Publication: Eurasia Daily Monitor Volume: 4 Issue: 3

Last month Russian President Vladimir Putin signed a decree ordering all weapons exports to be handed over to the state arms trader Rosoboroneksport beginning March 1. The MiG corporation, the Tula-based Instrument Manufacturing Design Bureau (KBP), and other independent exporters that together shipped $624 million of weapons in 2005, will be forced to hand over their business to the state company, which has close ties to the Kremlin (Kommersant, December 15).

Since its formation in 2000 as a state-owned trading company, Rosoboroneksport has been transformed into an industrial conglomerate. According to its CEO, Sergei Chemezov, the company currently has $21 billion in confirmed arms export contracts (Interfax, November 13, 2006). In 2005 Rosoboroneksport’s sales reached $5.2 billion, and now it will be a full export monopoly.

According to Chemezov, Rosoboroneksport has also been investing hundreds millions of dollars into Russia’s defense industry (, November 13, 2006). Today Rosoboroneksport fully controls the production of civilian and military helicopters in Russia.

Intelligence officers and high-ranking military personnel in active service, including admirals and generals, staff the company. While serving at Rosoboroneksport, these officers still receive full military pay, benefits, promotions, and service medals.

Rosoboroneksport’s trading practices are opaque, and its overall earnings have never been officially revealed. But commissions for its services, such as arranging the transport of weapons to their destinations, apparently considerably exceed 10% of Russia’s annual arms exports.

Russian arms producers actually use Soviet designs and equipment and Soviet-made components for assembly. Often entire Soviet-made weapons systems are repainted and sold as “newly Russian-made” (see EDM, July 31, 2006). Illegal profits are sky-high and Rosoboroneksport has been at the center of this racket, stockpiling billions of dollars.

Rosoboroneksport is fully government owned, but it is clear that most — if not all — of its revenue is spent by the company — not transferred to the state. In 2005, Rosoboroneksport paid $700 million to buy a 62% share in Russia’s biggest car company Avtovaz; in 2006, another $700 million was paid to buy 66% of Avisma, one of the world’s main producers of titanium (Kommersant, December 15).

Appointed in 2004, Rosoboroneksport CEO Chemezov is a former KGB operative who served in the 1980s in Dresden, East Germany, together with Putin (Wall Street Journal, May 19, 2006). Chemezov has been cited as a possible successor to Putin in the 2008 presidential elections (Moskovsky komsomolets, August 15, 2006; Moscow Times, December 7). Last month Chemezov was elected to the bureau of the Supreme Council of United Russia, the pro-Putin ruling party, putting him in an advantageous position ahead of the campaign season.

Today, few people consider Chemezov to be a front-runner. But he clearly enjoys close personal relations with Putin and comes from the circle of the president’s old KGB pals. Chemezov also seems to have already assembled the largest war chest of all other serious contenders.

Whether or not Putin backs Chemezov to be the next Russian president, he and the Rosoboroneksport conglomerate already exert considerable influence on Russian policymaking. Today Russia seems to oppose U.S. actions and influence (at least verbally) on any front worldwide, but Chemezov has his own personal agenda in the Horn of Africa.

In 1998, Eritrea and Ethiopia began an armed conflict that still continues intermittently or through proxies. In the current fray in Somalia, the Eritreans supported the Islamists, while Ethiopian troops invaded to install a provisional government. In the late 1990s Chemezov, as head of the arms trading company Promeksport, supplied Ethiopia with Russian weapons worth billions, including Su-27 jets and attack helicopters together with mercenary Russian pilots. Last month the Ethiopian Air Force Chemezov helped build led the rapid advance on Mogadishu.

Commercially successful shipments of Russian weapons by Promeksport to different African war zones advanced Chemezov’s career. In 2000 Putin merged Promeksport with Rosvooruzheniye to form Rosoboroneksport. Chemezov was first deputy CEO of the joint company and later its head.

In 1999, retired Colonel Vladimir Nefedov, former chief representative of Rosvooruzheniye in Ethiopia, told me that he was a freelance arms trader who had organized the purchase of MiG-29 jets by the Eritreans direct from the MiG corporation bypassing state arms trading companies. Eritrean diplomats in Moscow confirmed the story. Today Moscow (together with Washington) is backing the Ethiopians, while Eritrea and the Islamists are apparently being supplied with Russian weapons through other sources.

Russian-made weapons have also shown up recently in the Middle East. KBP, the independent arms trader based in Tula, supplied Syria with the modern anti-tank Russian Kornet missiles that Hezbollah allegedly used against the Israelis in Lebanon last summer. The fact that Islamists or their supporters in Lebanon and in the Horn of Africa used independently exported Russian weapons may have lead Putin to impose a strict arms trade monopoly.

Of course, when shipping modern arms to Iran, Venezuela, and China, Rosoboroneksport does not follow U.S. policy guidelines. Long-term Russian national interests are also not a priority. In arms trading and industrial empire building the private aims of former spooks are the denominator.