Publication: Monitor Volume: 6 Issue: 26

Reports published in the Russian press last week suggested that the Kremlin is launching a major push to increase arms export revenues for the year 2000. The same reports also listed final figures for 1999 arms sales which were significantly higher than those that had been bandied about several months ago (see the Monitor, December 23, 1999). The reports raise the question of whether the 1999 figures have been artificially inflated, perhaps for political reasons. They also suggest that the government may be turning to Soviet-era type target figures in setting out the revenue totals it expects this year from Russia’s handful of state arms trading companies. The companies will be ordered, in other words, to “fulfill the plan.”

These new targets were apparently set during a January 31 meeting of the Russian commission for military and technical cooperation with foreign countries. The meeting was chaired by acting Russian President Vladimir Putin and was attended by Deputy Prime Minister Ilya Klebanov, who oversees Russian arms sales abroad. According to remarks Klebanov made after the meeting, the commission approved a “general concept for military cooperation [with foreign countries] to the year 2010.” Klebanov revealed few details of the new arms trade guidelines. But he did say that Moscow would continue to emphasize arms sales to India and China, which he said “accounts for more than 50 percent of the entire amount” of Russia’s total military cooperation with foreign countries. It was not clear whether that 50 percent figure was a projection for the year 2000, but previous Russian accounts have put Russian arms trading with China and India together at closer to 80 percent of total arms export revenues. Klebanov said that Moscow would also focus on increasing Russian arms sales to Latin America, Africa and the Middle East.

Klebanov told reporters that the total value of Russian military exports last year had amounted to US$3.6 billion. Of that total, some US$2.8 billion was reportedly accounted for Rosvooruzhenie, Russia’s chief state arms trading company. Each of those figures are higher than the estimates released toward the end of 1999, when Russian arms trade officials suggested that Rosvooruzhenie would likely rack up sales of US$2.5 billion for the year, and that Russian arms sales as a whole might get over the US$3 billion mark. In 1998 Russian arms sales had totaled US$2.6 billion.

Aside from the somewhat-higher-than-expected final 1999 figures, Klebanov’s remarks were noteworthy for suggesting that the government intends to push the three main Russian state arms trading companies–Rosvooruzhenie, Promeksport and Rossiiskie Technologii–to increase their sales revenues in 2000. According to Klebanov, Rosvooruzhenie officials, for example, had come to the January 31 meeting with projections indicating that the company expected to earn US$2.6 billion in 2000. But the company was apparently criticized for having set itself “unambitious tasks,” and told bluntly that that figure would not do. Rosvooruzhenie will reportedly have to redo its projections for the year 2000. One report quoted Klebanov as suggesting that Rosvooruzhenie will be expected to top the US$3 billion mark in sales. The Russian deputy minister also said that Rosvooruzhenie, Promeksport and Rossiiskie Technologii would all be compelled by the government to “demonstrate convincingly exactly how they are planing to fulfill the declared plans. They are state unitary enterprises and are to receive annual plans from the state.”

Klebanov suggested that the Russian defense sector as whole, moreover, could earn more than US$4 billion in 2000. That, he said, would be the first time in a decade that Russian arms exports had topped the US$4 billion mark (Itar-Tass, RIA, January 31; Vedomosti, Nezavisimaya gazeta, February 1).

Some Western analysts have painted a less than rosy picture of the longer term prognosis for Russian arms exports, however. They point to the markets which Russia has lost in Eastern Europe and elsewhere, and to the fact that many former Soviet client states are too poor to purchase Russian weaponry. In addition, Moscow suffers from its inability to provide the sort of offset programs, technology transfers and co-production deals that many Western arms producers now offer as a matter of course (Wall Street Journal Europe, December 8). Some Russian experts, moreover, are predicting an eventual decline even in Russia’s now lucrative arms export arrangements with India and China, as the two Asian giants move increasingly toward producing their own military hardware, or look to other suppliers.

Recent Russian arms sales to India, moreover, may soon come under some unwelcome scrutiny. On February 6 Indian Defense Minister George Fernandes unexpectedly ordered an investigation into all Indian defense purchases since 1985-1986. The probe will be directed at uncovering instances of bribery and corruption in the acquisition of billions of dollars worth of Russian and French warplanes and of Russian armaments and spare parts. India reportedly spent some US$3.5 billion on Russian military hardware from 1990-1996 alone (Times of India, February 6; AP, February 5; IPS, February 4).