The unwillingness of Margus Tsahkna to see his roles as Estonia's foreign minister and a defense contractor conflicting sheds poor light on the government and undermines the credibility of the Estonian defense industry, Meelis Oidsalu writes.
Eesti Ekspress reported this week (last week – ed.) that Eesti 200 member Margus Tsahkna has not resolved a conflict of interest, known before Kaja Kallas' third administration took office, in the three months he has served as its foreign minister. The conflict concerns his stake in MM Hospital OÜ that develops field hospitals for defense contractor AS Semetron.
Semetron field hospitals have been mentioned on three occasions during government press conferences of the past two years. Not every Estonian product receives this level of advertising from the government. It is likely that the good reputation of Semetron field hospitals is well-deserved. They are of high quality and constitute a defense sector success story, first becoming widely-known when the coronavirus crisis started. There is no reason to disparage the field hospitals themselves. However, Minister of Foreign Affairs Margus Tsahkna's ties to the export of these field hospitals is far more intimate than we are led to believe.
I asked Eesti Ekspress journalist Martin Laine for comments he received from Ilona Alev-Russ, head of office for AS Semetron, on the links between MM Hospital, which is partly owned by the foreign minister, and the field hospital maker. According to Alev-Russ' explanations, MM Hospital OÜ was created as a subsidiary of AS Semetron. The latter's head of office also told Eesti Ekspress that "MM Hospital and its parent company Semetron operate synergically, sharing resources, such as labor, expert analysis, management, finances; as well as expenses and income." Therefore, we clearly have a situation where the government orders goods from a company part of which is owned by the foreign minister. While the contracts are entered into with parent company AS Semetron, the latter freely admits that it shares its profits with the subsidiary in which Tsahkna has a stake.
The minister claims that risks are managed through the fact that he does not sit on the management boards of companies he owns. Corruption prevention experts are not convinced and say that is not enough to rule out conflict of interest. Direct economic benefit from the sale of field hospitals is still reaching the foreign minister.
Kaja Kallas' administration cannot avoid using the worlds "field hospital" in official communication if only because Estonia and Lithuania are working on a new joint tender for just such hospitals worth €150 million. The government better practice its poker face now should it turn out the tender will favor AS Semetron and Foreign Minister Tsahkna still have his stake in its subsidiary at the time. We should also consider how the situation could affect the preparedness of Western governments, which tend to be much more sensitive to corruption than the local rulers, to procure field hospitals or other products from Estonia in the future. Will their representatives have to ask the Estonians for a list of incumbent direct beneficiaries set to profit every time an international deal looms? It is quite possible that the current situation alone has alienated some of Semetron's potential future clients. Because of decisions Margus Tsahkna has not taken.
As a precaution, the foreign minister might knowingly avoid promoting Estonian field hospitals and making information he has access to as foreign minister known to three companies involved in the export scheme. The latter also includes business lobby firm Defendest OÜ, which Tsahkna owns. Brita Kikas, press representative for the Foreign Ministry, said on Thursday that because Tsahkna has managed risks associated with Defendest OÜ (made his wife CEO of the company), this resolves the matter as far as the ministry is concerned. Looking at business activity, Defendest is the smallest and least significant element in the scheme. But it lists Margus Tsahkna's email address under contacts, which suggests he still has a role to play in the firm, if only forwarding emails to his spouse.
Should a foreign country's representative ask about the field hospitals...
The ministry's press representative said that it has not weighed or analyzed risks associated with Tsahkna's existing business ties. Therefore, we have no reason to believe the organization has knowingly addressed these risks or is keeping tabs on the minister's activities. Claims of the alleged separation of roles between Foreign Minister Tsahkna and defense businessman Tsahkna are based solely on the latter's statements. Margus Tsahkna publicly failed a relevant test on "Aktuaalne kaamera" Wednesday when he referred to Semetron's field hospitals as "the most innovative in the world." I would have liked to ask whether it was the Ministry of Foreign Affairs' official position and which other field hospitals competed with Semetron for the title. Experts from the Defense Ministry believe there should be enough competition out there.
Even the most diligent measures cannot completely rule out a situation where a foreign country's delegate pulls our foreign minister aside at a meeting to ask about Estonia's famous field hospitals. What might the foreign minister tell his conversation partner and might he mention his personal connection, especially if the conversation is held in confidence? What impression would that leave of the Estonian government and defense market? Provided Eesti Ekspress' Wednesday article reached the employees of embassies in Tallinn, memos urging governments and delegations to avoid using the words "field hospital" when meeting with Tsahkna are likely be sent out soon. Who knows, it might even spark a government crisis in Estonia. Perhaps we should equip the foreign minister with a badge that clearly prohibits the use of the worlds "field hospital" during international meetings. One of the companies in which Tsahkna has a stake paying for the badge would be fair, especially as the firms' financials suggest they can easily afford it.
