OBSERVERS NOTE SIGNIFICANCE OF GREEK-RUSSIAN MISSILE DEAL.

Moscow and Athens signed a contract on February 26 under which Greece agreed to purchase twenty-one Russian-made Tor-M1 short-range air defense missile complexes. The value of the deal was estimated by Russian sources at over US$500 million. The two sides also signed an option for an additional twenty-nine Tor-M1s, which would raise the total value of the deal to over US$1 billion.

The Tor-M1 contract was originally seen as something of a consolation prize for Moscow. Last year Russia and the United States engaged in an intense competition for a larger Greek air defense missile contract–one which pitted Russia’s much touted S-300 against the American-made Patriot system. Both countries wanted that contract not merely because of its worth–pegged at more than US$1 billion–but also because it was seen as one skirmish in what could develop into a larger battle for bigger financial and political stakes. Moscow, which had already sold S-300s to Cyprus in a controversial transaction, wanted to gain a foothold for the S-300s in NATO proper. Washington and Raytheon, the manufacturer of the Patriot, wanted to keep the S-300s out of Greece. An intense sales campaign by the United States won the contract for the Patriot late last year. Russia–which had from the beginning complained about Washington exerting political pressure on behalf of Raytheon–walked away instead with a commitment from Athens for the smaller Tor-M1 deal (Itar-Tass, March 1; Kommersant daily, March 2).

The Tor-M1 sale has nevertheless proven significant in several ways. For the missile manufacturer–the Antei company–the Russian-Greek contract will provide desperately needed revenues and help keep the concern in business. More generally, the deal provides some much-needed diversification of the client base for Russia’s struggling defense industrial complex. In recent years Russia’s successful major arms sales have been almost exclusively to only two countries: China and India. Moscow is eagerly seeking Western clients, and hopes that the Tor-M1 deal will, if nothing else, open the door at least a crack for Russia to grab a still larger piece of some US$17 billion in arms expenditures which Athens intends to make over the next several years (AP, November 7, 1998).

According to at least one Russian source, the country’s successful sale of the Tor-M1s to Greece was significant for another reason as well. A Russian daily reported on March 2 that the deal both represented a weakening of the monopoly power of Russia’s state arms trading company, Rosvooruzhenie and marked the first time since 1994 that an arms transaction of such magnitude had been concluded by an independent Russian arms maker–in this case, Antei–without the direct participation of Rosvooruzhenie (Kommersant daily, March 2).

The Tor-M1 sale has some history. In November of last year, as negotiations connected to the deal began in Athens, one Russian source reported that Russian First Deputy Prime Minister Yuri Maslyukov had earlier written to the Greek government requesting that it negotiate the Tor-M1 contract not with Rosvooruzhenie, but with Antei (Russian news agencies, November 18, 1998). That seemingly odd request reflected a situation in which, according to one Russian newspaper, Greek defense officials were kept waiting for two months while Moscow decided exactly who would be authorized to sell the Tor-M1 missiles. On November 23, the director of Rosvooruzhenie at the time, Yevgeny Ananev, flew to Athens to continue negotiations on the deal. On November 27 he was dismissed from his post (Vremya, December 1).

RUSSIAN ARMS EXPORT EFFORTS REMAIN POLITICIZED.