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Arms Trade

Ukraine on Arms Market – a View from Kiev

Valentin BADRAK

Growing interest in the Ukrainian arms business stems primarily from the fact that since 1995 Kiev has been annually boosting exports of weapons, military hardware and dual-use goods1. Representatives of the Ukrainian defense industry and the military-technical community name the following reasons for the growth:

  • Ukraine inherited an impressive 30% slice of the Soviet military-industrial complex, in summer 1996 Pakistan made a political de­cision by singing a major contract with Ukraine for 320 new T-80UD main battle tanks which made Ukraine recognizable on the world arms market,

  • Ukraine’s arms trade stabilized when in October 1996 a single gover-nment media­tor – Ukrspetsex­port – was formed as a state company for export and im­port of military and special purpose products and services to which all parties to the arms business were subordi­nated2,

  • the export control system was improved (with the help of American partners)3,

  • up-to-date approaches to marketing and exhi­bitions were applied that in their turn facilitated the sale of outdated weaponry from the arsenals of the Ukrainian Defense Ministry.

It should be said that the Ukrainian military-industrial complex consisted of 1,810 enterprises with a combined work force of 2.7 million peo­ple while Ukrainian R&D centers were involved in 17 out of 21 “critical technologies” developed in the Soviet Union, including everything re­lated to electronics and cybernetics, radar sys­tems, low visibility target homing, and laser equipment.4 In 1998-1999 the following addi­tional factors evolved:

  • investments in the most promising sectors of the military-industrial complex,

  • a rise in the share of contracts on the sale of new arms, on partial or full sharing of tech­nologies,

  • the expansion of forms of arms trade (offset deals, sale of production licenses),

  • the expansion of the list of buyers of Ukrainian defense and dual-purpose output.

Gradually the share of contracts to upgrade and repair military hardware started growing, the funding of certain priority R&D programs started growing in conditions of a general decline in spending on the defense industry. Be­sides, at the end of the 1990s repair facilities started operating at greater capacity largely thanks to the remaining broad repair network in Ukraine. Hence, Andrei Kukin, the first director of Ukrspetsex­port mediator company (October 1996-April 1998), said that the share of upgrading con­tracts grew to 15% of total in 19975 and his successor Valerii Maliev reporting the results for 1998 said upgrading and repair contracts constituted 30% of to­tal.6

At the same time there remain certain limita­tions for Ukraine on the world arms market. Ukraine does not manufacture many end products. For instance, aircraft constitutes about 50% of the current international arms market but Ukraine does not make them and correspondingly does not sell new combat air­craft. However, here it should be noted that certain Western analysts7 believe that the fu­ture of the arms market belongs not only to combat aircraft but to space-related products, electronic systems and means of reconnaissance, and Ukraine is quite strong in these spheres (except for electronics). Besides, several defense facilities such as the Kharkiv Machinery Plant FED, Novator Production Association in Khmelnitsky and Artem State Holding Com­pany deliver combat aircraft assembly parts and components.

Neither does Ukraine manufacture submarines. It can offer only a limited range of surface war ships while war ships are believed to constitute some 14% of the world market of military hardware. The share of helicopters is approxi­mately the same – 14%, Ukraine produces en­gines for them and is capable of delivering com­bat modules. An 11% share belongs to armored vehicles that are the end product, 10% to rock­etry and finally 2% to artillery systems, com­munication, command and reconnaissance sys­tems each.8 Ukraine has complete production cycles of many types of military hardware belonging to the latter groups.

Today Ukraine is represented best on the markets of East and Southeast Asia, the Middle East and Africa. Though there has been a tendency towards the expansion of presence on new markets, at the end of 1999 Ukrspetsexport chief Valerii Maliev spoke of a certain “limits in Ukraine’s capability” on arms markets. He stressed that “it can be competitive only in spheres where it can fully represent the domestic manufacturer – from development to production as the example of radar equipment shows.”9

Ukraine’s certain opportunities on the world arms market stem from the great amount of armaments in the arsenals of its Armed Forces. Out of the 500 different classes and types of arms and military hardware, only 30-45% rank as up-to-date. According to expert estimates, by 2005 56 out of the 65 key types of armaments will become obsolete for the Ukrainian Armed Forces and require disposal.10

The institutional system of arms trade

In Ukraine the same as in Russia military-technical cooperation is organized as a presidential vertical structure in which the parliament and government play an insignificant role. For several years Ukraine has been using a pattern under which a single state mediator company engages in arms trade and only several special exporters operate on the market independently. The National Security and Defense Council led by the president makes the political decisions in the sphere.

Ukraine has clearly defined the number of independent arms exporters. Under the document issued in June 1999 the right to export and import arms and military hardware was given to subsidiaries of Ukrspetsexport: Ukroboronservice, Progress, Ukrinmash, Promobornexport and Spetstechnoexport. Besides, the following companies were allowed to export and import explosives, ammunition and their elements:

  • TASKO-Export State Enterprise,

  • Artem State Holding Company,

  • Motor-Sich Company,

  • AVIANT Kiev State Aviation Plant,

  • Kvant-Radiolokatsia radar system research institute,

  • Antonov ANTK aircraft complex,

  • Malyshev Plant State Enterprise (Kharkiv).

Ukrainian Cargo Airways (UCA) was given the right to render air services to transport military goods and to sell aircraft received from the Ukrainian Defense Ministry (in cooperation with the state mediator company). The corresponding document stated that in the process of foreign trade transactions with military goods authorized economic entities should engage in marketing and set prices in coordination with Ukrspetsexport. The certain reduction of the number of parties to foreign trade operations with arms and other sensitive products made the business more centralized and increased the role of the state.

