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Ukraine and Belarus: in Search of a Niche on the Arms Market
Alexander Vasilevitch
Oleg Belosludtsev, Higher Academic Degree in History
Enterprises of the military-industrial complex (MIC) in Russia, Belarus and Ukraine were the mainstays of the USSR defense industry. After the dissolution of the USSR, all of the newly independent states pursued separate military-industrial policies. It is customary in Russia to look down upon the methods they adopted to resolve military-industrial issues: Russians consider Western experience alone to be of interest. Nevertheless, the problems, which our neighbors face, are very similar to ours, and innovative measures have frequently been adopted to overcome them. Therefore, the experience gained by the CIS-states is more valuable for us than that of the West.
State of the Defense Industry
Ukraine: Results of a Poorly Planned Conversion
After the fall of the USSR, Ukraine inherited nearly one third of all Soviet enterprises working in the military-industrial complex. During Soviet times, about 45% of the gross domestic product of Ukraine was produced by the military industry1. The military-industrial complex of that time incorporated 1,840 enterprises with 2.7 million workers, and produced one third of GDP of Ukraine. Seven hundred of those enterprises, with 1.3 m workers produced only military output2.
Ukraine accounted for 17% of Soviet defense output. The MIC's leading-edge industries were space rocketry, shipbuilding, transport aviation, armor and engineering hardware, and the manufacturing of special radio engineering systems. Ukraine produced indigenous military hardware such as heavy aircraft and missile cruisers, navy vessel power plant, space rocketry items; there were strategic raw materials available (manganese, titanium alloys). At the same time, Ukraine did not produce such critical arms components as attack planes, fighters and bombers, antiaircraft missile systems, artillery and small arms.
Changes in geopolitical conditions, which occurred after the collapse of the USSR and the emergence of Ukraine as a sovereign state, called for a radical restructuring of the MIC. Conversion of military production was viewed as the linchpin of the restructuring of the entire national economy. 22 civil programs were developed at the government level, which included over 550 sub-programs to establish the development and production of consumer goods. However, these plans turned out to be in shatters.
Poorly planned and short of resources, the conversion of military production in the context of Ukraine's crisis-ridden economy brought about a situation when in early 1997 only 150 enterprises were engaged in the development and manufacture of military products, and the work force at those enterprises was reduced to 57,000. In 1996 military output plunged one forth and amounted to only 4% of the total output of goods produced by the machine-building industry3.
Annual rates of decline in military output were estimated at 25% (compared to 1-3% in western countries) from 1993 to 1995, which heightened economic and social tensions at the MIC's conversion enterprises. The switching of military production to civil products under government target programs failed to deliver the expected results. Disbursed funds were only 20-30% of those planned, and many enterprises used conversion funds as working capital and to pay wages. Nearly half of the finances from the budget targeted at conversion were paid to enterprises which had no connection whatsoever with MIC. Owing to short and irregular financing (for example, in 1994 less than 50% of funds against those planned were appropriated to the conversion program), production defense facilities were used at a rate ranging from 5-80% of their estimated capacity.
Owing to limited financing by the Defense Ministry, research and development projects were largely scrapped. For example, if in 1995 about 600 R&D projects involving 133 research and design centers were ongoing, then in 1996 the number of R&D projects was reduced to 318, and the number of research and design centers to 86. But during the year the Defense Ministry, owing to a shortage of funds, was forced to scrap another 130 R&D projects4. In fact, all high-profile R&D projects designed to develop new types of arms and military hardware were disbanded.
The MIC crisis in Ukraine is fraught with grave implications. Production output has dropped, the internal market for consumer goods produced by the defense enterprises has virtually collapsed, the majority of enterprises and organizations have contracted their main production activities, while the highly skilled work force of the MIC is leaving the industry. Many products are of poor quality and overpriced, which contributes to the low competitiveness of Ukrainian goods on the world market. Production and research teams built up over decades have broken up. The MIC's research and engineering potential is in the process of critical disintegration.
Owing to a considerable drop in purchasing power and disastrous macroeconomic situation, the products of many enterprises, even of those with high technologies and state of the art production facilities, are not in demand on the market.
But in spite of the above negative trends, Ukraine has so far retained capabilities to develop and produce an impressive list of military products including:
Weapons and military equipment, ammunition and their components, devices and completing articles, training facilities (dummies, trainers-simulators of various weaponry types);
Communications systems and control systems for troops, weapons and equipment;
Explosives, blasting supplies, powder, propellant for combat rockets, special-purpose materials and special equipment for their manufacturing;
Means of individual and collective protection from weapons of mass destruction;
Engineering installations and equipment for combat weapons and equipment;
Special equipment and technology for repairing, upgrading and disposal of arms and hardware;
Installations to operate, repair, modernize weapons and military hardware and dispose of them;
Special software for automated control systems for troops, arms and hardware, R&D military projects5.
But today, owing to under-financing, the Ukrainian army is unable to ensure heavy-loaded procurements of arms and materiel. Besides, Ukraine does not operate a closed production cycle of a majority of designations of military products. Thus, in 1990 a share of closed-cycle technological processes was estimated at 18-20% of the entire Soviet MIC; today it reduced to 5-7%6. Therefore, the Ukrainian leadership has attempted to harness the MIC's capabilities in military-technical cooperation with foreign states.
Belarus: Complete Production Cycle not in Place
Belarus ranked the third among other Union republics in the number of employees at defense enterprises. In 1995 the work force at the MIC's enterprises amounted to 245 0007 or 16.3% of the total number of industrial workers8. After the dissolution of the USSR, Belarus inherited about 120 enterprises and organizations of the military-industrial complex including over a dozen of R&D centers engaged in defense projects. Belarus enterprises specialized in the production of completing articles and weapons components. The production of final arms systems was virtually nonexistent. The following types of products and services were delivered:
Radio electronic systems and devices for diversity of weapons types;
Specialized computer-aided hardware and military-purpose systems including automated control systems for weapons and troops;
Electronic-optic and laser military-purpose systems;
Special-purpose communications;
Components of missile and space defense systems;
Chassis for various types of hardware including missile launchers (20% of the Republic's motor-car industry was geared up to meet military demand);
Repairs of aircraft, armor, engineering
equipment and vehicles, radio electronic components of weapons and devices for air defense.
