik Prince deal was signed off on in December 2017 it was only in mid-April 2018 that Mozambican Prime Minister Carlos Agostinho do Rosário announced that Prince, on behalf of Frontier Services Group, had signed a deal to recapitalize the tuna fishing fleet, and would be taking over the ProIndicus fleet too.
As a result of the deal, the state-owned tuna fishing fleet, formerly EMATUM, would be renamed TunaMar.
Ironically, the naval vessels, although far smaller than the South African Navy’s Meko class frigates, would possibly make Mozambique more effective at fighting piracy than South Africa. Media reports disclose that none of the three submarines bought in South Africa’s controversial 1999 arms deal are operational, while two of the four frigates purchased in 1999 are also in dock awaiting repair.
The Mozambican vessels – three high speed catamarans armed with electronically aimed and fired machine guns and cannon; three trimarans, armed with heavy machine guns and cannon; and drones which could be armed – come equipped with military grade surveillance radars and high-speed semi-rigid inflatable boats that can be used to launch commandos and boarding parties from the larger ships.
Prince, who is not known as a tuna fisherman, signed the deal at a time when Mozambique is facing a worsening Islamist insurgency in the northern Cabo Delgado province.