The existence of a government monopoly on arms exports has produced certain results: Ukraine can lobby its national interests and a team of professionals has been formed that is identified today by many importer-countries. The main principle observed by Ukrspetsexport is not to provoke competition between two Ukrainian suppliers on foreign markets and to create possibilities for flexible and fast response to clients’ queries. In practice the fruitfulness of this approach has been proven in 1998 by the rise by almost one third in the number of orders Ukrspetsexport placed with defense plants in Ukraine. Ukrspetsexport chief Valerii Maliev says that defense plants performed operations worth over $56 mln11. According to official reports, the exports of Ukrspetsexport in 1997 amounted to $148 mln and in 1998 to about $300 mln.12 The author finds the figures somewhat understated considering that in 1997-1999 Ukraine annually gained $150 mln to $160 mn from the tank contract with Pakistan alone.

With the purpose of tightening government control and improving coordination between agencies a Commission for export control policy and military-technical cooperation with foreign states under the president was set up in keeping with a presidential Bill of February 4, 1999. Beginning with summer 2000 the Commission was transformed into the Committee for Military Technical Cooperation Policy and Export Control under the President of Ukraine. Under the Decree the National Security and Defense Council officially assumed the functions of the coordinator of military-technical cooperation and Ukrspetsexport together with the State Export Control Service were subordinated to the new committee.

Under the August 14, 2000 presidential Bill the State Commission for the Defense Industry Complex was set up that should centralize R&D and the production of arms and military hardware. The new agency intensified work on the Program of Developing Arms and Military Hardware the drafting of which had lasted over five years and the adoption of which has been constantly put off since 1997. According to Ukrainian Defense Minister Oleksander Kuzmuk, the program will be approved this year and at the moment the wording of the document is being examined at the State Commission for the Defense Industry Complex.13 Moreover, according to Kuzmuk, certain concrete steps have been taken by way of implementing the program, for instance, the Su-25 (Frogfoot) ground attack aircraft of the Ukrainian Air Force is being modernized and should take into the air in May 2001. Besides, work proceeds at a fairly high speed on two fundamental documents: the national security concept and the new military doctrine. If approved this year, they should have a direct impact on arms exports.

In this context it should be noted that in 2000 for the first time in the history of independent Ukraine the planned budget spending on national defense was assigned in full, and 2001 is the first year when money for reforming the Armed Forces constitutes a separate budget article. In the past few years the Ukrainian Armed Forces received 19 new types of armaments. Kuzmuk said that 28 more are about to be commissioned. Thanks to this the Ukrainian Armed Forces have started working to upgrade existing types of military hardware in 12 directions.14 Undoubtedly all this is directly connected with the system of arms trade and future exports of defense products.

Ukraine on regional arms markets

Ukraine’s presence on the European market remains insignificant. The following are the biggest contracts with European countries so far:

  • deliveries of the Sumy-based Frunze Production Association to France, Britain, Netherlands and Austria,

  • deliveries of Feodosia More Production Association to Greece and Turkey,

  • deliveries of Topaz State Holding Company to Denmark,

  • deliveries of Motor-Sich Joint Stock Company (Zaporizhzhya) to the Czech Republic, Ireland and Bulgaria,

  • ammunition deliveries by TASKO-Export State Enterprise to the Czech republic, Slovakia, Slovenia, Poland and Bulgaria,

  • the $97 mln contract with Greece on the delivery of two Zubr (Pomornik class) amphibious craft was the most impressive European deal signed by Ukrspetsexport in 2000.

Ukraine’s military-technical cooperation with Greece is expected to develop quite dynamically both through direct sales and sharing of technologies and offset deals. Thus, according to officially unconfirmed reports, in addition to the amphibious ships Ukroboronservice has delivered long-range Kornet-E (AT-14) ATGM.15

The formation of an international consortium with Italy (also involving Brazil) to upgrade and launch Ukrainian Tsiklon launch vehicles from a Brazilian (or American) space center is another example of Ukraine’s successful cooperation with European countries.

Besides, Ukraine managed to keep its traditional repair and assembly parts delivery markets in Eastern Europe. According to Oleksandr Kovalenko, deputy director of Ukrspetsexport, in 2000 Ukraine carried out small-scale contracts with Poland for the delivery of various materiel for the Army and storage batteries for the Air Force; with Hungary for aircraft repairs and upgrading and delivery of assembly parts; with the Czech Republic for aircraft repairs and upgrading and aircraft spare part deliveries.16 There have also been small deals with West European countries mainly to get a foothold on new markets: the joint Ukrainian-French-Czech project to upgrade the T-72 main battle tank17, the contract of the Morozov Design Bureau (Kharkiv) with the leading Swiss Ordnance Enterprise Corp. on the manufacture of a test sample of a NATO standard tank gun (120 mm)18 and some others.

The beginning of 2001 has also been quite good. Ukraine sold a batch of used helicopters (four Mi-8 multirole helicopters and four Mi-24 assault helicopters) to Macedonia.The contract also provides for the training of six pilots for Mi-24 and 40 engineers and technicians (28 for Mi-24).19 The deal indicates two tendencies: firstly, the unrelenting willingness of Kiev not to lose its positions in Central and Eastern Europe, secondly, the capability of the Ukrainian defense industry to rapidly react to market demands irrespective of the contract size.