In the early 90s a large-scale conversion program was launched. In 1992-1993 fifty-nine enterprises and organizations of the State Committee for Industry were undergoing conversion. The implementation of this program prevented a general drop in production, unlike, for example, in Russia. From 1990 to 1996, the slump in the most science intensive industries including MIC's enterprises amounted to 40% (in Russia -70-80%)9. This led to a decrease in the share of defense output from 50.1% in 1991 to 12.7% in 199410 against the total output of enterprises, which were under conversion to civilian production. Conversion was initiated not only by the government. There were a number of reasons for many enterprises, and above all, for the radio electronic and instrument-making industry, to switch over to the production of civil goods:
Shortage of funds and, predictably, a shortage of orders from Russian enterprises, the major consumers of Belarus MIC's products; a sharp drop in outputs of arms and military hardware in Russia;
Lack of funds, expertise and research facilities for independent design and production of final products which could meet demand on world markets;
The structure of demand for the Russian MIC's products on world market, which did not favor Belarus enterprises;
The Russian Federation policy to meet demand for assembly parts and systems based on utilizing the capabilities of Russian MIC's enterprises.
As a result, enterprises within the Belarus defense complex sharply reduced their capacity. According to experts, less than 20% of Belarus current defense industry is able to fulfill military orders within the range and volume of the earlier period11.
The Belarus MIC's enterprises are assigned to two ministries: Industry and Defense, with the bulk assigned to Industry. These include machine-building, radio-electronic, instrument making, including high-precision instruments, motorcar and tractor-building enterprises. Four enterprises, including aircraft repair enterprise #558 (in Baranovitchi), repair enterprise #140 (in Borisov), motorcar repair enterprise #124 (in Minsk), and an enterprise that repairs radio electronic components for air defense facilities (in Borisov) - are assigned to the Defense Ministry.
Almost all enterprises engaged in fulfilling military orders are fully or partially state-owned and under its overall management. Controlling interests of joint-stock companies remain in the hands of state bodies. A rare exception is found in the Open Joint-Stock Company (OJSC) "Minotor-Service», which was established by former employees of the military production of the Minsk tractor plant, specializing in upgrading self-propelled antiaircraft guided missile systems. Good relations with their main contractor, the Russian Defense Ministry, are likely to save them from the encroachment of state ownership.
The central plant of test range and training equipment #708 is assigned to the Minsk City Council, but today over 90% of its activities deal with the output of diversified civilian products.
A majority of Belarusian MIC enterprises have received no orders whatsoever from the Belarus Defense Ministry since the mid-nineties. Adequate upgrading of hardware in the Belarus Armed Forces has not been carried out since the moment of their inception. The shortage of funds has prevented full-scale procurement of spare parts, units for repairing weapons or military equipment12.
Only maintenance of military hardware, primarily aircraft, armor and air defense facilities is ongoing, and from time to time small batches of hardware have been modernized by repair plants assigned to the Defense Ministry. The upgrading of combat equipment of Air Defense Forces and Air Forces13 was a priority.
"Minator-Service," jointly with the Russian engineering plant in Ulyanovsk, implemen-ted a program of upgrading self-propelled antiaircraft guns "Shilka"14;
aircraft of the Belarus Air Forces were upgraded at the Baranovitchi aircraft repair enterprise in 1998;
in 2000, repair plant #140 in Borisov jointly with a number of enterprises under the Industry Ministry, namely, BelOMO, the Joint-Stock Company "Peleng," and the Joint Venture “Sanoet” were in charge of upgrading main battle tanks T-72, infantry combat vehicles. Works include improvement of fire control systems with mounting of thermal imaging equipment and digital data processing devices, strengthening of armor protection15;
the Minsk motorcar plant designed upgrading of "Grad" multiply launch rocket system which includes mounting multiply launch rocket system on a new chassis16.
In August 2000, there was talk about intentions to upgrade MiG-29 fighters jointly with Russian enterprises, which would supply new units and spare parts17. It is worth mentioning that the upgrading of some of the above armaments of the Belarus army was likely intended as a pre-sales activity with the aim to sell them on outside markets.
The lack of orders from the Belarus Defense Ministry, the shortage of funds, the inadequacy of research and production facilities to produce final arms systems, and the absence of structures to ensure a complete design cycle of final arms systems, except for the production of automated control systems (Belarusian industry as a whole accounts for 1-3% of autonomous production of final arms samples18), forced Belarus MIC's enterprises to seek cooperation with former partners in Russia and customers in the CIS-states and foreign countries.
Military and Technical Coopera-tion with Russia
Ukraine: A Forced Imperative
Military and technical cooperation with Russia is treated by Ukraine as a forced imperative, since the military-industrial complex of Ukraine is a fragment of the USSR MIC, and it is dysfunctional unless it cooperates with Russia and other CIS-states. Interaction between the defense complexes of Ukraine and the Russian Federation is simple since the armies of both countries are equipped with similar-type military equipment, and share the same system of services, spare parts supply, cooperation in the process of arms development and production.
However, military-technical cooperation between the two countries is seriously hampered by competition on world arms markets. Ukraine offers excess arms at prices much lower than those of Russia, and Moscow accuses Kiev of dumping. In particular, a would-be contract with Ecuador for the delivery of Russian air defense systems was frustrated when Ecuador bought the anti-aircraft guided missile system "Osa-AK" for 64 million USD from Ukraine.
262 Ukrainian MIC's enterprises and organizations maintained contacts with Russia in 1996. The rocket design bureau "Yuzhnoye" named after M.Yangel, the production association "Yuzhny Inzhenerny Zavod", the O. Antonov aviation science and engineering complex, the Zaporozhye aircraft repair complex "Progress" - "Motor Sich", the Kiev science and research institute "Quant", the Nikolayev science and engineering association "Mashproect", and the Kiev plant of engineering machines, science and production association "Khartron" are in close cooperation with Russian enterprises. Cooperation is generally concentrated in such defense industries as space rocketry, aircraft building, shipbuilding, radio engineering, electronics, armor and artillery rocketry.
