Russian defence-related products are sold to just under 60 countries. This was claimed by Sergey Chemezov, Director General of Rosoboronexport, in his interview to the Independent Military Review (nvo.ng.ru).
The export consists mostly of Russian-made aviation equipment. The Russian helicopters as well as the Su and MiG series fighter aircraft are quite competitive in the terms of quality-to-cost ratio. Russian automatic small arms are also in great demand. The latest models of the Kalashnikov sub-machine guns - AK-101 and AK-102 – meet the NATO standards, and they are bought by some countries which are members of NATO.
The Russian-made air defence systems are of considerable interest abroad. Russia is carrying out negotiations with a lot of Arab countries on the matter of establishing a united air defence system by using the Russian-made air defence systems, such as S-300, Buk, and Tor.
However, from the year 2005 onwards the lion's share of Russian export will probably be composed of navy-related equipment and weaponry. At the present time, the total order portfolio (which is worth $12 billion and consists of the contracts which either have been signed or have already come into force) is for more than 50 per cent formed by navy-related agreements.
Of course, the Russian defence-related export activities have problems of their own. Unfortunately, Rosoboronexport seems to have a limit of $5 to 6 billion as far as Russia's export capability is concerned. This takes place due to the fact that the manufacturers have no possibilities to switch to the manufacture of more modern products. Although the Russian design bureaux and scientific research establishments do have state-of-the-art developments and promising inventions, the most of the defence-related enterprises have no finding available for establishing series production facilities to manufacture newly-developed weapons. This problem, however, can be solved by obtaining investment from the business circles or, more desirably, from the government.
Every year Rosoboronexport concludes contracts for a total amount of around $4-5 billion. The current order portfolio usually covers orders for around $11-12 billion. One of the newcomers among the clients of the Russian defence industry is Morocco. Previously, this country never purchased Russian-produced weapons.
India and China will remain Russia's main partners at least up to the year 2008. They will consume 70 to 80 per cent of Russian arms sales abroad. The industry of these two countries is quite developed, and they are capable of developing indigenous weapons based on their own developments and inventions. At present, negotiations are under way with these countries as to granting of licences for manufacture of various types of weapons. In the future, this kind of sales will increase it share in the total scope of exports sales.
An increase in the scope of export sales is planned to be achieved by means of increasing the scope of supplies of spares for the weapons already exported. Nowadays the share of spares supplies constitutes only around 17 per cent of the total scope of Russia's arms export 17%. This value is much less than that of Russia's competitors.
At present the number of the enterprises authorised to export spares has been increased up to 14. Rosoboronexport and the Federal Industry Agency are carrying out the cataloguing of all spares being produced by the defence-related enterprises. These efforts must result in providing a possibility of selling/buying spares by means of Internet, as is done nowadays in many countries. Besides, the scopes of spares supplies are dramatically limited by the existing complicated procedure of obtaining an export licence.
It for many years already that Russia has been involved in the competition to meet the requirements of Turkey for a helicopter. The first competition was won by Russia, both technically and financially. But the competition results was cancelled, and a new competition was initiated. This was won by Russia, too. And, once again, Turkey cancelled the competition results. It is difficult to say now what will come next in this project. The Russian helicopter is a match for its American competitor as far as its capabilities are concerned, moreover, it will cost considerably less for Turkey. Besides, the conditions of the competition envisage not only supply of ready helicopters, but also their licence production. Russia agreed to provide an unlimited licence, while the United States wanted to impose a limitation that no helicopters produced under licence in Turkey could be sold to any third country.
Some of East European countries having joined NATO, their defence ministries were experiencing a kind of euphoria thinking that from that moment onwards they will abandon Soviet-produced weapons and will acquire either West European or American fighting machines and weapons. However, the calculations showed clearly that each country will have to pay about $10 to 15 billion in order to switch to NATO standards. Therefore it turned out to be financially more expedient to carry out modernisation of the in-service Soviet-made weapons, especially aircraft. Rosoboronexport started to get involved in the business, having developed a Russian version of modernisation programme for the aircraft fleets of the countries in question. Besides, a similar programme was developed in cooperation with French, British and other foreign companies. Rosoboronexport participates in the competitions for modernisation of weapons of the Polish, Bulgarian and Hungarian Armies. It also offers modernisation programmes of land fighting vehicles, such as T-72 main battle tanks. In particular, a version of T-72 modernisation programme was developed in cooperation with a Serbian company. The programme is offered to European and Arab countries. Also developed are modernisation programmes for Soviet-made artillery weapons to enable them to meet NATO standards. For example, the well-proven 152 mm Msta self-propelled howitzer has been fitted with a NATO standard 155 mm cannon. We do believe that this upgraded howitzer will be in demand in many countries, including NATO member-countries.
In 2004, Rosoboronexport paid various taxes in the total amount of well over $75 million ($55 million to the federal budget, $20 million to Moscow's budget and $300,000 to other cities' budgets).
Sergyi Wey
24.02.2005