The results of several aviation tenders have been disappointing for Ukraine. The German Defense Ministry that initially supported the Ukrainian-Russian “Medium Transport Aircraft” Consortium in the final account opted for the A-400M project. Besides, the Ukrainian An-124 Ruslan (Condor) heavy aircraft failed in the tender to meet Britain’s defense needs. Even though Kiev frequently speaks of developing military-technical cooperation with France and Germany, in particular in making aircraft and armored vehicles, the process has not reached the degree of implementing impressive projects.20 As an example one may name the talks in May 2000 between Ukraine and the leadership of the influential France-Convercia Association at which the French side confirmed its willingness to cooperate with Ukraine on a number of defense projects, in particular on developing and upgrading of armored vehicles (together with SAGEM and GIAT corporations), producing sub-caliber projectiles together with the Ukrainian TASKO (with GIAT), upgrading MiG-29 air superiority fighters and selling them to third parties (with Thomson-CFS, now Thales).21

The Middle East and North African market has always been regarded as promising by Ukrainian arms trade experts, namely, because the countries of the region have big quantities of Soviet-made armaments. According to the public statements of Ukrspetsexport senior officials at IDEX-2001 arms show, the share of deliveries of arms, military hardware, materials and technologies to the Middle East amount to about 40% of total.22

Ukraine has been especially successful in selling military hardware and technologies to Iran. For instance, it has delivered to Tehran 12 An-74 passenger/cargo aircraft for $132.9 mln and signed a $195.2 mln contract for the construction of a plant in Iran to manufacture An-140 regional aircraft.23 Besides, it has started implementing a contract for the production of An-140 under license. The first aircraft of Iranian make was assembled in 2000 and took into the air in 2001.

Algeria is another major importer in the region. In 1998 it ranked third among importers of Ukrainian arms and military hardware with 10% of overall sales. It is indicative that armaments constituted 90% of all Ukrainian exports to Algeria.24

In 1999 tank-builders in Kharkiv through Ukrspetsexport signed with Jordan an agreement for about $6.5 mln on the sale of 50 new BTR-94 wheeled APCs.25 Earlier Ukraine carried out a contract to transform the old British Centurion tank into a heavy armored personnel carrier. The other deliveries to the region have been:

  • deliveries of ammunition by Luhansk Machine-Tool Plant to Yemen in 1999,

  • deliveries of ammunition and components by TASKO-Export to Kuwait in 1998,

  • deliveries of Motor-Sich products to Egypt.26

After the SOFEX-2000 international arms shown in Jordan a contract was signed for training 100 foreign experts at the tank plant in Kharkiv, letters of intent with several other countries of the region on upgrading 150 T-72 main battle tank and a deal on the delivery of 100 T-84 main battle tanks to a country in the Middle East.27

Arms trade with the region continued successfully in 2000 - the beginning of 2001. For instance, new partners started appearing that used to import Western or Russian-made defense products. In 2000 a contract was signed with the United Arab Emirates for the delivery of 90 armored personnel carriers for the Navy. Ukrspetsexport hopes that the volume of arms trade with the Emirates may exceed $100 mln in 2001.28

The African market is attractive for the relative ease of selling arms decommissioned from the Ukrainian Armed Forces or stockpiled at their arsenals. Despite the strong competition on this market Ukraine has traditional clients there. There are also others who import military hardware from several sources simultaneously. Among them one may name the Democratic Republic of the Congo that in 1997 imported an impressive amount of materiel and continued purchases in 1998-1999. In 1999 Angola purchased military hardware manufactured in Zaporizhzhya. According to Ukrspetsexport, two fairly big contracts with unnamed countries in Central Africa have been implemented since 1998, one of which was worth $132 mln. At the beginning of 2001 the KrAZ truck plant in Kremenchuh completed a contract for the delivery of over 40 vehicles.29

The market of South and East Asia remains the most important for Ukraine. The biggest importers there are China, India and Pakistan. Unlike the West Ukraine does not put forward additional political conditions to countries of the region. Hence Pakistan after being pressured by the United States (the embargo that affected the delivery of 28 F-16 multirole fighters) and France (the almost one month delay in the delivery of 8 upgraded Mirage-III/5 ground attack fighters and an Agosta class attack submarine) is becoming more inclined to deepen military-technical cooperation with Ukraine and China.

During the past three years Pakistan along with Russia remained Ukraine’s biggest military-technical partner and in addition to the tank contract already implemented there have been several new ones. It is curious that China – the biggest importer of Russian armaments – launched the Al Khalid project of building a new main battle tank for Pakistan with Ukraine. It should also be mentioned that Ukraine is involved in the upgrading of Pakistan’s Type 59 tanks and in the future hopes to win tenders to supply the Pakistani Navy with medium-class combat ships and passenger/cargo aircraft. According to early estimates, the size of potential Pakistani orders in the next five years may rise to about $1 billion.

China has also significantly increased purchases of Ukrainian arms and related services. This applies primarily to aircraft and it components and the repairs of Soviet-made aircraft delivered to China earlier. In 1999 the overwhelming majority of Ukrainian high tech companies traded with China: Artem State Holding Company (Kiev), Lorta State Company (Lviv), Motor-Sich (Zaporizhzhya), FED (Kharkiv), Arsenal Central Design Bureau and several others.30 Earlier China purchased a batch of 56 R-27 (AA-10 Alamo) medium-range air-to-air missiles, a batch of radioeelectronic security equipment, a batch of aircraft engines and their service technology. The military-technical rapprochement with Beijing in 2000 opened up several new opportunities for Ukrainian exporters in that part of the world. During the aerospace show in Zhuhai several agreements were signed on upgrading and servicing Chinese aircraft and also an agreement on space exploration that is expected to promote Ukraine’s advancement to Asian space markets.31