Since Ukraine has poor resources of tin, nickel, copper and precious metals, enterprises of electronic, electrical and some other industries are extremely dependent on cooperation with Russia. The list could be enlarged to include aircraft and shipbuilding enterprises, which require imports: Russia supplies 70% of finished products and 95% of materials to the aircraft industry of Ukraine. The share of Russian assembly parts in the aircraft An-70 amounts to 80% including 75% of electronic components and 38% of materials to complete the aircraft engines of the Joint-Stock Company (JSC) "Motor-Sich"19.
Ukraine and Russia pursue similar interests in the use of science and engineering capabilities to develop a new generation of space vehicles, in particular, civil- and military-purpose micro-satellites, to upgrade existing and prototype space transport systems of aircraft equipment. The international programs "Sea Launch" and "Global Star" foresee close cooperation between Ukraine and Russia in the space rocketry industry. By virtue of their largely commercial nature, those projects would not be affected by the pro-western politics of Ukraine.
Delivery of radars stations for air defense, completing articles for communications installations, automation, radio electronic warfare is critical for Russia. Ukraine has a well-established production of central computing system, loader-launcher vehicles, individual devices, systems and units to the Russian S-300 SAM system.
Ukrainian military facilities, including the science and pilot center "Nitka" designed for test flights of new shipborne aircraft and naval pilots training, fall within the scope of Russian interest. In 1997 Russia supplied spare parts and technical documentation to Ukraine for MiG-29 and Su-27 aircraft worth of 600 000 USD, in order to obtain access to the center's facilities. Moreover, Russia is seeking to operate military-purpose facilities and installations of the shipbuilding industry, including delivery-acceptance bases for finishing ships, special parent ships meant for decommissioning nuclear submarines and dockyards.
There is great potential for developing military and technical cooperation between Ukraine and Russia. The military-industrial complexes of both countries are currently depressed. The scope of state orders has shrunk dramatically, the conversion of military production has failed, while the privatization and restructuring of the military-industrial complexes of each country has had detrimental implications. No new organizational and structural management forms have emerged, the hoped-for-growth of production has not materialized, and the cash strapped economy cannot afford structural and technological changes to reform the MIC, or far-reaching R&D projects.
Belarus: Dynamic Convergence
Military-technical cooperation with Russia is a major vector in the policy of Belarusian MIC's enterprises. To date about 200 Russian defense enterprises have technological relations with nearly 120 organizations of the Belarus MIC20.
There are multiple rationales to explain this tendency:
a high degree economic integration - 60% of Belarusian foreign trade is with the Russian Federation, imports to Belarus are largely raw materials and energy; 70% of Russian transit to European countries goes through the Republic of Belarus; Russia is a major distribution market for products of Belarusian industry as a whole;
convergence of political and military-strategic ambitions;
a track record of close military-technical and production cooperation during the years of the Soviet power, and the structure of the Belarus defense complex, 90% of which output is completing articles for weapons assembled in Russia21.
The main vectors of cooperation are:
1. Delivery of assembly parts, weapons components being produced by Russian MIC's enterprises, joint development and production of new weapons, upgrading and repairs of hardware produced at earlier stages.
Political efforts to integrate Belarus and Russia undertaken since 1993 are in harmony with the interests of Belarus' MIC's enterprises. These include Belarusian defense enterprises, which have been driving integration processes both in the economic and military fields. Thus, one of the biggest arguments of those advocating the CIS Collective Security Treaty lies in the opportunity to expand military orders for the MIC. The Customs Union of Belarus and Russia created in 1995, which enabled duty-free shipments between Belarusian and Russian defense enterprises including the Kazakhstan MIC, became one of the major landmarks in the process of integration.
Agreements pertaining to the integration of the Republic of Belarus and Russian Federation, namely the Treaty of the Creation of the Union State are the mainstays of MTC between Belarus and Russia. There are about 40 documents which specifically address this area including the Treaty on Military Cooperation between Belarus and Russia, the Security Concept of the Union of Belarus and Russia, the Joint Defense Policy Concept, the Agreement on Joint Assurance of Regional Security and so on. One of the basic documents to streamline military-technical cooperation is the Concept of Joint Defense Order signed on April 28, 1999, which sets forth the creation of uniform types of weapons and military equipment in compliance with uniform standards, and an agreement on the procedure for drawing up and placing orders.
The action plan of the Republic of Belarus and the Russian Federation to fulfill the provisions of the Treaty of Creation of the Union State signed on December 8, 1999, envisages the completion of a joint defense order for 2001, and a joint armament program for the Union State to 2005. The Belarusian side believes that these documents would be approved by the end of 200122. The share of Belarusian shipments in Russian defense production is estimated at 17%.
The emergence of state-to-state financial-industrial groups marks an advanced form of cooperation. Enterprises organized in such structures produce a virtually complete cycle of final products.
Since the Russian Defense Ministry's demand for armaments is so low, cooperation is most pronounced in the production and development of weapons with international market potential, like air defense systems. Therefore, a limited number
of Belarusian defense enterprises, whose products are marketable, account for a major proportion of total cooperation. Prospects for Belarusian producers of completing articles depend on Russian producers of final weaponry systems and their capacity to promote their products on the world market.
Two tendencies are worth mentioning in this scenario:
A few Belarusian enterprises, regardless of whether they produce a complete cycle of products, have a chance to become leading-edge enterprises through the joint developments of new systems and the upgrading of outdated systems;
Since the economies of both countries lack financing for the development of new weaponry systems, the upgrading of outdated systems a high-profile trend in this cooperation.
