Publication: Monitor Volume: 7 Issue: 235

Russia’s arms export establishment expects to earn more than US$4 billion in revenue this year, a figure that at least one report suggests is both a ten-year high and a sign that the country’s struggling arms sector may be poised to recapture some of the glory it experienced during the Soviet era. According to a lengthy article on the subject published earlier this week by the Moscow Times, the US$4 billion that Russia will earn this year compares favorably with last year’s figures, in which Russia’s defense sector reportedly collected US$2.84 billion in cash and delivered hardware worth US$3.68 billion. The Russian state arms trading company Rosoboroneksport, which still controls the bulk of Russia’s arms exports, has reportedly topped its own earnings forecasts for this year. According to the Moscow Times, it has received US$3.6 billion in payments for the first eleven months of 2001 and says its own revenues could exceed the US$4 billion mark by the end of the year. Most of the figures appear to have been provided by Aleksandr Denisov, the deputy chairman of Russia’s Commission for Military and Technical Cooperation with foreign countries.

According to the Kremlin-connected website, Denisov is also predicting that Russian revenues from foreign arms sales could rise by another third over the next two to three years. That is because of a decree issued earlier this week by President Vladimir Putin reportedly aimed at streamlining procedures by which individual Russian defense enterprises are allowed to sign contracts for the supply of spare parts to countries which have already purchased Russian weapons systems. identifies existing weaknesses in this area as the biggest problem confronting Russian arms exporters, and says that even such major buyers of Russian arms as India and China have complained about delivery of spare parts for the hardware they have purchased. Denisov’s own commission, meanwhile, will apparently be given responsibility for overseeing the granting of export licenses of this sort to individual Russian arms exporters. The Military and Technical Cooperation Commission is subordinated directly to the Russian president’s office and represents just one link in a broader, recent Kremlin effort to assert control over the country’s arms export activities.

Indeed, the reported rise in Russian arms export revenues will undoubtedly be attributed to a reform of the sector Putin began implementing late last year. Essentially, that reform involved both the consolidation of what had been three Russian state arms trading companies into one, Rosoboroneksport, and the placement of the president’s own people (many of them from the intelligence establishment) in key slots atop the arms export hierarchy. Perhaps equally important, Putin has also made the export of Russian arms a top foreign policy priority. He has ordered diplomatic personnel to focus more attention on peddling Russian arms abroad and has made concerted and at times very public efforts himself to intercede with top foreign officials in order to win contracts for Russian arms companies. In this he appears to have looked to the West, and to the United States in particular, as a model. Putin has also launched what appears on paper at least to be a major reorganization–and consolidation–of Russia’s broader defense industrial sector, but it is too early to say whether this potentially unpopular effort will pay significant dividends in terms of increasing foreign arms sales.

Another priority identified by Putin’s Kremlin is the need to diversify Russia’s arms export client base, which is now dominated by India and China. Over the past year Russia has engaged in intensive negotiations with the authorities in Tehran, and there have been suggestions that Iran might soon emerge as a third major customer for Russian military hardware. As the Moscow Times article points out, however, Russian arms officials are also focusing their attention elsewhere. One potential market–albeit one that many believe Russia will have a hard time cracking–is Latin America. Prime Minister Mikhail Kasyanov reportedly pushed Russian weaponry hard during a recent visit to Brazil and Venezuela. Russia’s MiG and Sukhoi aircraft manufacturers are currently competing for a US$700 million contract to supply Brazil with twenty-four fighter jets, but Russian experts apparently believe that Moscow may have a better chance of selling helicopters or river patrol boats to Brazil. Venezuela, which purchased eighteen Russian-made Mi-17 helicopters in the late 1990s, is said to be interesting in acquiring additional helicopters.

But Russian arms peddlers are said to be especially interested in increasing exports to Africa, where a number of countries have a long history of purchasing Soviet-made weaponry and where deliveries of Russian arms have recently been made to Ethiopia, Eritrea, Angola and Zimbabwe. Military-technical cooperation was again on the agenda during a recent visit by Ethiopian President Meles Zenawi to Moscow, where the two sides reportedly discussed Russian participation in the modernization of Ethiopia’s air force and air defenses. And potential arms sales were likewise discussed during a recent seven-day visit by Foreign Minister Igor Ivanov to Angola, Namibia and South Africa. The visit appears to have produced no new arms contracts, however (Moscow Times, December 19;, December 12, 17; Interfax, December 11; AP, December 3).

The Kremlin sees increased arms sales as crucial for two reasons. One is because Russian defense budgets have not by themselves been sufficient to support the defense sector, and will apparently not be capable of doing so for the foreseeable future. The sector’s survival, therefore, not to mention the Kremlin’s plans of reequipping what it hopes will be a leaner and more battle capable armed force in the next decade, depend to an important degree on success in peddling arms abroad. In addition, the Kremlin sees arms sales as a potential lever of influence around the globe, one that is important both for geopolitical reasons and because arms are one of the few areas in which Russian technology remains internationally competitive. Voices have already been raised warning that Russia is, in fact, falling behind world standards in this area, however, and that India and China in particular are seeking over the longer term to make themselves independent of Russian military technology. Against that background, and in view of the cash-poor Russian government’s difficulties in granting the sort of credit terms that Moscow’s major arms competitors use to their advantage, it remains to be seen whether Putin’s reform efforts will be enough to pull Russia’s arms makers out of their long, downward spiral.