Russian Military-Technical Cooperation with Foreign States in May-September 2001

The main developments in Russia's military and technical cooperation with other coun­tries in May-September of this year were:

• The signing of an intergovernmental agree­ment, and possibly a contract, with China that calls for the delivery of a second batch of Su-30MKK fighter jets, tentatively worth $1.5 bil­lion to $2 billion.

• The signing by Russian Aircraft Corporation "MiG" of two contracts for the delivery of MiG-29 (Fulcrum) fighter jets to Myanmar and Yemen.

• The publication of information on joint re­search and development by Russia and India on a PJ-10 anti-ship cruise missile (the BraMos project).

• The publication of information on foreign currency earnings through Russian arms ex­porter Rosoboronexport in the first seven months of 2001.

Contracts with China

Reported order for second batch of Su-30MKKs

In July of this year rumors began to circulate in Moscow's journalistic community that Russia had signed an intergovernmental agreement with China to deliver a second batch of Su-30MKK fighters. Later, the well-informed Military News Agency reported that a corresponding contract had been signed. It is reckoned that China placed a $2 billion order for 38 fighters. The contract for the first batch of Su-MKKs, also probably 38, was signed in August 1999. The first ten jets were delivered to China's air force in December 2000.

As it is usually the case with Russian-Chinese military-technical cooperation, official con­firma­tion of these reports cannot be obtained from Russia's Military-Technical Cooperation Com­mittee (KVTS), Ros­oboronexport or aircraft maker AVPK Sukhoi. But sources at the Kom­somolsk-on-Amur Aviation Production Associa­tion have con­firmed that a contract has been signed.

One cannot help but notice that, in acquiring the Su-30MKKs, the Chinese air force has in­creased the size of its orders by half or more compared to earlier purchases of Su-27SK (Flanker) fighters (two batches of 26 and 22 planes), and reduced the time period between orders from four - five years for the Su-27SKs (the first batch ordered in 1990 or 1991, the second in 1995) to less than two years (August 1999 and July 2001) for the Su-30MKKs. This means that China is stepping up the pace of its military buildup and is trying to more rapidly close the technological gap between its air force and those of Taiwan and Southeast Asian countries.

Contracts for delivery of aviation sub­systems to China

During the Moscow aerospace show in August 2001 a number of companies announced that they had signed con­tracts with China to deliver aircraft subsystems and engines. One that especially stands out is a contract worth about $300 million for the delivery of 300 modified AL-31F engines that are to be fitted on the Chinese-made F-10 light fighter jets. This contract will be filled by Mos­cow's MMPP Salut. The F-10 fighter was de­veloped using the technology of Israel's Lavi program, which in turn was based on the U.S. F-16 fighter. It should be noted that the price of AL-31F engines in earlier contracts with China exceeded $2 million, so one can assume that either an exaggerated figure for the number of engines or an understated contract price were published.

Another such report was about a $5 million con­tract to deliver Zhuk on-board radar systems to China (to be filled by Fazotron-NIIR). The con­tract probably calls for the delivery of no more than five radars. The same reports said that China would like to buy a total of up to 100 radars for its F-8-IIM (Finback) fighters. Also, the Russian-Belarusian group Aerospace Equipment announced that it had signed a $200 million contract to deliver radio electronics equipment to China for Su-27 fighters. It is un­clear whether this refers to equipment within the context of the 1996 contract according to which 200 Su-27SKs were to be produced under license in China, or whether the country is buying additional avionics.

Renaissance of RAC "MiG"

In June and September it was reported that Russian aircraft maker RAC "MiG" had signed two contracts that could radically change the economic situation at the company.

The newspaper Vedomosti in June reported that "MiG" had signed a $130 million contract with Myanmar to deliver eight one-seater MiG-29 fighters and two MiG-29UB combat trainers. This report was later indirectly confirmed during a visit to Myanmar by Military-Techni­cal Cooperation Committee chairman Mikhail Dmitriev, but the company itself declined to confirm the signing of the contract. This con­tract alone should keep "MiG" in operation and allow the company to pay debts and taxes. In August, during an aviation show at the airfield in Lukhovitsy, a Russian journalist observed a MiG-29 jet with the markings of the Eritrea air force. The presence of markings means that the aircraft was completely ready to be sent to that country. The daily Kommersant later reported that two MiG-29 fighters had been delivered to Eritrea. In 1998 and 1999, RAC "MiG" already delivered six MiG-29 to this country. The paper surmised that there was an option for another six jets. But this option, if it existed, was not written into the contract because of the embargo on military aircraft supplies to the Horn of Af­rica imposed by the UN Security Council in the spring of 2000; the embargo lasted until May 16, 2001.

At the beginning of September 2001 Vedomosti reported the sensational news that RAC "MiG" had signed a big contract worth up to $300 mil­lion to deliver an unknown number of MiG-29 fighters to Yemen. The paper's sources said there is also an option to buy another $100 mil­lion worth of jets. RAC "MiG" has categorically refused to confirm or even comment on this in­formation, but judging by previous experience one can say confidently that Vedomosti's infor­mation on the military-industrial complex and military-technical cooperation stands out by its consistent accuracy. It follows that:

1.    The contract with Yemen, if its financial pa­rameters are correctly reported by Vedomosti, is RAC "MiG"'s biggest since the Malaysian con­tract of 1994, which called for the delivery of 16 MiG-SE fighters and two MiG-29UB for a total of $560 million to $650 million, according to various source. After fulfilling the Malaysian contract, VPK MAPO/RAC "MiG" signed only small contracts with Peru, Bangladesh, Eritrea and Myanmar worth no more than $130 million for the delivery of three to ten aircraft. If the Antey concern does not sign any new contracts before the end of the year for delivery of Tor-M1 (SA-15) SAM systems to Greece, Iran or Syria, RAC "MiG" will for the first time since 1995 become Russia's second biggest arms ex­porter by volume of contracts signed and proba­bly value of deliveries, behind Rosoboronexport.