Cooperation in the field of modernization and repair of military hardware for the Defense Ministries of both countries is a low-profile activity. It is limited to the upgrading of 500 SAM systems23 carried out by OJSC "Minotorservice" in conjuncture with Russian enterprises, with 300 out them being upgraded under an order placed by the Russian Defense Ministry. A number of repair plants in Belarus were commissioned to carry out individual orders. The upgrading of Belarus equipment in Russia was also limited to a few air-defense systems24. The Ulyanovsk engineering plant jointly with "Minotor-Service" and OJSC "Peleng" fulfilled an upgrade program for the antiaircraft system "Shilka." Experts from the Tula Instrument Design Bureau were engaged in the order placed by the Defense Ministry of Belarus to upgrade and repair anti-aircraft guided missile system "Tunguska," the Ulyanovsk plant - the antiaircraft guided missile system "Buk"25. In 1999 the Izhevsk electrical plant upgraded the Belarus antiaircraft guided missile system "Osa." According to press coverage, a project to establish facilities to assemble Su-27 fighters was planned at the Baranovitchi aircraft repair plant.
Opportunities for the further development of this type of cooperation are slim. The Defense Ministry of Belarus states that virtually the entire range of armaments and military equipment (over 4,000 designations) can be repaired by Belarusian enterprises, except for part of air-defense systems and aircraft Su-2427.
2. Deployment of Russian military installations on the territory of Belarus, joint assurance of regional security.
Russian military installations located in Belarus are the backbone of the west-facing missile attack warning system. The digital solid-state radar station "Volga", capable of monitoring the launching of ballistic missiles throughout the territory of Europe is among the first wave of air-defense systems commissioned in 2000 and located in the area of Baranovitchi, in Gantsevichi, the Brest Region28. Belarusian MIC's enterprises contributed to the construction of this station. According to American experts, the value of a similar station in Latvia was 3 bln USD29. Another installation integrated in the unified communications system of the Russian Navy is located in Vileika, Belarus. According to Russian experts, the construction of a similar installation in Russia will take 5-6 years and cost over 3.2 bln USD30.
In 1999 Belarus ratified the Agreement on the Joint Use of Installations Within Military Infrastructure of Belarus and Russia. Under the Agreement, jointly used installations are funded from government budgets or from the budgets of Belarus and Russia. Jointly used installations include control points, system of engineering communications, positions and installations of air-defense systems, airfields, communications points and lines, test ranges, stockpiles, bases and warehouses31. The issue of rent to be paid to Belarus for the use of such installations (along the lines of Baikonur in Kazakhstan) has not been raised so far.
Belarusian troops are engaged to defend Russian western borders. For example, the air-defense system of Belarus obviously exceeds its own needs. The unified regional air-defense system is to be completed in 2001. Analysts say that to establish its own grouping of air-defense system on the western border, Russia must spend over 4,6 bln USD (10 trillions rubles for August of 1994)32. Belarusian airfields are used as forward bases for Russian long-haul aviation.
3. Shipments of final battle systems and military equipment are low-key component of military-technical cooperation. Such shipments from Russia to Belarus were virtually nonexistent owing to lack of funds.
At the same time, two contracts as minimum for each delivery of such expensive aircraft as MiG-
29UB (2 in 199733 and 8 in 199934) have been identified. The Belarus Defense Ministry states with regards to the last contract (for 8 units) "we have not signed any contract whatsoever for shipments of MiG-29 to Belarus"35. The logical assumption is obvious: those shipments were meant for the re-export of aircraft as per the Peru and Algiers deals.
Prospects for the development of this aspect of cooperation are assessed as insignificant. Belarus intends to purchase some types of weapons and military equipment through the armament program for 2001-2010, which has not yet been approved by Alexander Lukashenko. The approval of a joint defense order for 2001 is conducive to the adoption of the program. Besides, plans to reduce the size of the Belarusian army can hamper rearmament program, while the Defense Ministry remains strapped for cash. Such shipments are most likely to be carried through barter. Belarus owns several systems which can be offered to the Russian Defense Ministry: firstly, an automated control system for weapons, troops and staff or the diversion vehicle 2T which was developed in conjuncture with Russia and others. However, the Russian Defense Ministry faces the same lack of funds. The most likely scenario would be the purchase of automated control systems (likewise through barter) which are produced only in Belarus and which are required for enhancing the combat readiness of the Russian army.
Cooperation on the international arms market can be broken into a few stages.
Stage 1. By 1995 neither Belarus nor Russian special exporters were orientated to joint cooperation, primarily owing to the following reasons:
violation of the secrecy regime by the Belarusian side in connection with a number of developments of the USSR MIC;
availability of a similar range of second-hand armaments and the resulting competition;
low-level MTC culture in both countries.
The first disagreements emerged as early as 1992 when Russian security services suspected that Belarus shared with foreign security services information about the military hardware with which Belarus and Russia were armed. Shipments of the Su-27 and components of S-300 to the US were manifestation of that policy36. In October-November 1995, Belarus and Russia competed for shipments of Mi-35 helicopters (the export prototype of Mi-24) to India.
Stage 2. The years 1996-97 were the most successful in the arms trade for Belarus. However, at that time it became clear that armament and military equipment inherited from the Belarusian military contingent of the Soviet period would soon run out, and the range of its own products was limited. Therefore, in spite of a few disagreements between Belarus and Russian exporters (they mostly arose from the contract for the shipment of eighteen MiG-29 to Peru in 1996-97 when the VPK "MAPO" voiced its refusal to maintain and repair those aircraft), the process of cooperation recovered. It is worth pointing out that, but for a number of disputes with some Russian structures, a cooperative spirit prevailed on both sides. Thus, in the end, Russian enterprises participated in the implementation of the Peru contract. In 1998 "Rosvoorouzhenie" and the MIC "MAPO" signed a contract for the maintenance and repair of aircraft purchased by Peru and for the delivery of three more aircraft.
Stage 3. There was a formal twist in policy in 1998. A number of statements were issued, including those on behalf of President Alexander Lukashenko, that the Republic of Belarus and the Russian Federation played and would play roles of business partners, not competitors on the arms market. Similar statements were made by the heads of major special exporters of both countries37. The process of building up cooperation culminated with the signing in September 1999 of the Inter-Government Agreement between the Republic of Belarus and the Russian Federation "On the Procedure for Joint Actions in Exporting Military-Purpose Products to Third Countries"38.
