Ruslan Pukhov
Konstantin Makienko
Maxim Pyadushkin

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Judging by reports about the results of Russia's military-technical cooperation (MTC) with foreign countries last year published in December 2002- January 2003 we can say with a high degree of probability that Russia set another national record in arms exports by making deliveries worth $4.7 billion. It must be stressed that deliveries grew for the fourth successive year and for the third successive year consistently posted record figures. The rise from 2001 amounted to one billion USD with Rosoboronexport government-owned arms trader securing 70% of the increase. Independent exporters brought in $300 million with RAC MiG and the Tula-based Instrument Design Bureau reporting the greatest achievements.

According to CAST early estimates, foreign currency receipts stood at $4.2-4.3 billion. For the sake of comparison it should be said that Russian exports reached their peak in 2000-2001 when deliveries amounted to $3.6-3.7 billion.

Sources: Alexei Nikolsky, Mikhail Kozyrev, "Monopoliya VTS krepchayet", Vedomosti, 05.03.2002. The Chart is prepared by CAST.

Rosoboronexport

Commenting on MTC results at the end of December head of the Russian Federation Committee for Military-Technical Cooperation with Foreign States (CMTC) Mikhail Dmitriev noted that in 2002 Rosoboronexport deliveries stood at 3.4 billion [1 ]. The estimate was indirectly confirmed by a statement of the arms trader's CEO Andrey Belyaninov that by the beginning of November his company had performed contract operations for $3.4 billion while the target figure for the year was $3.5 billion [2 ] . Later reports [3 ] came that on December 16, 2002 Rosoboronexport performed one more major delivery transferring nine Su-30MKK multirole fighters and aircraft equipment to China under a 2001 contract for 38 fighters for a sum of no less than $400-420 million. This and also the fact that December as a rule sees the intensification of deliveries to foreign customers permit us to assume that the mediator company's annual deliveries reached $4 billion (85% of overall Russian arms exports) which is 20% more than $3.3 billion in 2001 [4 ] . The company leadership reported that foreign currency returns in 2002 stood at $4.3 billion [5 ] .

As usual deliveries, primarily aircraft, to two key Russian partners in arms trade - China and India - constituted the major share of Rosoboronexport exports. Thus, judging by existing reports about 60 Sukhoi aircraft worth over $1.3 billion were delivered:

• 19 Su-30MKK fighters and 10 Su-27UBK combat trainers to China,
• 10 Su-30MKI to India [6 ] ,
• seven Su-27 fighters to Ethiopia [7 ] ,
• and also evidently the last 12 Su-24MK frontline bombers to Algeria under a 2000 contract the implementation of which was prolonged until the end of 2002 [8 ] .

Helicopters were also intensively exported:

• six Mi-17-V5 multi-mission helicopters to Colombia under a 2001 contract for $36.1 million,
• two Mi-172 medium utility and transport helicopters to Vietnam,
• Mi-17-V5 to China under a 2001 contract for 35 units [9 ] ,
• three Ka-31RLD to India under a 2001 contract for five units for $108 million [10 ] ,
• the completion of deliveries of Ka-27 anti-submarine helicopters to China [11 ] .

On the whole aircraft (Su-27/30 series fighters, Mi-17 transport helicopters, aircraft engines and air-borne weapons) constituted 75% of overall arms deliveries along Rosoboronexport lines.

Arms and military hardware for the land forces constituted 14.5% of total at $580 million. The biggest deals were the transfer of 84 T-90S tanks under a 2001 contract with India [12 ] , the possible delivery of Smerch MLRS to India [13 ] and the delivery of ammunition to Kuwait.

In the naval sector the biggest event was the transfer of the repaired and upgraded diesel Kilo class submarine Sindhuratna (project 877EKM) with the long-range Club missile system [14 ] to India and also the delivery of two patrol boats of the Svetlyak class to Vietnam [15 ] . The sector brought in about 6% of Rosoboronexport export receipts. There were no large deliveries of air defense weapons with the sector posting no more than 4% of overall exports.

Note: The Diagram is prepared by CAST.

The portfolio of Rosoboronexport contracts on January 1, 2003 stood at $11.8 billion. It is indicative that most of the reported contracts are with China and for naval arms systems.

