Preliminary Estimates of Russia's Arms Export in 2001

Konstantin MAKIENKO

The main achievement of Russian arms ex­porters in 2001 was the absolute post-Soviet record in foreign currency receipts that soared to $4.4 billion, according to official reports. That is $1 billion more than during the previous peak years of 1996 and 1999. President Vladimir Putin announced the size of foreign currency re­ceipts at a Russian Security Council session on December 26, 2001.¹ In 2000 receipts amounted to $2.84 billion.

However, in contrast to his March 2001 state­ment on the results of military-technical cooperation (MTC) in 2000 Putin did not dis­close the cost of arms deliveries. Hence it re­mains the prerogative of nongovernmental experts to estimate this indicator. According to the CAST estimate, in 2001 the price of deliveries stood at $3.6 billion, going slightly down against the successful year of 2000 when it amounted to $3.68 billion. Out of the $3.6 bil­lion at least $400 million were earned through deliveries not mediated by Rosoboronexport government-owned arms trader, but mainly Russian Aircraft Corporation "MiG" (RAC "MiG") and Antey Concern.

Rosoboronexport

Judging by a statement of Yuri Khozyainov, Deputy Chairman of the Russian Committee for Military-Technical Cooperation with Foreign States (CMTC), we can assume that Rosobo­ronexport foreign currency receipts slightly ex­ceeded $4 billion.² There is no exact informa­tion about the volume of deliveries, but Sergei Chemezov, first deputy chief of Rosoboronex­port, has said in an interview that his company hoped to reach the target figure of $3.3 billion. Judging by several other statements by CMTC officials we can conclude that in reality deliv­eries mediated by Rosoboronexport amounted to $3.2 billion, with half of that sum being brought by fighter aircraft of the Su-27/30 family.

In 2001 China received 30 Su-30MKK fighter-bombers under the 1999 contract. The delivery was a serious achievement for Sukhoi Design Bureau and the Komsomolsk-on-Amur Aviation Industrial Association (KnAAPO). After the contract was signed there were great doubts whether the design bureau or plant would be able to develop the new fighter modification or produce it on such a large scale. In addition, the Irkutsk Aviation Industrial Association (IAIA) transferred 10 Su-27UB trainers to China by way of paying Russian government debts. At a briefing at the end of 2001 AMIC Sukhoi General Director Mikhail Pogosian said his holding had exported "over 50 Su fighters." In addition to the 40 aircraft transferred to China Su-24 frontline bombers could have been deliv­ered only to Algeria. It must be said that Russia had never exported such a big number of air­craft in post-Soviet times. The previous record was set in 1995 when MAPO "MiG" exported 36 fighters.

Among the other major transfers we should mention the beginning of deliveries of T-90S tanks to India under the $800-million contract signed in February 2001. The shipment of at least 41 tanks began in November-December. The second Zubr amphibious ship was handed over to Greece, and an upgraded Kilo class submarine armed with the long-range Club mis­sile system to India.

Thus according to our count, the difference be­tween currency receipts and the cost of deliveries in 2001 was around $800 million or approximately the same as in 2000. The differ­ence is that in 2000 currency receipts were smaller than the cost of deliveries, and in 2001 the situation was the opposite. The sums for two years are more or less the same. Evidently the significant part of payments for major deliv­eries in December 2000 to China (destroyer and ten Su-30MKK fighters-bombers) was made in 2001. Besides, Rosoboronexport executives have said they managed to increase the size of ad­vance payments under current contracts.

As for the third key indicator of arms trade - the volume of contracts, Russia has never dis­closed such figures. The biggest contract of 2001 identified by CAST was the agreement on the delivery of the second batch of Su-30MKK air­craft to China. It is likely that 38 or 40 units worth $1.8 billion were in question. In Febru­ary 2001 several contracts were signed with In­dia, the biggest of them an $800 million deal for the delivery of 124 T-90S tanks and the pro­duction of 186 such tanks under license. Russia also agreed with India on upgrading Il-38 coastal guard patrol aircraft for $180 million, delivering five Ka-31 AEW helicopters for $108 million, and transferring an unknown arms sys­tem for $150 million. At the very end of 2001 the news came that an over $400 million con­tract was signed with China on the delivery of the third batch of medium-range S-300PMU (SA-10) SAM by way of payment of the Rus­sian debts. Thus, contracts identified in the open press totaled $3.5 billion.

As for the list of Russian arms export items, 2001 reversed the trend of 2000 when the deliv­ery of a destroyer to China increased the share of naval weaponry. In 2001 aircraft deliveries again topped the list and constituted 60-70% of overall arms exports. The domination of aircraft exports is likely to continue in 2002. Later the share of naval weaponry will grow again given the existing contract for the construction of two new destroyers for China, the expected contract for the transfer of the aircraft-carrying cruiser Admiral Gorshkov to India and the transfer of frigates built for India at Baltiysky Zavod shipyard.

