Publication: Monitor Volume: 2 Issue: 25

China has purchased a license to produce high-performance Russian SU-27 fighter jets in a major sale estimated to be worth more than $2 billion. The deal, reportedly finalized by the Russian state arms trading firm Rosvooruzhenie in December 1995, was announced February 2 by Commander in Chief of the Russian Air Force Col. General Pyotr Deinekin. While the details of the sale were not made public, Russia will apparently supply China with production lines for the aircraft as well as train Chinese workers. It is expected to be several years before the fighter jets actually take to the skies. (5) China bought 24 SU-27s from Russia in 1992. The latest sale could accelerate an already worrisome arms race in Asia, where a number of nations fear what they perceive to be a Chinese military build-up.

Although the sale will undoubtedly provide long-term financial benefits to Russia’s impoverished defense sector, it may not represent all that Moscow had hoped to get in a deal with China. In March 1995, reports surfaced of Beijing’s desire to purchase licenses to build SU-27s, but Moscow apparently held out in the hope that China would first buy 100-150 of the fighter jets from Russian factories. (6) That would have been the most lucrative option for Moscow. However, Beijing has in general sought to keep its own hard currency expenditures down by purchasing licensing agreements rather than hardware "off the shelf." The agreed-upon form of payment will also determine how lucrative the sale will really be for Moscow. In recent years Russia has accepted barter in partial payment for some of its arms deliveries, including consumer goods of suspect quality from China.

Chubais and Yasin Warn of Economic Disaster.