Simultaneously Ukraine is increasing its presence on the Indian market. Ukrspetsexport hopes to open its own representative office in New Delhi in the near future. “Ukraine is trying to increase the volume of arms and military equipment deliveries to the Indian market and is doing so year after year,” - Ukrspetsexport General Director Valerii Maliev noted in September 1999.32 He accounted India’s traditional reliance on the Russian military-industrial complex not so much to its need for the latest weaponry, but sooner to Delhi’s “willingness to have a strong ally.” Objectively there exists a list of armaments the acquisition of which makes even a client oriented on Russia turn to Ukraine. Thus back in 1995 Ukraine delivered 500 trucks with a payload of 10 tons to the Indian Armed Forces, and in July 1995 Ukraine and India signed one more contract for the delivery of new trucks with a payload of 6.5 tons.33 The Sevastopol Aircraft Plant received an order for overhauling five Ka-27 (Helix) anti-submarine helicopters of the Indian Air Force. Earlier the same plant repaired Ka-25 (Hormone) anti-submarine helicopters for the Indian Air Force. For a long time India has preferred to repair its submarines in Ukraine as well.34 At the beginning of April 2001 the Indian Defense Ministry announced its decision to purchase a relatively big batch of radars from Iskra Electrical Engineering Works in Zaporizhzhya.35

Besides, Bangladesh received An-24 (Coke) aircraft and aircraft components from Kharkiv-based FED, Sri Lanka purchased Mi-17 (Hip H) multirole helicopters and Mi-24 (Hind) assault helicopters, Cambodia – 10 million cartridges of the 7.62 mm caliber. Myanmar placed orders for the acquisition of military goods in 2000.

Ukraine is a young player on the market of Southeast Asia. Its determination to increase presence on the market not only an indication that Ukrainian specialists understand the development trends on the world market but are ready to respond to this development. Already before the 1997 financial crisis Ukraine implemented several contracts with Indonesia (repairs of naval equipment and the sale of 50 BTR-50 amphibious armored personnel carriers) and Vietnam (a contract for the organization of the production of patrol boats). Today Progress State Enterprise with good reason counts on winning the tank tender in Malaysia for the delivery of 78 vehicles with the following purchase of 30 more.

Vietnam shows lively interest in expanding military-technical cooperation with Ukraine. In addition to the project of building patrol boats and the delivery of 100 R-27 (AA-10 Alamo) medium-range air-to-air missiles Ukraine has assembled equipment for the production of smokeless powder in Vietnam. On this basis it was suggested organizing the production of ammunition, which implies the transfer of technologies.36 In 2000 Vietnamese Defense Minister Pham Van Tra during an official visit to Kiev confirmed intentions to carry out a broad program of upgrading armaments: from air defense systems and armored vehicles to radar stations, and also to send several dozen Vietnamese officers to Ukrainian military academies in September 2000.37 Talks with Indonesia, Burma and the Philippines on arms deliveries are also under way.

The Latin American market has also been declared a zone of interest for the Ukrainian arms business. Ukrainian experts believe that Ukraine can and must try to benefit from the difficulties most countries in the region have with developing repairs facilities. Several countries are interested in the production of ships under license with the delivery of certain complex assembly parts, for instance, gas turbine engines that may be ordered from Ukraine. Possible deliveries of aircraft and space launch services are being considered.

In 1997 Ukrspetsexport signed a contract with Ecuador for the delivery of “Osa AK” (SA-8) surface-to-air missile systems for $64 million. Earlier Peru acquired nine An-32 (Cline) cargo aircraft (in 1994 and 1996) and four An-72A (Coaler) medium-transport aircraft (in 1994). In 2000 Venezuela ordered a batch of aircraft and patrol boats from Ukraine.38 In 2001 reports came about the willingness of Mexico to acquire 15 to 40 An-3 (Colt) and An-32P aircraft.39

The market of CIS and Baltic states depends on the political situation and is connected primarily with Russia. The geopolitical changes of the past few years give rise to hope for an increase in the number of orders placed in Ukraine, if it remains politically stable. Russia, the Baltic states, Georgia, Azerbaijan and Uzbekistan are in question first of all. Military-technical cooperation agreements cover repairs and component deliveries. In 1999 small-scale deliveries were made to Azerbaijan, Uzbekistan, Estonia, Turkmenistan, Kazakhstan, Lithuania, Moldova, Lithuania, Georgia, Tajikistan and Kyrgyzstan. Big quantifies of assembly parts were delivered to Russia.

In 2000 Ukraine impressively expanded military-technical cooperation with Turkmenistan. Under an agreement signed back in 1996 Ukrspetsexport and its subsidiary Ukroboronservice carried out a number of contracts. In this context in the middle of summer 2000 the Turkmen Deputy Prime Minister and Defense Minister Batyr Sarjayev sent a letter of thanks to the head of the Ukrainian state company.40 According to Maliev, “with the help of Ukrainian specialists, companies and institutes the air defense system of Turkmenistan was restored, work is under way on individual air defense systems”.41 In 2000 Ukrspetsexport also received a $600,000 order for maintenance services and repairs of An-26 (Curl) military transport planes of the Lithuanian Armed Force.42 In October 2000 Kiev signed several contracts for the delivery of materiel to Uzbekistan, the deals concerned weapons and military technology for the Land Force and implied deliveries of small arms, small caliber artillery and ammunition.43

Naturally the highest degree of military-technical cooperation remains with Russia. The latest meeting of the presidents of the two countries in Dnipropetrovsk and the signing of concrete programs on military-technical cooperation permit to speak of the appearance of plans to develop arms and military hardware for third countries.44 It is also interesting that Ukraine, Russia and Kazakhstan intend to work together on a new heavy launch vehicle (LV) though the Russian Angara LV may become its competitor on the space market. Among classical examples of military-technical cooperation one may name the decision to coordinate the policies of the two countries on the Greek market and the crediting of Ukrainian enterprises by Russian banks. At the beginning of 2000 the Russian MDM Bank - a partner of Sibirsky Aluminum group - gave the first ever $5-mln loan to Artem State Holding Company for the production of technical equipment and assembly parts in the framework of the contract for the delivery of 40 Su-30MKI multirole fighters signed by the Russian “Rosvoorouzhenie” arms trader with India.45

It is understandable, though, that in most cases the two countries are competitors on the world arms market.

