“Russia Needs to Move from Arms Trade to International Cooperation on Weapons Programs”

An interview with Gennady GORNOSTAEV, author of the book «Foreign military-economic relations of Russia: development problems and their solution».

What is the main idea of your book?

The fundamental idea of my research is that Rus­sia can no longer continue to only trade in arms produced domestically. Russia must si­multane­ously develop contempo­rary forms of interna­tional scien­tific-produc­tion cooperation, when en-gineers and producers of dif­ferent countries co­operate in the design, production and sale of military products.  In this way foreign mili­tary-eco-nomic relations en-compass not only the selling stage abroad, but also the entire cycle of weapons systems, in par­ticular the design and production stages. In the sphere of cooperative activity there are also ques­tions of managing design and production, the drafting of common approaches to financing weapons manufacturing, drawing up strategies for marketing arms.  In other words, Russia needs to develop international scientific-produc­tion cooperation in the military production sphere, which consists of joint entrepreneurial activity of designers and producers of military products from different countries under various contracts and in­stitutional forms and is ful­filled under govern­mental management.

Why does Russia have to develop inter­na­tional scientific-production co-opera­tion in weapons production?

The forms of foreign military-economic rela­tions, above all, are determined by the sophisti­cation of conventional weapons. The most important factor in armaments is the cost. On the other hand the forms of foreign military-economic relations are affected by the amount of military spending that a country can allocate for the development and production of weapons systems.

Let’s look at this from the position of what is pro­duced in Russia. On the one hand the cost of a new generation of weapons will grow at a fast pace in comparison with the pace of the country’s economic de­velopment.  This is a long-term tendency. Ac­cording to foreign esti­mates, a heavy American fighter of the fifth generation costs over $100 million and a light-class fighter will cost about $40 million. In 1979-1988 when their pro­duction was at its peak the fourth-generation F-15 and F-16 fighters cost an average of $20-25 million in constant prices. On the other hand, at the be­ginning of the 1990s Russia accounted for about 50% of the former USSR GDP. During the 1990s Russia’s GDP fell by half. As a result, in terms of GDP size by purchasing power parity, Russia has fallen behind not only the G-7 countries, India and China, but also South Korea, Mexico and Brazil.  Russia, like the leading industrial countries of the world, spends almost 3% of its GDP on defense and maintains its armed forces on resources that amount to a little more than 10% of the American military budget.  In addition, almost all military spending goes toward maintaining the armed forces. Very little money is left over for military research, development and production.

The development of a new generation of weapons necessary for ensuring national security and strengthening Russia’s position on the global arms market would be so expensive that it would be dif­ficult to finance without a big increase in the pro­portion of GDP spent on defense and doing considerable damage to the civilian sector of the economy. In the near future Russia can hardly in­crease its GDP many times over and consequently increase spending on development and production of new weapons without significantly increasing the proportion of GDP spent on the military. Earning the additional money needed to develop a new generation of weapons by increasing military exports will also be very difficult, since it is im­possible to even talk about a significant increase in arms exports. In future, it will be even more diffi­cult to increase arms exports because at present there is very little funding for the development of the scientific-technical base that is necessary for developing a next-generation weapons system.

All of this makes it necessary for Russia to develop different forms of international cooperation in the area of arms production, which would allow Russia and her partners to share both the cost of developing and manufacturing new weapons sys­tems, as well as the risks involved. It will be very difficult for Russia to create a fifth-generation fighter independently, relying only on its own eco­nomic capabilities. Today, several experts are talking about the need for Russia to establish an international cooperation program to develop such a fighter.  Even the US is developing such a fighter together with its partners and allies.

What is meant by Russian military-techni­cal cooperation with foreign countries?

Russia’s military-technical cooperation with foreign countries is actually the foreign trade in arms. The overwhelming part of Russia’s foreign trade activity is the intermediary deals.  This is ex­plained by the fact that governmental intermediary export over 80% of Russian arms.

The trade-agent nature of foreign military-economic ties results in a dependence on only domestic scien­tific-technical and production resources, and also to the exclusion and isolation from the world mili­tary-technical arena. The overwhelming majority of Russian arms developers and manufacturers are ex­cluded from the foreign military-economic arena by the government agent. Russian defense companies seldom participate in the joint development and production of arms with foreign partners and there­fore take little part in the exchange of scientific, technical and management achievements with foreign military-industrial companies. In most cases Russian defense companies try to develop modern weapons relying only on their own technological potential, and export them.