Judging by the media reports the identified new contracts total $3.4-3.5 billion. (See Table 1).

Table 1. Major Rosoboronexport contacts, signed in 2002.

Note: The Table is prepared by CAST.

RAC MiG

In 2002 MiG corporation started work on a major package of contracts signed in 2001 for delivering new aircraft and upgrading the old ones. As far as deliveries are concerned we can definitely speak of the transfer of some 10 MiG-29 fighters to Yemen under a 2001 contract for 14 aircraft for $437 million [28 ] . The delivery of 10 MiG-29 to Myanmar is likely to have been completed as the first four were transferred in 2001 [29 ] . Thus the number of identified RAC MiG deliveries at the moment is 16 aircraft for at least $300 million which makes the company the second biggest Russian arms exporter after Rosoboronexport for the first time since 1995. However, Mikhail Dmitriev mentioned some force majeure circumstances, which the corporation faced on the foreign market. This is likely to have happened in Sudan that had signed a contract for 12 MiG-29 and is known for dodging payments for arms deliveries.

The market of upgrading MiG-29 primarily in Eastern Europe was another important sphere of the corporation's operations. The strategy was successfully carried out and contracts were signed for upgrading MiG-29 for Bulgaria [30 ] , Slovakia [31 ] and Poland [32 ] . In 2001 a similar contract was signed with Hungary. Even though they are not big in size they permit RAC MiG to remain on this market.

KBP Instrument Design Bureau

The management of the Tula-based Instrument Design Bureau (Russian acronym KBP) has reported that in the first nine months of 2002 its export deliveries exceeded $400 million [33 ] . However, an analysis of similar reports made in previous years indicates that the KBP leadership tends to overestimate its export volumes. The probable explanation is that it combines independent sales and deliveries through Rosoboronexport. As KBP produces a wide range of armaments, including various subsystems for aircraft, naval systems and armored vehicles it remains unclear whether the figure stands for independent exports or includes armaments delivered to foreign customers by other exporters together with bigger systems.

According to CAST estimates, the company's independent exports did not exceed $200 million which is double the amount of 2001. This can be accounted to the beginning of the main stage of the fulfillment of a 1999 contract with the United Arab Emirates for the development and delivery of 50 Pantsyr-S1 (SA-19) wheeled SAM systems. In 2002 KBP was supposed to deliver the first 10 systems [34 ] . Unidentified contracts signed in 2001 for $500 million may be another reason for the hike [35 ] .

Among the new contracts we should mention the agreement signed at the end of 2002 with India on delivery of 28 upgraded Tunguska-M1 anti-aircraft artillery systems [36 ] .

Antey Concern

In 2002 Antey Concern completed the implementation of the 2000 contract with Greece by delivering the last four Tor-M1 (SA-15) short-range SAMs and two battery command posts [37 ] . After that it ceased to exist as an independent company in the Russian MTC system forming the Air Defense Concern together with Almaz Central Design Bureau. The authorities are still considering the question of giving the right to independent arms exports to the new holding that in addition to Antey and Almaz unites other facilities involved in the production of air defense systems. Thus in 2002 the exports of the already nonexistent Antey Concern stood at about $120 million.

The 2002 export deliveries of the Kolomna Machine-Building Design Bureau (Russian acronym KBM) hardly exceeded the 2001 volume and according to early estimates amounted to $30-50 million. In 2002 it is known to have implemented a 2001 contract with Vietnam for transferring 50 Igla MANPADs and the license for their production.

There are signs that in 2002 it intensified its foreign economic operations by independently concluding export contracts for $150 million in the first half of the year [38 ] . At the same time Rosoboronexport signed several export contracts for its staple - MANPADs (with Malaysia and Mexico) which is a saddening sign of the beginning of competition between Russian arms exporters on the world market.

In 2002 the Machine-Building Research and Production Association (NPO Mash) continued work under the Russian-Indian BrahMos project of an anti-ship missile. There were reports of the second test launch of the missile [39 ] . Thus in the absence of other major contracts we can assume that its export operations also remained at the 2001 level or about $30 million.

Hence the deliveries of independent arms exporters totaled about $700 million amounting to 15% of overall Russian arms exports.

