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Poles End Talks on Multibillion Deal with Airbus Helicopters

Poland's Development Ministry said the negotiating positions of the two sides were so different that "further talks are pointless."

WARSAW, Poland (AP) - Poland says it is backing off from the multi-billion-euro purchase of French-made Caracal helicopters, quoting unsatisfactory offset deal negotiations.

Poland's Development Ministry said late Tuesday it was breaking off the vital offset negotiations with Airbus Helicopters that produces the Caracal. It said the negotiating positions of the two sides were so different that "further talks are pointless."

The offset deal had been a major condition for Poland's purchase of 50 Caracal helicopters for 13.5 billion zlotys (3.14 billion euros).

In an offset agreement, the seller of a product or service agrees to invest in sectors or goods on the buyer's side, as a way of compensating or enhancing the value of the deal. Offset deals usually accompany large deals in the military industry.

The ministry said that offers made by Airbus Helicopters failed to properly secure Poland's economic and security interests. Polish officials earlier hinted the value of the offset should approximately match the value of the purchase and should help develop the nation's defense industry.

The decision means that Poland will need to open new negotiations with other producers of helicopters. It also delays the purchase of the much-needed multi-task helicopters for Poland's armed forces that are in the process of being modernized.

The decision to buy the helicopters from Airbus was made by the previous government, led by the pro-European Civic Platform party. It drew protests from trade unions in two Polish aviation plants linked to firms that were not chosen, one linked to the U.S. producer of the Black Hawk, the other to a British-Italian consortium AgustaWestland, now Leonardo Helicopters, making the AW149 helicopter. Workers in those plants fear layoffs.

The conservative Law and Justice party backed those protests and indicated it might cancel the deal when it won elections last year.

Poland is especially cautious about the conditions of offset deals because the offset that accompanied the 2003 deal to purchase 48 U.S.-made F16 fighters fell short of Poland's expectations.

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