Hungarian-owned weapons company to arm rising Asian power

Czech Prime Minister Petr Fiala paid a visit to Vietnam last week. He arrived in the capital city of Hanoi with a business delegation of 15 companies. Four of these operate in the weapons industry.

One of the four companies is Aero Vodochody. Previously in 2021, Vietnam bought a dozen of L-39NG light combat aircrafts, produced by the firm. The shipment of the planes starts now in 2023. Why does it bear importance? Aero Vodochody is majority-owned by the Hungarian HSC Aerojet, which is in the hands of the Hungarian state, Portfolio explains.

Czech-Vietnamese weapon ties

Prague is the European Union’s main provider of weapons to Hanoi. The Czech arms industry is known to specialise in the modification and modernisation of old Soviet weaponry. They also produce such weapons, which are compatible with old Russian equipment. Considering that 80 percent of Vietnam’s arms stockpiles consist of old Russian/Soviet military gear, arms deals with Czechia seem like the perfect way to renew their weaponry.

The Czech company Omnipol is also part of the delegation. They are minority holders in Aero Vodochody, and owners of Aircraft Industries, which makes the L 410 NG, a twin-engine 19-seat aircraft. Vietnam may end up buying some of these cargo planes, along with radars and other Czech-made military equipment.

Hungarian ownership ties

Aero Vodochody was the largest Czech aircraft-producing company. HSC Aerojet bought the shares of the firm back in August 2021. At that time, Aerojet was in the ownership of current Defense Minister Kristóf Szalay-Bobrovniczky. To conduct the purchase, the firm had to procure a loan of around 140 million euros, which Szalay-Bobrovniczky received from the Hungarian Development Bank, a state-owned financial institution.

After Szalay-Bobrovniczky was appointed minister, he sold his shares in Aerojet to Zsolt Hernádi, the CEO of the government-affiliated Hungarian oil and gas company, MOL. Later in October 2022 Hernádi transferred these to the N7 Holding National Defence Industrial Innovation Ltd (N7 Holding Nemzeti Védelmi Ipari Innovációs Zrt). This governmental holding is a conglomerate of different national defense industry firms.

In Spring 2022 the government ordered 12 of the L-39NG aircrafts for the Hungarian army. According to estimations, the deal may have cost up to HUF 60-70 billion (EUR 160 million-186 million).

In a nutshell, the Hungarian government granted a loan to a government-affiliated businessman to buy an aircraft company. Once Szalay-Bobrovniczky was appointed minister, he sold the rights to the company to another government-affiliated businessman, from whom then the government purchased it.

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Source: Portfolio