Note: The Diagram is prepared by CAST.

Conclusions

Proceeding from early reports on Russia's MTC in 2002 we can draw the following conclusions:

• In 2002 Russian arms exports reached another record figure, earlier forecasted by CAST, - $4.7 billion.
• The year did not change the geography of Russian arms exports that are still tied up with China and India. Kuwait, Algeria, Vietnam and Greece are other important recepients of Russian armaments.
• The record volume of defense exports was reached through joint efforts of the government agent and independent exporters. The biggest growth figures were reported by three exporters: Rosoboronexport, RAC MiG and KBP. Though the number of arms transfers through Rosoboronexport grew against 2001, its share in overall exports shrank from 88% to 85%.
• New leaders emerged among the independent exporters: RAC MiG and KBP. It is indicative that in addition to actual exports the upgrading of Soviet-made aircraft is becoming an important component of RAC MiG foreign economic operations. The year also saw the logical departure of a one-contract company - Antey Concern from the market.

1.Interfax-AVN, 10.12.2002.
2.Interfax-AVN, 12.11.2002.
3.Interfax-AVN, 16.12.2002.
4.Alexei Nikolsky, Mikhail Kozyrev, "Monopoliya VTS krepnet, Vedomosti", 05.03.2003.
5.Lyuba Pronina, "Arms Exporter Rakes in Record $4.3 bln", Moscow Times, 14.01.2003.
6.Alexei Nikolsky, "VPK zarabotal 4 mlrd", Vedomosti, 17.12.2002.
7.Alexei Nikolsky, "Sushki vmesto masla", 13.01.2002.
8.The first 10 aircraft under the contract were delivered in 2001, see Interfax-AVN, 05.12.2001.
9.ITAR-TASS, Aviatsiya, kosmos i oruzhie Rossii, 07.08.2002.
10.CAST information.
11.ITAR-TASS, 12.09.2002.
12.API (Yekaterinburg), Novosti, 06.08.2002.
13.Vladimir Georgiyev, "Novy tankovy konflikt", Nezavisimaya Gazeta, 13.02.2002.
14.Aviatsiya, kosmos, vooruzheniya, 12.09.2002.
15.Aviatsiya, kosmos, vooruzheniya, 28.08.2002.
16.Alexei Nikolsky, "Molitsya na Kitai", Vedomosti, 21.05.2002.
17.Ibid.
18.Aviatsiya, kosmos i oruzhie Rossii, 03.01.2002; Anna Nevskaya, Ilya Bulavinov, Kommersant, 09.01.2002.
19.Ibid.
20.Alexei Nikolsky, Mikhail Kozyrev. Rossiya postroit Kitayu Rify, Vedomosti, 30.04.2002
21.CAST estimate
22.Pyatyorka silnykh, Gazeta, 11.11.2002; CAST information.
23.Ibid.
24.Aviatsiya, kosmos, vooruzheniya, 30.09.2002
25.Aviatsiya, kosmos i oruzhie Rossii, 21-22.05.2002.
26.Konstantin Lantratov, "Meksika zakupila pyat Igl dlya okhrany svoyei nefti ot terroristov", Kommersant, 19.11.2002.
27.Ibid.
28.Interfax-AVN, 28.06.2002
29.Russia's report for 2001 to the UN Register of Conventional Weapons, disaramemtn.un.org.
30.Interfax-AVN, 26.03.2002.
31.Interfax-AVN, 04.07.2002.
32.Aviatsiya, kosmos, vooruzheniya, 26.09.2002.
33."Donskiye kazaki zatmili russkoye oruzhie", Kommersant, 04.10.2002.
34.ITAR-TASS. Aviatsiya, kosmos i oruzhie Rossii, 05.04.2002.
35.Statement of KBP Deputy Director Stanislav Averin, Petersburg economic forum, 20.06.2002
36."Donskiye kazaki zatmili russkoye oruzhie", Kommersant, 04.10.2002.
37.Aviatsiya, kosmos i oruzhie Rossii, 02.04.2002.
38.Aviatsiya, kosmos i oruzhie Rossii, 21-22.05.2002.
39.www.brahmos.com