The latest tendencies of 2000 and 2001

As Ukrspetsexport reported Ukraine “not only preserved but somewhat increased the volume of sales of military hardware and armaments to foreign states” in 2000. Since 1999 Ukraine’s key mediator on international arms markets has not been reporting absolute figures but stressing that such a state of affairs “is tantamount to significant success considering the absence of the receipt of $150 million for tanks sold to Pakistan that had become customary during the previous three years.”46

Being asked through what reserves and steps Kiev had kept its presence on the market Ukrspetsexport named several reasons. First of all, Ukraine has intensified work on small and medium contracts and also the search for new partners in Asia and Africa. Rather many new clients have appeared, even though the main geography of contracts has not changed and the most important markets lie in South and Southeast Asia, North and Central Africa, and the Middle East. Besides, such new partners as Myanmar and the United Arab Emirates, for example, have taken a special place in Ukraine’s military-technical cooperation with foreign states. The Malyshev Plant from Kharkiv hopes to oust Russian companies from the market by forming a JV to service, repair and upgrade combat vehicles with a company from the United Arab Emirates to which Kurganmashzavod delivered several hundred vehicles several years ago, if the partner-competitor proves less flexible. On the whole, according to Ukrainian expert estimates, about a dozen new buyers of Ukraine’s arms or military services have appeared in the past two years.

The sales of new arms and military technology are clearly on the rise. The sale of old arms from Defense Ministry arsenals constituted mere 20% of overall exports in 200047 while an increase in investments in R&D in radar technologies, special equipment, artillery, upgrading of armored vehicles and air defense systems, and in naval shipbuilding not only brought new receipts but tangibly increased the operating capacities of such industrial facilities as Topaz State Holding Company (Donetsk), Iskra Electrical Engineering Works (Zaporizhzhya), the Research Technical Center for Artillery and Armaments (Kiev) and several other Defense Ministry plants.

Kiev has been increasingly involved in technology transfers. SFTE Spetstechnoexport set up in 1998 as a subsidiary of Ukrspetsexport has a database on no less than 500 new ready-for-sale technologies most of which are military or dual-use technologies. The delivery of Zubr amphibious ship to Greece is a typical contact implying the transfer of technology. According to Valerii Maliev, “the Ukrainian-Greek contract would not have taken place, if Ukraine had not implied the transfer of technologies to Greece. The transfer of technology provides for the production and repairs of turbo engines from Nykolayev, platforms for the transportation and maintenance services of the craft and finally for the manufacture of Zubrs at Greek shipyards with Ukraine’s involvement”48 Another contract of the kind was the delivery a smokeless powder production line to Vietnam and, of course, the delivery of the An-140 regional aircraft assembly line to Iran. It is interesting that the share of barter in Ukrspetsexport payments does not exceed 5%.

In the past few years Kiev has been working more energetically with countries that are customarily described as critical. A tested system of export control and many years of experience on the market allow Ukraine to look realistically at the possibility of cooperating with Iran, Libya and Syria. Kiev is no novice to those markets: it is now successfully implementing a voluminous contract for the delivery of two An-124 cargo aircraft to Libya.49 Defense Ministry repair plants have successfully completed repair operations for Syria.

And finally Kiev has made significant headway on the markets of former Soviet republics. A high degree of military-technical cooperation has been achieved with Turkmenistan, Uzbekistan and some of the Baltic states.

According to Ukrspetsexport, the best sold items in 2000 were air defense systems; repair and maintenance services; the upgrading of military hardware, primarily aircraft and combat vehicles; radar systems and naval vessels.

Kiev has managed to get a foothold on the markets of NATO countries, first of all Greece. Ukrspetsexport Deputy General Director Oleksandr Kovalenko has said that Ukraine has good chances of winning an aircraft tender with its An-32 short to medium transport plane, while “amphibious ships of the Zubr (Pomornik) class are not the only naval equipment of interest to Greece”. Among potential spheres of cooperation with that country he named the upgrading and partial deliveries of armored vehicles, air defense systems, ship repairs and deliveries of patrol boats. TASKO-Export having a license to trade ammunition in 2000 won a tender in Turkey and delivered a batch of TNT.50 Ukraine intensified government-lobbying efforts to support defense projects at the highest level. For instance, the Ukrainian President Leonid Kuchma and his Turkish counterpart Ahmet Sezer agreed to boost trade turnover between their countries this year to $2 billion and to deepen cooperation in the defense industry.51 At the beginning of the year the Ukrainian Defense Minister Oleksandr Kuzmuk quite successfully worked in Ankara.

It is quite difficult to calculate the exact annual volumes of Ukraine’s arms exports. Arms and military hardware worth up to $400 mln are delivered along the lines of Ukrspetsexport. To that one should add:

  • the contracts of other special exporters,

  • the profits of the Defense Ministry for training foreigners at its military academies,

  • the cost of commercial transportation by a Defense Ministry enterprise,

  • the non-budget income of 18 companies of the rocket and space sector subordinated to the Ukrainian National Space Agency,

  • the deliveries of 50 defense industry enterprises that sell assembly parts to Russia and do not need licenses of the State Export Control Service for the purpose.

The total cost of trade and services along all these lines is no less than $600 mln, naturally with the reservation that this calculation pattern includes goods and services that can be considered military only conventionally.