Headway in cooperation enables the Belarusian party to perform the role of an active player on the market of armaments and military hardware, even in light of cutting down military stockpiles. Arising from this, it is worth mentioning the continuing re-export of Russian MiG-29UB, for example to Algiers. Belarus has renewed efforts of joint arms developments targeted to the international market.
Military-Technical Cooperation with Foreign Countries
Ukraine: From Export of "Soviet" stocks to own products
Once Ukraine proclaimed its sovereign independence, it came into possession of whopping stocks of weapons far exceeding its
own defense needs. This stock was composed of 9,293 tanks T-64, T-72, T-80 (in Russia – 10,333 units), 11,346 armor vehicles BMP-1, BMP-2, BTP-70, BTP-80, BPM-1K (in Russia –16,389 units), 18,240 artillery and missile systems 2A65, 2S19, BM-21, 9P140 (in Russia -7,719 units), 1,431 aircraft MiG-25, MiG-29, Su-27, Su-24, Yak-28, Su-25 (in Russia - 4,161 units), 285 helicopters Mi-6, Mi-8, Mi-9, Mi-24 (in Russia -1,035 units.) Warehouses were hoarded with huge amounts of ammunition, fuels and lubricants, foodstuffs sufficient to supply five army fronts. According to foreign estimates, the materiel was valued at 89 bln USD39.
It is understandable, that under conditions of imminent economic collapse Ukraine made the decision to sell excess weapons to raise funds for maintaining the combat readiness of the remainder of weapons and military hardware and to carry on with conversion. Foreign partners were familiar with those armaments and their national armies were armed with such weapons and military hardware, and they were staffed with military personnel who had a track record of training at Soviet military educational establishments. In view of such conditions, the objective of replenishing the arsenals of those countries which had Soviet-made arms and military hardware was well-grounded.
Arms and materiel were sold not only through official channels but on the black market as well, which held control over a considerable part of the arms shipments from Ukraine to the outside market. According to some sources, the shadow economy accounted for not less than 80% of export arms deals40.
The government spared no efforts to deal this situation, and engaged the Security Agency of Ukraine and Interior Ministry. Thus, by the end of 1995 an operation carried out with the help of law enforcement bodies of other countries resulted in the seizure of about 5,000 t of ammunition, disrupting the activities of a go-between company which, in violation of international sanctions, was involved in the illegal arms trade from Ukraine to the territory of former Yugoslavia. In 1996, the Security Agency of Ukraine revealed and put an end to gross violations of law in the course of foreign trade operations by some enterprises of the machine-building industry of Ukraine. In particular, a number of contracts for the delivery of explosives to foreign companies operating on behalf of the "Tigers of Liberation of Tamil Ilama" operated, were terminated41.
According to the UN Register, in 1992 Ukraine exported arms to the amount of 400 m USD, ranking seventh in world sales (after the USA, Russia, Germany, France, the UK and China). However, in 1992 the majority of export deals in Ukraine as a rule ignored interests of the state. Therefore, export control was tightened, and already in 1993 arms sales were reduced to 46 m USD. According to SIPRI, in 1994 Ukraine sold arms worth of 107 m USD.
The period from 1991-95 as a whole led can be characterized as frustrating Ukraine's hopes for Western concessions in exchange for disarmament, which had considerable economic implications of defense conversion. When Ukraine participated in the international arms fairs for the first time in 1995, armaments became the main issue not in the context of reduction and scrap, but as a real source of forex receipts.
The arms trade in Ukraine is carried out under conditions of state monopoly, mostly through "Ukrspetsexport." Today, subsidiaries of "Ukrspetsexport" - "Ukroboronservice," "Progress," "Ukrinmash," "Promoboronexport" and "Spetstekhnoexport" - have been granted the right to export and import weapons and military equipment. Besides, the state enterprise "TASKO-export," state joint-stock holding company "Artyom," OJSC "Motor-Sich," Kiev state-owned plant "AVIANT," state -owned enterprise "Science and research institute of radar systems "Quant-radar" and the state-owned enterprise "Aviation Science and Engineering Complex named after Antonov" were granted rights to export and import military-purpose explosives, ammunition and their components. In addition, the state-owned enterprise of the Defense Ministry "Ukrainian Aviation Transport Company"42 was granted the right to export air services for transporting military-purpose goods and sell aircraft received from the Defense Ministry (in cooperation with a state-owned intermediary). Such principles of military-technical cooperation enabled Ukraine to get rid of negative trends in the arms trade during the first years of the independence of Ukraine, and to gain momentum of export growth.
Thus, if in 1996 thirty countries purchased Ukrainian weapons, then by early 2000 Ukraine sold armaments to more than 50 countries and carried out operations on almost every continent. In 1999, military and technical cooperation embraced 78 countries43.
Ukraine promotes its most competitive samples manufactured by space rocketry, armor, electronic-optical, shipbuilding, aircraft building and propulsion engineering industries. Enterprises producing aircraft engines offer overhaul and maintenance services for the engines of helicopters type "Mi," and "Ka". Thus, in 1995 the export of aircraft engines generated over 100 m USD for Ukraine. Ukraine is one of the world's leaders in producing navigation devices, independently targetable warheads for surface-to-air missiles, radio technical control stations, sound ranging systems of artillery surveillance, sophisticated control systems, communications equipment, radio engineering and radio electronic warfare, aviation and rocket aiming systems44.
The signing in 1996 of a contract for the shipment of 320 T-84 tanks to Pakistan is recognized as the most impressive accomplishment of Ukraine in the MTC area. It is not so much the matter of the value of the contract, about 650 m USD, but the fact that Ukraine is a stand-alone entity on the world arms market.
