By Sergey Kandaurov,
senior research officer,
Russian Strategic Research Institute

Since the beginning of the 90's the USA remains the undoubted leader on the volume of the armaments supplies to the foreign states possessing more than 50% of the world AME market while the joint share of the West European armament companies doesn't exceed 40% in the same period. Such strong US positions can make an impression that the country has no problems in this sphere of the foreign economic activity. But the economic benefits and costs of the American armament supplies to the foreign states arouse disputes and criticism among the American government's institutions and NGOs. First of all it concerns the economic efficiency of the government's and particular companies' activity in the MTC field.

The first discussed matter is the used military equipment transfers that became customary and have the developed legislative basis. But on the other hand, such supplies deprive the major contractor companies of the chances to sell new armaments systems abroad. The surplus transfers decision-making procedure also remains inefficient and reduces the economic benefits of this AME export mechanism. The US Congress had to adopt the amendments to the armaments transfer legislation in order to resolve the conflict between the interests of the Defense Ministry and the armaments producers.

Now all large AME export contracts usually include clauses about the compensations for the importer's expenses on the armament purchase. The American companies use very different forms of the offset programs such as the purchase of the necessary components in importer-state, the usage of the foreign labor in production, the transfers of know-how etc. The American government has to accept this reality and doesn't interfere in the preparation of the respective agreements. The largest US companies have the advantage in performing the offset contracts while the interests of the numerous American second- and third-level subcontractors are restrained because their work is often given to the companies of the importer country.

Since the 70's the USA uses the Foreign Military Financing (FMF) program to support the armaments export. The financing volume under the FMF program has exceeded USD 3 billions a year in the recent years. Rendering the finance assistance the American government expects the recipient states to purchase the American military equipment. But since the end of the Cold war the critics consider the AME export financing as the useless waste of the taxpayers' money.

The American experience of the AME export functioning, of its economic efficiency raising and the rational taxpayers' money expenditure is topical for Russia too. Some similar problems have to be solved today and the others will appear later when the Russian MTC system is finished off and the present crisis in the defense industry is over.