It would be a shame if a single businessman's (Margus Tsahkna that is) formalist treatment of a conflict of interest would make it more difficult for the Estonian defense industry to penetrate Western markets. We also have no reason to believe Estonia's competitors would neglect to point out this lapse in corruption prevention. Transparency benefits foreign trade far more than a conflict of interest situation, which is made no less serious by the fact it's public knowledge. Rather, the conflict becomes more serious the longer we know about it but choose to do nothing.
Tsahkna's conflict of interest is too new for any final conclusions to be drawn, while one thing is for sure – the foreign minister is denying there is a problem. Tsahkna pulled a Trump or Helme (the younger), painting himself as a business promoter. And he has been one as defense minister in the past. But even Martin Helme, a true spokesperson for clientelism, refrained from promoting his own personal business as minister. Eesti 200's elections slogan of the "personal state" is taking on new and rather unflattering meanings in light of the party's recent blunders.
The ministry's press representative said Thursday that Margus Tsahkna has not attended a single meeting where the sale or donation of field hospitals was discussed. But considering the recent political visibility of the product category of field hospitals, Tsahkna will have to attend a government meeting where one is discussed sooner or later. They will come up indirectly at next year's state budget talks at the latest. Before elections, Margus Tsahkna promised to carry out a round of austerity in the public sector. But how motivated can an entrepreneur –who is also a member of the government – really be to demand cuts or austerity in fields where he has business interests?
Is the minister capable of understanding the concept of a conflict of interest?
Based on statements he has made to Eesti Ekspress, Tsahkna will decide whether to sell his stakes based purely on financial considerations. If that is indeed the case, we are unlikely to witness a sale, as why would a businessman sell a stake in a firm that might be looking at winning a joint tender worth €150 million. It is not out of the question that, speaking both financially and politically, it would be best for Tsahkna to resign as minister or take up a portfolio that is somewhat more distant from his business interests. The risk of a conflict of interest materializing would require more concrete action from the minister. But the foreign minister simply cannot avoid coming into contact with foreign trade matters (including international defense contracts).
My recommendation to Foreign Ministry officials would be to hold at least one meeting on field hospitals with their minister. The chief auditor or secretary general might ask the minister whether he understands the concept of a conflict of interest in the public service and whether he has completed the relevant e-training as part of guidelines for how to avoid such conflicts introduced by Kaja Kallas' first administration.
The guidelines were drawn up following the case of former Ministry of Rural Affairs adviser Urmas Arumäe who has been found guilty by now. Approving the guidelines must have been a significant moment for Kallas as a clear sign of her government's approach differing from its EKREIKE predecessor where businessmen could directly lobby EKRE ministers without the public having an overview of such things. Under Kaja Kallas, lobbyists' meetings with ministers need to be registered to suggest that something has been done to achieve the minimum level of hygiene and comply with GRECO recommendations, even though this has clearly not been enough.
We can give three examples since Kaja Kallas has been in power where the principles of avoiding a conflict of interest were violated or twisted without anyone taking political responsibility. Appointing then unions head Peep Peterson as minister of the respective field without the necessary cooldown period when Kallas' second government was being put together; sending Finance Minister Keit Pentus-Rosimannus to the European Court of Auditors, whereas only the minister got to propose the candidate; and finally, the potential foreign policy interests of businessman Margus Tsahkna as the most recent incident working to ridicule Kaja Kallas' anti-corruption efforts.
In the case of Pentus-Rosimannus landing in the European Court of Auditors, State Secretary Taimar Peterkop and the usually tight-lipped Ministry of Finance Secretary General Merike Saks stepped up to take the blow. The PM commented a week later, referring to journalists who reported the matter as "friends of the Isamaa party." While the PM initially saw Peterson's appointment as problematic, the topic was eventually swept under the rug at a rather embarrassing government press conference.
Kaja Kallas clearly faces a choice today. The favorable ratings situation allows her to clench her jaw and simply sail through the storm, much as was done in the cases of Peterson and Pentus-Rosimannus. The other option would be to do something, if not for the Estonian journalistic public (whom Eesti 200 member Meelis Niinepuu has taken to berating on social media, demonstrating zeal not seen since the People's Union) then at least to try and maintain Estonia's international competitiveness.
Editor: Marcus Turovski