But no doubt the outgone year of 2000 was a year of significant losses for Ukraine. First of all, this applies to Europe’s renunciation of the Ukrainian-Russian An-70 military medium transport aircraft. The loss sobered up the romantics of Ukrainian-European partnership and forced the country to act energetically in other directions. Britain’s rejection of the Ukrainian An-124 cargo plane was also disappointing. Thus, 2000 was a year of a cold spell in arms trade with Europe, except for probably Greece.

Kiev expects that as the world arms market livens up competition will certainly intensify with Russia among other countries. A greater number of joint projects and access to markets of third countries can reduce the acuteness of the competition but this requires mainly political will.

The main question for Ukraine is whether the domestic problems of the defense industry are going to be resolved this year. Experts say the future of Ukrainian arms exports depends on the development of the technology transfer system and an increase in investments in the defense industry. In 2001 Turkey and Malaysia will sum up the results of their tank tenders both of which Ukraine has good chances of winning. There are also hopes that Turkey despite its economic crisis will not curtail one more important project - an order for 8 corvettes - in which Ukraine is also involved.

In the nearest future the government policy on the arms market will be aimed primarily at the sale of radar systems, air defense systems and naval shipbuilding products. As agencies trading arms have already got used to saying, Kiev has come to the world arms market to stay.

1 At least that is what arms traders in Kiev claim. However, Dr. Bjorn Hagelin, Pieter and Siemon Wezeman of SIPRI say that Ukraine preserved its position among international arms exporters placing eight in 1995-1999. According to SIPRI experts, 1997 was the best arms trade year for Ukraine (618 trade-indicator values), in 1998 Kiev sold arms worth 607 trade-indicator values and in 1999 its exports declined by 429 values (SIPRI Yearbook 2000, Armament, Disarmament & International Security).

 2 The first Ukrainian foreign trade company that started trading weaponry on behalf of the state - Progress - appeared ten years ago (Industrial Ukraine, No. 2, pp. 5-7).

 3 Ukrspetsexport General Director Valerii Maliev said in an interview with Zerkalo nedeli weekly (September 30, 2000) that sometimes the interval between the signing of a contract and delivery is merely 10-12 days.

 4 V.S.Shekhovtsov, R.V.Bondarchuk, “Oboronnii promislovii kompleks Ukraini: stan i perspektivi rozvitku”, Strategichna panorama, #3-4, 1998, p.134

 5 Interview to UNIAN agency, 25.12.1997.

 6 UNIAN, 18.12.1998.

 7 For instance, this is the opinion of Jean-Paul Hebert, a leading French expert on arms trade and defense industry. See Jean-Paul Hebert, “Era of National Defense Industry Complexes is Over”. Eksport Vooruzheniy (Russian version), #1, 2001.

 8 The results of studies were announced in 2000 by Russian Deputy Trade Minister Grigory Rapota and published in the Russian-Ukrainian Bulletin No. 5, 2000, p. 50.

 9 Interview to UNIAN agency, 14.09.1999.

 10 Kievskii telegraph, 15.05.2000.

 11 Valerii Maliev’s interview to UNIAN agency, 09.03.1999.

 12 Kievskii telegraph, 15.05.2000.

 13 Hotline with Defense Minister Oleksandr Kuzmuk, 03.04.2001.

 14 Briefing of the Ukrainian Deputy Defense Minister for armaments and Chief of armaments of the Ukrainian Armed Forces Col. Gen. Oleksandr Stetsenko, 10.02.2001.

 15 2000 Weekly, 03.11.2000

 16 UNIAN, 16.06.2000

 17 Natsional’na bezpeka i oborona, #6, 2000, p.62

 18 UNIAN, 25.08.1999

 19 2000 Weekly, 13.04.2001

 20 An interview of the Head of the State Commission for the Defense Industry Complex Volodymyr Horbulin to the first national TV channel, 18.03.2001

 21 Versii analytical information agency, 19.05.2000

 22 A press conference of the Ukrainian delegation to the show, 19.03.2001

 23 UNIAN, 02.10.1999

 24 The database of the Center for Army, Conversion and Disarmament Studies. The information was officially confirmed during the visit of Chief of the General Staff of the Algerian People’s Army Gen. Mohamed Lamari to Kiev.

 25 Versii analytical information agency, 12.05.2000.

 26 The database of the Center for Army, Conversion and Disarmament Studies

 27 An interview to UNIAN of General Director of Ukraine’s Armor Concern Yuri Mirhorodsky, 05.05.2000

 28 A press conference of the official Ukrainian delegation to IDEX-2001, 19.03.2001

 29 The database of the Center for Army, Conversion and Disarmament Studies - information from news conferences on the results of arms shows in 1999-2000

 30 Natsional’na bezpeka i oborona, #6, 2000, p.65

 31 A press release of the Antonov ANTK on the results of the aerospace show in China in November 2000

 32 UNIAN, 14.09.1999

 33 VPK Weekly, #40, 1999, Krasnaya zvezda, 25.09.1999

 34 2000 Weekly, 03.11.2000

 35 Indian-Express, 04.04.2001

 36 Interview of Ukrspetsexport General Director Valerii Maliev with Zerkalo nedeli Weekly, 30.09.2000

 37 UNIAN, 11.05.2000

 38 However, at the moment it is not known whether the deliveries did actually take place.

 39 UNIAN report quoting sources at the Ukrainian State Committee for Industrial Policy, 14.04.2001

 40 UNIAN, 26.07.2000

 41 UNIAN, 04.10.2000

 42 2000 Weekly, 03.11.2000

 43 2000 Weekly, 03.11.2000

 44 The military-technical cooperation plan signed by the defense ministers of the two countries on January 18, 2001 is in question.

