What Do Russia’s Arms Sales to Bangladesh Mean?

On January 15–16, President Vladimir Putin held talks in Moscow with Bangladesh’s Prime Minister Sekh Hasina. As a result of these discussions, Russia has pledged to lend Bangladesh $1 billion to buy weapons, $500 million to construct the country’s first nuclear plant, as well as discussed the possibilities of expanding trade to the level of $1 billion, which will include helping Bangladesh launch national telecommunications satellites. Gazprom will also drill ten natural gas wells in the South Asian country (Rossiya 1, Interfax, January 15). These deals mark a major step forward in Moscow and Dhaka’s bilateral relations and call for an explanation.

Obviously Bangladesh requires a great deal of foreign assistance in many sectors. Its Foreign Minister Dipu Moni justified the loan from Russia on the grounds that Bangladesh has long been buying Russian weapons. Moreover the Bangladeshi army participates in virtually every UN peacekeeping operation and therefore needs modern weapons (Interfax, January 17). Of course, the later argument is no justification for specifically Russian weapons, as European, American, and Israeli arms could also fit this need. It would probably be more candid to admit that this is not only a case of continuing to use systems with which Bangladesh is familiar, but also that there does not appear to have been anyone else rushing to sell Dhaka weapons and lend it the money to do so. Furthermore Bangladesh lives in a very troubled neighborhood. Its ties with India have often been difficult, and it has good reason to worry about potential insurgencies of Muslim extremists and/or Pakistani or Chinese support for its internal dissidents. This may explain why Bangladesh is buying Mi-17 helicopters, armored vehicles and infantry weapons (The Daily Star, January 16). The South Asian country is also seeking duty-fee and quota-free access to markets in Russia and the Customs Union, which Moscow is building (The Daily Star, January 16). That case of recognition of the Customs Union (EURASEC) may be a political win for Moscow as it tries to gain international support for its efforts to subordinate CIS economies to its own economy.

However, Russian actions illustrated by this bilateral deal are perhaps even more revealing. First, it is clear that Moscow has long had several economic and political objectives regarding South Asia, which this deal promotes. For almost two generations, Russia has been India’s primary partner in world affairs. Although ties remain good, Moscow’s primacy for New Delhi has long since eroded, and India is now a major international actor whose orientation tilts ever more toward the United States. In the sphere of international arms sales, Russia has encountered stiff and growing competition from the United States, United Kingdom, France and Israel. In many cases, Russian arms sellers have simply failed to deliver on their contracts either with respect to quality or timely delivery (see EDM, November 30, 2012; December 7, 2012). Thus, as it loses market share in India, Russia is duly obliged to look elsewhere for customers to sustain its arms exports and domestic defense industrial sector.

This consideration might also explain why Russia has again resorted to the practice of lending poor states money to buy Russian-made weapons. Notably, the Russian Federation had loudly renounced this Soviet policy, which blew up in Moscow’s face, leaving it with billions in uncollectible debts. However, starting in 2005 with Syria, Russia resumed lending money to developing countries to purchase its arms. Given Syria’s current state, it is debatable as to just how beneficial the outcome of this policy has been for Russia. But it is clear that Moscow understands the risk, as it is charging Bangladesh twice the interest rate on the loan (five percent) that China and India received on recent Russian loans (The Daily Star Online, January 15).

Analogous considerations appear to be at work in the nuclear energy deal. Russia has long touted its nuclear energy assets as being highly competitive, and intense competition is taking place among global providers of nuclear energy to sell reactors and nuclear power abroad. Russia is already providing at least 20 percent of Bangladesh’s electric power if not more; so it is already well represented in this market (www.kremlin.ru, Interfax, January 15; the Daily Star, January 15–16). These loans and projects will help cement the economic and political ties between the two states, further extending Russia’s reach into South Asia. Similarly the program for Gazprom to drill wells for natural gas evidently aims ultimately at generating 56 billion cubic meters (bcm) annually of production (The Daily Star, January 16). Here too Russia has long sought to gain a foothold in South Asia’s gas and overall energy market—e.g. by trying to become involved in the so called TAPI pipeline, which would deliver gas from Turkmenistan through Afghanistan and Pakistan to India. Bangladesh’s reserves of the “blue fuel” could become a useful bargaining chip in the contest to supply India with much needed natural gas.

Therefore, this deal replicates what has been a typical example of Russia’s modus operandi to improve its ties with potential partners: namely, the expansion of economic ties based on energy and, often, arms deals (which may have secret or tacit links between them). Those enhanced business and trade ties then generally lead to increased Russian political influence—a process that has been observed in many other states. Consequently, this deal may be the opening page of a new chapter in what will undoubtedly be a most interesting book as South Asia’s importance continues to grow.