2.    If the Yemen contract goes well, RAC "MiG" will get the resources to step up work on the completion of generation four-plus fighters, the MiG-29SMT and MiG-29K. Only after these aircraft are on the market will the company be able to secure a firm place on the Indian, Ira­nian, Syrian, Libyan and, maybe, Algerian mar­kets. Theoretically, these markets could provide RAC "MiG" with orders for generation four-plus aircraft until 2010-2015.

3.    An improvement in RAC "MiG"'s finances increases the chances that Russia's air force will call a tender for the design of a next generation combat aircraft. Until now, while RAC "MiG"'s financial resources were close to zero, the com­pany had little chance of competing with Suk­hoi Design Bureau, which earns considerable royalties from the Komsomolsk-on-Amur Avia­tion Production Association. It is clear that the research and development program for a next generation combat aircraft depends directly on the ability of an economic player to raise his own resources (which can be done only through exports) and build a system of international co­operation. At present, those working in Sukhoi's research and production system have obvious advantages on both counts, but this gap will narrow if the Yemen contract is successfully carried out.

4. At the time of writing this article, it was still not known how many fighters are to be delivered under the contract. According to information that has leaked from RAC "MiG", the company proposes to deliver a version of the jet that is "close in appearance to the Malaysian MiG-29". If this information is true, we are probably talking about the MiG-29S, which differs from earlier modifications by its bigger weapons load (up to 4 tones), larger fuel tanks, new software and an updated onboard computer that allows the use of RVV-AE long-range air-to-air missiles with active radar guidance. At present RAC "MiG" can deliver up to 15 MiG-29S jets for export in a short time span. The company has delivered 16 such aircraft to the Russian Air Force, 16 to Malaysia, and three to Peru. This version has an approximate minimum price of $15 million. Therefore, if Vedomosti's sources are not mistaken about the value of the con­tract, the company plans to deliver all 15 air­craft plus two to four MiG-29UBs in the first shipment, that is 17-19 aircraft, which would come out to nearly $300 million. If the contract calls for the delivery of a bigger batch, the company would have to go into full-scale pro­duction or deliver jets held by the Russian Air Force.

5. Holding to the assumption that the contract is worth $300 million, it is very likely that Yemen will have to find foreign financing to pay for the deal. It is almost certain that Yemen does not have such internal financial resources. The source of this outside financing would have to be a country that is trying to reduce Saudi Arabia's military dominance of the Arabian Peninsula. This would most likely be the United Arab Emirates.

BraMos - a Pilot Program to Build a Russian-Indian Military-Economic Space

On June 12, 2001, the Russian and Indian press reported the successful test firing of the PJ-10 cruise missile from the Chandipur test range in the Indian state of Orissa. Thus it was revealed that Russia and India have been working for several years already on a joint program to de­velop a new weapons system. The BraMos pro­ject is a joint venture set up by Russia's NPO Mashinostroeniya (Machine-Building Research and Production Association, from Reutov) and India's Defense R&D Organization (DRDO). The venture was set up in 1998, when NPO Mashinostroeniya received the right to independently conduct military-technical cooperation with foreign countries for an un­precedented term of seven years. The venture received large loans for research and develop­ment on the new system: $122.5 million from the Russian government and $128 million from India's. The Russian credit was extended in 1999, and in the federal budget it was entered in the section for "international affairs."

The report that Irkutsk Aviation Industrial As­sociation has signed an agreement to begin joint development with India of the Il-214 military transport plane is in the same logical series. These projects can be seen as the first compo­nents in the formation of a single Russian-In­dian military-economic space, similar to that in Europe. Here it should be noted that IAIA and NPO Mashinostroeniya, firstly, stand out in terms of their management quality and culture, and, secondly, with their tight technological connections formed in working on the integra­tion of the air-borne version of the Yakhont anti-ship cruise missile for the Su-30KN and Su-30MKI platform. An interesting way to step up the formation of a single Russian-Indian mili­tary-economic space, probably, could be the sale or exchange of the government's 14.7% stake in IAIA for a stake in the Indian aircraft maker HAL.

Foreign Exchange Earnings

During the MAKS-2001 air show the manage­ment of Russian state arms trader Rosoboronex­port announced that foreign exchange earnings in the first seven months of 2001 totaled $2.8 billion. This is already almost as much as in all of 2000, when forex earnings totaled $2.84 bil­lion. This means there is a real possibility that earnings for this year will be quite high. Even now one can say with confidence that the record figures of 1996 and 1999 could be repeated, and it is quite possible that for the first time in his­tory Russia will actually earn up to $4 billion in foreign exchange (in freely convertible cur­rency and clearing payments) on its arms ex­ports. At present, however, it remains unclear exactly what transfers brought in such big forex earnings, but it is clear that it could only have been the transfer of Su-27/30-family fighters to China and/or India.