 45 Vedomosti, 04.02.2000

 46 Zerkalo nedeli, 20.01.2001

 47 Interview of Ukrspetsexport General Director Valerii Maliev with Zerkalo nedeli weekly, 30.09.2000

 48 Ibid.

 49 Kievskie Vedomosti, 15.01.2001

 50 Zerkalo nedeli, 20.01.2001

 51 UNIAN, 23.11.2000

Major Ukrainian Arms Contracts, 1996-2001



Contract Description




Delivery of 32 BMP-2 AIFVs. Ordered in 1997, completed in 1998.

Purportedly from stock in arsenals of the Ukrainian Defense Minis­try



Delivery of 14 Mi-24 (Hind) assault heli­copters; ordered in 1997, completed in 1998.

From arsenals of the Ukrainian Defense Minis­try



Delivery of 27 T-72 main battle tanks. Or­dered in 1997, completed in 1998.

From stock in arsenals of the Ukrainian Defense Ministry



Deliveries of military equipment from the arsenals of the Ukrainian Defense Ministry, military equipment from Iskra Electrical Engineering Plant (Zapporizzhye) and other military goods, 1998-1999.1


Ukraine: Frunze NPO (Sumy)


Unspecified delivery of company’s own manufacture, volume and sum unknown, 1999.2




Singing of several contracts for repair and upgrading of military hardware, 1999-2000.3




Deliveries of aircraft equipment and assem­bly parts, 1999-2000.4


Ukraine: Mo­tor-Sich, TASKO-Ex­port


Unspecified deliveries of company’s own manufacture, volume and sum unknown, 1999.5


Ukraine Ukrainian De­fense Ministry


Delivery of unspecified quantity of 7,62 mm cartridges for $10 mln.6


Ukraine Ukrainian De­fense Ministry


Delivery of 56 air-to-air missiles, radio electronic security equipment and AI-25TL aircraft engines for Chinese K-8J trainers 1997.7


Ukraine Chernomors-ky Shipyard


Sale of the incomplete missile cruiser “Varyag” for $20 mln to Macao, then a colony, now Chinese territory, in 1998.8

Under contract the vessel could be used for non-military purposes only.



Two separate deals for maintenance tech­nology for AL-31F engines, $10 mln each, in 1999-2000. Also in 1999 Artem delivered aircraft products, Lorta (Lviv) delivered control systems, FED delivered aircraft products, and Arsenal and Motor-Sich made deliveries.  All companies delivered products of their own manufacture.9


Ukraine Anto­nov ANTK


Several contracts for aircraft maintenance services and repair signed at Zhuhai exhibi­tion in November 2000.10




Deliveries of military equipment and  other goods in 1998-1999. Several deliveries of unspecified products manufactured by Luhansk Machine-Tool Plant in 1997-1999.11


Ukraine Motor-Sich, TASKO-


Czech Republic

Unspecified deliveries of company’s own manufacture, volume and sum unknown, 1999.12


UkraineTopaz (Donetsk)


Unspecified deliveries of company’s own manufacture, volume and sum unknown, 1999.13



Ukrainian De­fense Ministry


Delivery of “Osa AK” (SA-8) SAMs for $64 mln, and Su-27 (Flanker) fighters for $600 mln in 1997.14


Ukraine Frunze NPO (Sumy)


Unspecified deliveries of company’s own manufacture, volume and sum unknown, 1999.15




Repair of aircraft and naval equipment, moder-nization of Tbilisi air defense system, 1999-2001.16


Ukraine Frunze NPO (Sumy)

Great Britain

Unspecified deliveries of company’s own manufacture, volume and sum unknown, 1999.17


Ukraine Ukrspetsex­port, NPO More (Feodosia)


Signed contract for two Zubr (Pomornik class) amphibious ships valued at $97 mln in January 2000. Final delivery expected in mid-2001.18

Completion of contract still in progress.

Ukraine, Luhansk Ac­cumulators In­dustrial Asso­ciation


Deliveries of 203U storage batteries for the Indian Navy with estimated value of about

$1 mln, 1998.19


Ukraine Sevastopol Aircraft Plant


Overhaul of 5 Ka-27 (Helix) anti-subma­rine helicopters for the Indian Navy. Sepa­rate contract made earlier for repair of Ka-25 (Hormone) anti-submarine helicopters. Value of contracts unknown, purportedly completed in 1999-2000.20



 Iskra Electrical Engineering Works (Zaporizhzhya)


Report on the Indian Defense Ministry’s final decision regarding a prior resolution to purchase a supply of artillery radar sys­tems becomes available April, 4 2001. Sum unknown.21

The Ukrainian radar sys­tems were in competition with Cobra radar systems of French manufacture.



Delivery of 12 An-74 passenger/cargo air­craft for $132.9 mln.22




Signed contract for the sale of production and assembly technology for An-140 dual-purpose aircraft in 1995, Planned capacity of 12 units annually to be reached in 2004. Sum unknown.23

First ground test of Ira­nian-made An-140 in No­vember 2000. First flight in February 2001.

Ukraine: Mo­tor-Sich


Small-scale deliveries of company’s own manufacture, volume and sum unknown, 1999.24


Ukraine Malyshev Plant (Kharkiv)


Delivery of 50 BTR-94 wheeled APCs for $6.5 mln, 1999-2000. An additional con­tract for the training of 100 specialists was signed at SOFEX-2000.25

New vehicles were as­sembled at the plant itself.



Delivery of two An-124 Ruslan (Condor) dual-use aircraft, ordered in 2000.26

Completion of contract purportedly in progress.