Exports did not improve much as far as their regional structure is concerned. About two thirds of Russian arms weaponry go to merely two countries - China and India. Despite favorable political and economic conditions Rus­sia has failed to make a proper comeback to the Middle East markets. The only relatively big contract reported in 2001 covered 20-30 Mi-17 helicopters for Iran for no more than $150 mil­lion. Now that oil prices have plummeted, addi­tional financial barriers have appeared to Rus­sian arms exports to that part of the world.

RAC "MiG"

In 2001 RAC "MiG" radically boosted its sales. The price of deliveries grew 50-100% compared to previous years to $150-200 million. During an aviation air festival in Lukhovitsy in August 2001 reporters were shown a MiG-29 air superi­ority fighter with the markings of the Eritrean Air Force. This means that after the UN Secu­rity Council lifted its embargo on arms supplies to the Horn of Africa, RAC "MiG" resumed de­liveries of MiG-29 fighters to that country. However, it is not clear whether it was the sec­ond batch of aircraft (in which case the transfer should consist of at least six units) or the com­pany delivered two-four units in addition to the aircraft transferred in 1998. We can also as­sume that in 2001 RAC "MiG" started deliveries under contracts with Burma and Yemen for four to eight units. Thus, the size of deliveries re­mains unclear.

There is much more certainty about the volume of concluded deals. In 2001 the company signed contracts for the delivery of 36 MiG-29 aircraft to the tune of $1 billion. Last time the corpora­tion did as well was in 1994 when it concluded contracts with Malaysia, Slovakia and India for 36 aircraft of the same type, also for $1 billion. Ten of the MiGs agreed upon in 2001 should go to Burma, 14 to Yemen and 12 to an unidenti­fied country in Asia or Africa.

Even though its sales have radically improved,I  RAC "MiG" still faces serious difficulties in its development. It has not completed testing MiG-29SMT and MRCA fighters of the 4+ generation. Without offering such a fighter, its future on the market cannot be considered safe. It seems that there are institutional and legislative obstacles to the restructuring of an inefficient company with redundant personnel and absurd placement of its core production in the one of the world's most expensive cities. Nevertheless, the new contracts will allow the corporation to prepare for its key agreement of the next five-seven years on the delivery of air wing for the Admi­ral Gorshkov aircraft carrier at the price of up to $1.5 billion. If successfully fulfilled the deal with India should make MiG the second most important Russian arms exporter, which it used to be in the mid-1990s.

Antey Concern

In 2001 Antey concern delivered four short-range Tor-M1 (SA-15) surface-to-air missiles to Greece for a little over $100 million. Therefore, its overall exports hardly exceeded $150 mil­lion. The remaining two out of 31 agreed mis­siles will be transferred to Greece in February 2002. At the beginning of January 2001 there was no indication of Greece's readiness to sign a deal for the remaining option of 19 Tor-M1 SAM. It is also evident that the concern failed to sign contracts for the delivery of such sys­tems to the Middle East or any other part of the world either by itself or through Rosoboronex­port, therefore in 2002 it risks becoming an out­sider in Russia's MTC.

So far no reliable information has been pub­lished about the exports of the Tula-based In­strument Building Design Bureau (KBP) in 2001. It is likely to have started receiving money from the United Arab Emirates for R&D related to the Pantsyr-S1 wheeled air defense missile/gun system but the size of the funds hardly exceeded $100 million.

In June 2001 information surfaced for the first time on the nature of work done the Reutov-based Machine-Building Research and Pro­duction Association (NPO Mashinostroeniya) in the interests of a foreign customer. For sev­eral years it conducted R&D on the PJ-10 su­personic anti-ship cruise missile that can be launched from ships, submarines, aircraft and land platforms. The missile is developed on the basis of the Yakhont anti-ship missile in the framework of the BrahMos project together with India's Defense R&D Organization (DRDO).  The cost of the effort is estimated at $30-40 million. The information was released in connection with the first test launch of the missile.

During 2001 the Kolomna Machine-Building Design Bureau (KBM) carried out the first ma­jor contract it had signed as an independent arms trader. The December 2000 deal provides for the delivery of several hundred Igla man portable surface-to-air missile (SA-18) for $32 million. Under a contract with Yemen the de­sign bureau checked the technical condition of 80 short-range Tochka (SS-21) tactical missiles.
There is no other information that the design bureau has exported weaponry independently of Rosoboronexport.

Thus, in 2001 the defense industry companies that have permission to export arms independ­ently of the state intermediary, conducted deliv­eries for about $400 million and collected com­parable foreign currency receipts. 

Shares of major exporters in overall volume of Russia's arms sales in 2001

¹ Yuri Golotyuk, "PR prezidentskogo urovnya," Vremya Novostei, 27.12.01, p. 2.

² Interview with State Secretary - Deputy Chairman of the Russian Committee for Mili­tary-Technical Cooperation with Foreign States (CMTC) Yuri Khozyainov. See Sergei Sokut, "Voyennyi export budet rasti," Nezavisimoe voy­ennoe obozrenye, #47, 21-27.12.01, pp. 1, 6. In the interview Khozyaninov said that 90% of all foreign currency receipts were secured by Ro­soboronexport.