The T-84, tank produced by the Malyshev production association in Kharkov, is a diesel modification of the T-80U. Almost 80% of its assembly parts and spare parts were produced by Russian plants. However, Russian enterprises refused to join the deal, since it could threaten Russia's relations with India. According to Ukrainian analysts, Russian producers of assembly parts to the tank lost over 70 m USD45.
Seeking ways out of a predicament caused by the Russian refusal to participate in shipments to Pakistan, the Ukrainian MIC proved its ability to survive under dire conditions. The Malyshev plant was forced to reorient to shipping completing articles from Eastern European countries, and in the future plans fully to switch to a closed technological cycle targeted to the home production of tanks. For example, the Dnepropetrovsk battery plant adjusted to the production of batteries, similar to those previously bought in St.Petersburg. The Cherkassk "Photopribor" adjusted its production for manufacturing two out of three major sights, and the production of the third sight was planned in Ukraine too46.
However, the biggest breakthrough of the Ukrainian defense complex in seeking a solution of problems caused by the refusal of Russia to participate in shipments to Pakistan was creation of its own artillery system. The decision to manufacture was adopted on March 17, 199747, and already in a year the KBM-3 was presented, a 125-mm smooth-bore gun. The technical performance of the Ukrainian tank gun is the same as that of the Russian gun 2A46M1, which was earlier mounted on T-80UD. Although Russia submitted a formal refusal to participate in the manufacturing of tanks for Pakistan, Russian-Ukrainian cooperation in developing Ukrainian artillery system materialized nonetheless: a team of Russian engineers and workers from Perm, where the gun 2A46M1 originated, worked at the Malyshev plant48.
Belarus: Arms export as the only source to raise funds for national defense industry
The Treaty of Collective Security is the basis of the military and technical cooperation of Belarus with the CIS-states. Under the Agreement on Basic Principles of Military and Technical Cooperation, signed within the framework of the Treaty of Collective Security in June 2000, the member states, parties to the Treaty of Collective Security, sell armaments and military equipment within their military community at prices they pay when procuring armaments and military hardware for their own armies.
The Agreement on Military and Technical Cooperation with Tajikistan was signed by Belarus in 1998, although contacts in this area were established earlier. Thus, in 1997 a contract for repairing armor assemblies and units was concluded between the repair plant #140 in Borissov (Minsk region) and armor military plant #832 in Tajikistan. Within the framework of the Treaty of Collective Security, Belarus undertook to supply weapons to Tajikistan and Kyrgyzstan including small arms, grenade launchers, communications systems, optic sights for small arms, ammunition, armor and helicopters repair services, and supply of uniforms. Part of the supplies is free, part is paid through barter of cotton and aluminum49.
The Inter-Government Agreement on Military and Technical Cooperation with Armenia was signed in May 1999, and the Program for Military and Technical Cooperation between the two countries for 2000 was signed in December 1999 and envisages a number of activities including, among other things, joint combat training and repairs of Armenian military equipment at the Belarus plants and supplies of military hardware. However, more specific information on supplies carried out under the program is not yet available.
Among countries, which are not parties to the Treaty of Collective Security, Moldova is the most active partner and a major importer of Belarusian armaments and military hardware. As early as 1992 an Agreement on cooperation between the two Military Agencies was signed. According to the Agreement, Belarus supplied to Moldova vehicles and caterpillar vehicles, small arms and ammunition, multiply launch rocket systems "Grad," BTR-80 armored personnel carriers (the first batch in 1998 - 8 units at price of 200,000 USD each50), though export was frozen for three years due to the Transdniestr conflict.
All the CIS-states, which are involved in dynamic cooperation, have been engaged in combat missions and are concerned with building efficient, adequately armed military units. It is worth mentioning that Belarus in all issues related to the military and technical cooperation always take into account Russia's attitude towards the third country. As far as other countries are concerned, for example, Ukraine, cooperation is limited to multilateral activities with Russia involved along the lines of developing and creating armaments and, in rare cases, reciprocal services. Belarus repairs Su-24 aircraft51 in Ukraine through a barter deal. The four-party cooperation of enterprises of Belarus, Russia, Ukraine, Kazakhstan is most representative in the field of space rocketry systems, air defense and missile defense systems, components of high precision weapons, and electronic-optical devices.
Prospects for cooperation within the CIS-states are limited by the poor financial situation in these countries and the Russian lead on policy.
A number of Belarusian private and government-owned companies possessing a license to trade materiel are granted the right to carry out export operations of armaments and military equipment. "Beltekhexport," founded in 1993, is the biggest special exporter. There are other companies, which represented Belarus on the world arms market in 1996-2000, including "Belspetsvneshtekhnika," "Belintekhservice," "Belvneshpromservice," "Belintorg," "Belspetstekhnika," the Borisov tank repair and Baranovitchi aircraft repair plants. The arms trade is supervised by the Security Council under the President of Belarus. Deals are agreed upon with the Defense Ministry, the State Security Committee, the Foreign Ministry.
The practice of using non-government owned special exporters has several advantages:
government is able to keep a certain distance from deals with «black-listed» countries;
the process of concluding, finalizing and implementing deals is reduced to within a few months to half a year. Experts think that this process takes two-three times longer when Russian state special exporters are involved;
high level of secrecy applied to deals being executed.
The geographic range of deals concluded by Belarus special exporters is impressive. This market is identical to the Russian target market: industrially backward countries, which demonstrate stable demand for inexpensive Soviet armaments and military equipment, quite often second-hand. The list of customers purchasing the Belarus armaments, military hardware and services in 1996-2000 includes the following countries: Middle East countries (Turkey, Pakistan, Egypt, the UAE, possibly Iran, Iraq), Africa (Algeria, Angola, Sudan, Sierra-Leone, Congo, Ethiopia), Southeast countries (the North Korea, the PRC, India). Export supplies were carried out to Peru, Papua-New Guinea. By 1996, there were a number of deals with the East European countries (Hungary, Bulgaria, Czech Republic).
The biggest importers from Belarus are Peru, Algeria, China. The major goods are aircraft, helicopters, armor, ammunition, chassis for various types of hardware and electronic-optic systems.