Steps are being taken in the direction of expanding licensed production of Russian weapons abroad.  But one must keep in mind that producing foreign weapons under a license was widely used by the US and Western European countries in the years following World War II and was the first step on the road to a new type of military-economic rela­tionship, moving from a low form of foreign eco­nomic activity in the form of arms sales and mili­tary aid to a higher form: international cooperation programs for the development and production of weapons.

At the same time Russia is taking the first steps aimed at the use of international cooperation pro­grams for the development and modernization of conventional weapons.  However, this is being done while the legislative problems of developing international scientific-production cooperation in military production remain unresolved. The governmental system for regulating military-tech­nical cooperation with foreign governments is pri­marily aimed at serving trade-agent activities.

With which countries should Russia pri­marily try to develop cooperation pro­grams in arms development?

The scientific-production cooperation priorities of the CIS defense companies have been pre-deter­mined for the near future by the deep roots of eco­nomic history.  They all came out of the single eco­nomic complex of the Soviet Union and have retained the closely interwoven economic ties formed over decades, with identical standards, equipping troops with practically the same Soviet-made weapons and hardware. The defense industry personnel of the CIS countries were trained under one system of military and technical education.

Independent output of fundamental types of weapons and military equipment in any separate country of the CIS and their sale on the world arms market is extremely difficult. Even Russia and Ukraine, which have significant military-production potential, would face huge costs if they were to at­tempt a move to independent production of almost all armaments.  Obviously it makes much more sense to greatly strengthen and develop interna­tional cooperative relations between scientific-re­search institutes, design bureaus and defense compa­nies in the CIS countries. International scientific-production cooperation makes it possible to save money, reduce the time needed for arms development and production, and strengthen the common market for weapons within the framework of the CIS.

One should not overestimate the role and signifi­cance of Russia’s scientific-production cooperation with the CIS countries. They have an insignificant technological base and the CIS arms market is very small. The CIS countries account for only about 2% of world GDP by purchasing power parity, and about 3% of global spending on arms development and production.

China and India are two of the biggest buyers of Russian weapons. These countries have a relatively high growth rates and are aiming to develop their own defense industries.  Military technology al­ready accounts for 30% of Russian military exports to China. Beijing is trying to increase this to 70%. China and India are beginning licensed production of Russian weapons, and relations with these two countries are developing dynamically.

Under these conditions it is necessary for Russia not only to sell China and India military hardware and the technology to create modern weapons, but to develop various forms of scientific-production cooperation with these countries. It could also be possible to invite Chinese and Indian defense com­panies to join scientific-production chains formed under the management of Russian companies within the framework of the CIS.

The most important goal in developing international cooperative programs to develop and produce arms with China and India is to unite the scientific-indus­trial potential of the Russian weapons plants, above all, with the financial resources of these two coun­tries. Chinese and Indian interest in using more of their scientific and industrial capacities also has to be taken into account. The countries also need to coordinate the sale of the arms produced to third countries. This would give Russia additional re­sources for research, development and production, as well as access to new arms markets in developing countries.

Russian defense companies should also strive to de­velop international cooperation with partners from the world’s leading industrial countries. Scientific-production relations with these countries need to develop, above all, to increase the competitive ad­vantages of Russian weapons developers and manu­facturers. Loyalty to weak domestic and foreign partners for loyalty’s sake will in the end turn against Russian defense companies. The best form of loyalty to weak partners is to force them to become more competitive.

Of course, when developing international scientific-production cooperation with the leading industrial countries, it will be difficult for Russian defense companies to count on the leading role in interna­tional arms development and production programs, but they must agree to work under these programs as subcontractors and suppliers. At the same time it is of course necessary to build relations with part­ners based first of all on national interests.  Such an approach allows access to modern foreign methods of administering international cooperation programs in arms and technology development, and on the other hand makes it possible to attract additional resources for the development of the domestic scien­tific-technical potential.

It is clear that the development of international scientific-industrial cooperation with the U.S. and Western European countries is impossible without the normalization of relations with NATO. The major aspects of relations with NATO concern mili­tary-political issues, while the military-economic question is practically not even considered. There­fore the priorities that must be resolved while nor­malizing relations with NATO should include ex­panding Russia’s international scientific-production cooperation with NATO countries in the area of modern, and especially future, weapons systems.

Will the existing government system for regulating military-technical cooperation with foreign states need to be changed in connection with the development of Rus­sia’s international scientific-industrial cooperation in the area of weapons?

Foreign military-economic relations between defense companies of different countries in the course of joint development and production of arms are in the end consummated by foreign trade operations. Therefore, the government system for regulating Russia’s foreign military-economic relations should be based on the existing system. But this system should be supplemented by a government system for regulating Russian defense companies’ joint activi­ties with partners from different countries in scien­tific research, as well as the development, produc­tion and utilization of military-use products.