$600,000 service contract with a 3-year warranty for the repair of An-26 (Curl) military transport planes. Purportedly completed in 2000.27



Ukrainian De­fense Ministry


Delivery of 4 Mi-24 (Hind) assault heli­copters and 4 Mi-8 (Hip) multi-role heli­copters, March 2001.28. The contract in­cludes the training of 6 pilots for Mi-24 and 40 engineers, sum unknown.




Unspecified deliveries of military equip­ment, volume and sum unknown, 2000.29


Ukraine: Frunze NPO (Sumy)


Unspecified deliveries of company’s own manufacture, volume and sum unknown, 1999.30


Ukraine Malyshev Plant (Kharkiv)


Delivery of 320 T-80UD tanks for $600-650 mln. The contract was signed in sum­mer 1996 and delivery completed at the end of 1999.31


Ukraine Malyshev Plant (Kharkiv)


Participation in upgrading Type 59 tank, participation in the production of MBT-2000 Al Khalid main battle tank.

Reports concerning con­tracts appeared in 2000.32



Delivery of assembly parts to the Land Force and the Navy. Deliveries of TASKO-Export products, mainly ammunition.

Dates unknown.

Ukraine TASKO-Export


Contracts for upgrading and repair of arms and military hardware, deliveries of mili­tary goods. Volume and sum unknown, 1999.33


Ukraine: TASKO-Ex­port


Unspecified deliveries of company’s own manufacture, volume and sum unknown, 1999.34


Ukraine Ukrainian De­fense Ministry

Sri Lanka

Deliveries of four An-32 (Cline) aircraft in 1996 and Mi-24 assault and Mi-17 multi-role helicopters in 2000.35


Ukraine Dar­nitsky Tank Repair Plant


Repair of 200 T-55MV main battle tanks. Contract signed in 1995, completed in 1997.




Repair of a group of Mi-17 (Hip H) heli­copters. Contract signed in 1999.36


Ukraine TASKO-Ex­port


Delivery of a batch of TNT. Completed in 2000.37


Ukraine: Prog­ress State Enterprise, Morozov Design Bureau (Kharkiv)


Delivery of 90 BTR-3U APCs to the Navy. Contract signed in 2000, delivery still in progress.38


Switzerland Swiss Ordnance Enterprise Corp.

Ukraine Morozov Design Bureau (Kharkiv)

Contract for joint manufacture of 120-mm tank gun barrels for a for Ukraine.39


Ukraine Iskra Electrical En­gineering Works (Zaporizhzhya)


Deliveries of radar equipment ordered in 1999, completed in 2000.

The plant’s exports to­taled $60 mln in 1992-1998; at the beginning of 1999 their contract port­folio was in excess of  $13 mln.40


Topaz (Donetsk)

Unknown Middle Eastern country

Delivery of new “Kolchuga” electronic reconnaissance system. Completed in 2000.41



Isrka Electrical

Engineering Works (Zaporizhzhya), Ukrspetsexport

Unknown South American country

Deliveries of radar equipment completed in 1998.42


Ukraine Dar­nitsky Tank Repair Plant


Overhaul of 40 tanks for $3.2 mln, com­pleted in 1997.43




Deliveries of military equipment, small ar­tillery guns, ordered in 200044. Delivery of multiple-launch rocket systems also likely.




Delivery of 100 R-27 (??-10) air-to-air missiles for Su-27SK (Flanker) fighters, 1998-2000.45




The organization of combat boats and pow­der manufacture, cooperation in aircraft maintenance services and repairs, 1999-2000.46


Ukraine Ukrainian De­fense Ministry


Delivery of 4 Su-17 (Fitter) ground attack aircraft, completed in 1996.47


Source: CACDS, Kiev

 1 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.64

 2 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.62

 3 Materials of Ukrainian agencies, 2001

 4 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.65

 5 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.62

 6 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.65

 7 Ibid.

 8 UNIAN, 22.10.1998

 9 Jane’s Defense Weekly, 10.01.01; Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.64

 10 Antonov ANTK press release on the results of the exhibition, December 2000

 11 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.64

 12 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.62

 13 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.62

 14 CACDS database, 1998

 15 Ibid.

 16 Zerkalo nedeli, 27.01.2001

 17 Ibid.

 18 UNIAN, 26.01.2000

 19 UNIAN, 08.10.1998

 20 2000 Weekly, 03.11.2000

 21 Indian Express, 04.04.2001

 22 UNIAN, 02.10.1999

 23 Zerkalo nedeli, 20.01.2001

 24 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.62

 25 Versii agency, 12.05.2000; UNIAN, 05.05.2000

 26 Zerkalo nedeli, 20.01.2001

 27 2000 Weekly, 03.11.2000

 28 2000 Weekly, 13.04.2001

 29 Zerkalo nedeli, 20.01.2001

 30 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.62

 31 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.65

 32 Zerkalo nedeli, 20.01.2001

 33 Zerkalo nedeli, 20.01.2001 (TASKO-Export deliveries are reported in Nazional’na bezpeka ? oborona journal of the Ukrainian Center for Economic and Political Studies, #6, 2000. P.63)

 34 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.62

 35 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.65

 36 UNIAN, 01.10.1999

 37 Zerkalo nedeli, 20.01.2001

 38 Zerkalo nedeli, 23.04.2001

 39 UNIAN, 25.08.1999

 40 UNIAN-VPK, #6, 13.01.2001

 41 Zerkalo nedeli, 24.03.2000

 42 Ibid.

 43 Uraydovii kur'er, 08.02.1997

 44 Zerkalo nedeli, 11.11.2000

 45 Jane’s Defense Weekly, 27.12.2000

 46 UNIAN, 03.09.2000

 47 Nazional’na bezpeka ? oborona, Ukrainian Center for Economic and Political Studies, #6, 2000, p.63

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