One of the peculiar features of the Belarus arms trade is standing contacts and deals with so-called «rogue» countries. Supplies of armaments and military hardware were carried out to Angola, Iran, Sudan, and North Korea (delivery of 19 outdated tanks in 199252 and wheel chassis MAZ3543M for Scud missiles.) Contacts are maintained with Iraq, Yugoslavia, Afghanistan, Libya and Lebanon. Belarusian officials reject the majority of accusations of arms deals with those countries. However, export and re-export arms deals carried out by Belarus private firms cannot be ruled out.
Frequent reciprocal visits of Belarusian and Iraqi government officers, including the military in the late 90s, were accompanied by rumors
about the military and technical cooperation between the two countries. The press wrote about a possible delivery of the main battle tank T-55, T-72 and spare parts53 by Belarus to Iran. In 2000 a draft agreement on military-technical cooperation was elaborated54.
East European countries disappeared from the list of standing purchasers of Belarusian armaments after 1996. The policy pursued by Belarus does not please either the new NATO members or countries competing for entry, though they own a great deal of Soviet weapons in need of repair and upgrading. The only exception among NATO countries is Turkey. In 1997 an agreement envisaging cooperation in the fields of training personnel, defense industry, aviation, technologies and air defense systems was concluded.
Another feature of the Belarus arms trade is overall state support. During official visits of Belarus President Alexander Luckashenko to target countries of the Belarus MIC, issues related to supplies of arms by Belarus arms dealers are always discussed. For example, frank calls to develop MTC were voiced during visits to such countries as Syria, Turkey and Egypt.
The Treaty on Conventional Arms and Armaments in Europe set forth considerable cuts in military hardware inherited from the Red Banner Belarus military contingent. 2,171 main battle tanks, 1,420 infantry combat vehicles and armor troop carriers and 167 battle aircraft were meant for decommissioning.
These are the stockpiles which provided the basis for arms exports from Belarus and enabled the country to join the top ten world's arms dealers in 1997. Today, the trade of inherited armaments is a low-key issue. According to statements made by officials from the Defense Ministry, Belarus had practically depleted its armaments and military hardware resources, which had any appeal to customers55. The following military hardware meant for sale could be listed:
T-80 tanks;
a great amount of spare parts remaining after dismantling military hardware under Treaty of Conventional Arms and Armaments in Europe;
tanks of outdated models no longer in use (T-62, T-55 and 54);
anti-aircraft systems, which were modernized at enterprises of Belarus and Russia: "Shilka," "Tungusska," "Buk";
small arms, optical sights, grenade launchers;
communications systems;
ammunition56.
In view of statements on possible reduction in the Belarus Armed Forces57, this list is likely to grow. However, the future of Belarus on the world's arms market lies primarily in the re-export of Russian armaments, sales of products of the Belarus MIC and new developments to be targeted to outside markets.
Taking in to account the fact that 90% of the Belarus MIC is related to Russia, sales of the Belarus MIC alone could hardly keep Belarus among the leaders of the world trade dealers. However, there are a number of items within the range of armaments and systems, which Belarus could attempt to promote at the market. Experience shows that Belarusian enterprises, in cooperation with Russian counterparts, can initiate new armaments and the upgrading of final systems of arms for international markets. Less entrepreneurial structures will fully depend on prospects of the Russian MIC on the world's markets.
The upgrading of military hardware is one of services to be offered on the international markets. Thus, the Borissov tank repair plant has orders for the next five years. The upgrading of aircraft, helicopter and other hardware does not present the same bright picture. This type of business is highly competitive and crowded with CIS-states and foreign countries. Repair plants are separated by long distances from traditional distribution markets of Belarusian hardware. Besides, the East-European market under current military and political conditions is a lost business opportunity for Belarus.
Partnership in joint production and development of military products with countries beside the CIS-states is limited to China. The project under implementation with China could be assessed as a form of effective entry of a Belarus enterprise to the market. In 1998 the joint venture "Siantszan-Volat" was set up with a purpose of producing a chassis for the Chinese tactical solid-fueled DF-21 and -21X missiles. The long-term task of producing chassis for DF-31 and -41 ballistic missiles is likely to be implemented.
The plant has a production capacity of 3,000 units a year. Belarusian investments in the project are estimated at 3 m USD. In 1999 the enterprise produced 2 tractors, in 2000 another forty-eight units with Belarusian parts are planned for production.
Projections
1. Today Ukraine and Belarus are actively selling excess armaments and military equipment from Soviet-era stockpiles. Activities at this market will slow down, as stocks are depleted and the armaments and military hardware become obsolete.
2. Ukraine considers military and technical cooperation with Russia as forced imperative during the transition period of its MIC. In the future, as soon as the crisis is surmounted, Ukrainian experts predict a lower lever of military and technical cooperation with Russia and growth of cooperation with NATO countries.
Belarus pursues a policy of enhancing cooperation with Russia, together with establishing independent contacts with foreign clients. Even if integration with Russia goes up to a higher level, Belarus is unlikely to set aside its independent military-technical policies including operations on the markets, which offer good business opportunities for Russia. The rationale is crystal clear; no big capital to be invested to boost the Belarus MIC is expected in the near future.
3. Today, Ukraine largely relies on the remainder of its post-Soviet industrial potential, which is gradually running out. For a number of reasons (economic collapse, intellectual and ethical failure of the Ukrainian elite, break up of technological cooperation with Russia), this potential has stagnated, and attempts to push it ahead are made only in the field of design and production of main battle tanks and military transport aircraft of the An family. Ukraine has a chance to retain its role of an active player on the world market, namely within those two sectors.
Ukraine could play a significant role in marginal markets (Pakistan, Libya, Taiwan), primarily by offering tank and aircraft building industry products and services to repair and upgrade Soviet type military hardware. Military-technical cooperation is most likely with Russia and China, and Ukraine will step up its activities in this area as the political situation in the Crimea, in connection with increasing demands of the Moslem population in Crimea for recognition of their ethnic identity.
4. The Belarus MIC is an export industry. Russia is a catalyst for future trends in the development of the Belarus MIC. For the sake of further cooperation with Belarus, Russia should somehow sacrifice the interests of the Russian MIC (for example, by delegating to Belarusian enterprises the role of suppliers within the Russian defense procurement, and taking their interests into account while developing and producing weapons for third countries.)
Should Russia fail to grant favored treatment to the Belarus MIC, Russia and Belarus might cease cooperation. One cannot exclude an abrupt change in attitude towards such components in the cooperation as the presence of Russian military installations in Belarus or joint regional security efforts. The Belarusian side is securing its MIC stakes in the expansion of cooperation with Russian enterprises and can raise the issue of rent payments for those services. Belarusian officials a few years ago voiced an amount of 200 m USD a year. Prospects for MTC are largely dependent on political and economic cooperation between Russia and Belarus as a whole.
Notes
1 Österreichishe Militärische Zeitschrift. ? 5. 1998. S.262.
2 V.Yurchuk, Osoblivosti viiskovo-ekonominoi politiki Ukraini v umovakh formuvannya rinkovikh vidnosin, Rozbudova derzhavi, 1997, #6, p.22.
3 V.Shekhovtzov, R.Bodnarchuk, Oboronnii promislovii kompleks Ukraini: stan i perspektivi rozvitku, Strategichna panorama, #3-4, 1998, p.138.
4 Ibid., p.132.
5 Ukraina ta svitivii rinok ozbroennya, Doklad Natzionalnogo instituta strategicheskikh issledovanii Ukrainy, Kiev, 1999.
6 Military reform in Ukraine: The start or another false start?, Report of UCEPS, National Security & Defence, N 1, 2000. P.9.
7 Oboronnaya promyshlennost respubliki Armeniya – prilozheniya, Eksport Vooruzheniy, October-December, 1997.
8 Statisticheskii spravochnik 1993, Belarus State Committee for Statistics and Analysis, 1994.
9 Alexander Alesin, Konversiya cherez torgovliu oruzhiem, Belorusskii rynok, #4, 1996.
10 Belorusskii rynok, #18, 1996.
11 Alexander Alesin, “Dunfen saditsya na kolesa, Belorusskii rynok, #30, 2000.
12 Fedor Kolomoetz, Esli zatrat ne izbezhat, davaite rabotat s tolkom, Belorusskii rynok, #22, 1998.
13 Information of BelaPAN, 16.02.1999.
14 Minsk priglashaet Moskvu na Balkany, Izvestiya, 04.031999.
15 Alexander Alesin, Segodnya krepkoi broni malo, Belorusskii rynok, #36, 2000.
16 MAZu-“Grad”, MZTK-“Uragan”, Belorusskii rynok, #39, 1998.
17 Budem modernizirovat istrebiteli, Belorusskii rynok, #32, 2000.
18 Sozdanie Soyuza Belarusi I Rossii predostavilo unikalnuiu vozmozhnost’ formorovaniya edinogo oboronnogo prostranstva, Voenny parad, #30, 1998.
19 Politika i chas, #7, 1998, p.38.
20 Yurii Godin, Politicheskaya allergiya, Sodruzhestvo, #8, 27.09.2000.
21 Ibid.
22 Information of BelaPAN, 07.09.2000.
23 Ibid.
24 Information of BelaPAN, 06.09.2000.
25 Minsk priglashaet Moskvu na Balkany, Izvestiya, 04.03.1999.
26 Budem modernizirovat istrebiteli, Belorusskii rynok, #32, 2000.
27 Information of BelaPAN, 06.09.2000.
28 Volzhskii rubezh, Belorusskii rynok, #40, 1997.
29 Yurii Godin, Politicheskaya allergiya, Sodruzhestvo, #8, 27.09.2000.
30 Kommersant-Daily, 29.08.1994.
31 “Belaruskaya salidarnastz” Bulletin, 2000.
32 Kommersant-Daily, 26.08.1994.
33 FIRST Database
34 Nezavisimoe voennoe obozrenie, 24.12.1999.
35 Information of BelaPAN, 07.09.2000.
36 UN Register of Conventional Arms, 1996.
37 Rebyata, davaite vooruzhat druzhno, Belorusskii rynok, #35, 1999.
38 Anatoliy Nezvanov, Druzhba druzhboi, a torgovlya oruzhiem vroz, Belorusskaya delovaya gazeta, #799, 2000.
39 Nezavisimoe voennoe obozrenie, #4, 1997.
40 Ibid.
41 Ibid.
42 The Ukrainian Government’s Decree #1228 dated 12.07.1999 “On granting to the subjects of foreign economic activity the right to export and import military-use and sensitive goods”.
43 Press conference of Ukraine’s Defense Minister Army General Alexander Kuzmuk at the international arms fair IDEX99, UNIAN publication, 16.03.1999.
44 V.Shekhovtzov, R.Bodnarchuk, Oboronnii promislovii kompleks Ukraini: stan i perspektivi rozvitku, Strategichna panorama, #3-4, 1998, p.134.
45 Nezavisimaya gazeta, 14.04.98.
46 Nezavisimaya gazeta, 12.05.97.
47 Nezavisimaya gazeta, 17.03.97.
48 Ibid.
49 Alexander Pautin, Pervaya proverka na prochnost, Belorusskii rynok, #41, 2000.
50 Yurii Strigelskii, Ekspertiza: kak bratya slavyane oruzhiem torguiut”, Belorusskaya gazeta, #143, 1998.
51 Information of BelaPAN, 06.09.2000.
52 UN Register of Conventional Arms.
53 Alexander Alesin, Tam, gde nas zhdut, Belorusskii rynok, #3, 2000.
54 Alexander Patutin, Voenno-tekhnicheskaya sluzhba, Belorusskii rynok, #3, 2000.
55 Olga Birukova, Minoborony izbavitsya ot boepripasov, Belorusskii rynok, #36, 1999.
56 Ibid.
57 Information of BelaPAN. 29.10.2000.
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