ROSS sees 4.2 billion in sales; fear decline of sales looming

From Armstrade:

Russia: Rosoboroneksport Sees $4.2 Billion in Exports This Year, Fears Decline in Sales is Looming
Moscow Vedomosti in Russian 29 Jul 02
[Article by Andrey Nikolskiy: “We Are Going For A Record”]

Rosoboroneksport, the state intermediary for the sale of Russian arms, is planning on increasing the export of military equipment this year by 15 percent to approximately $4.2 billion. Experts emphasize that this year’s probable record has a chance of becoming the last record: without the development of new systems the volume of exports could fall in 2-3 years.

Arms exports in 2001 compared to 2000 based on various VTS [military-technical cooperation] entities are estimated at the following amounts: state intermediary Rosoboroneksport – $3.3 billion ($3.09 billion in 2000); Antey Concern (the PVO [air defense] Almaz-Antey Concern has now been created based on it) – $138 million ($393 million); KB Priborostroyeniye (KBP) [Instrument-Making Design Bureau] – $107 million ($73 million); RSK MiG [Russian Aircraft Manufacturing Corporation MiG] – $97 million ($86 million); NPO Mashinostroyeniye [Machine-Building Science and Production Association] – $31 million ($39 million); KB Mashinostroyeniye (KBM) [Machine-Building Design Bureau] – $32 million ($0). The total volume of arms sales amounted to $3.705 billion in 2001 ($3.681 billion in 2000).

The chairman of Rosoboroneksport talked about the plan for arms sales for this year at the air show in Farnborough. Citing this source, ITAR-TASS reported that in 2002, it is planned to increase the sales of all Russian arms exporters by 15 percent in comparison with last year; that is, from $3.7 billion to a total exceeding $4.2 billion. According to the state intermediary representative, whereas in the preceding five years the percentage of combat aircraft in the export structure amounted to 60-70 percent, in the first half of 2002 that percentage amounted to 56 percent. But the volume of sales has not fallen thanks to deliveries of missiles and ship helicopters. Rosoboroneksport would not comment on this information, but a source in the government stated that Russia actually plans to sell as exports 15 percent more arms than last year.

If the planned $4.2 billion is achieved, then this will be a record for the entire post-Soviet period. According to the editor of the journal Eksport Vooruzheniy [Arms Export], Maksim Pyadushkin, this figure is completely realistic.

According to Pyadushkin, the percentage of independent exporters in total exports (six firms besides Rosoboroneksport have this right) is currently difficult to determine. Everything depends on whether there will be sales of S-300 anti-aircraft missile systems (ZRK) to China this year and to whose account these sales will be credited — to Rosoboroneksport which concluded the contract or to the PVO Almaz-Antey Concern which was created in April.

Nevertheless, the volume of sales of independent exporters will amount to no less than $300 million. According To Pyadushkin, the Antey Concern (on which the PVO Concern was based) sent the last shipment of Tor SAM systems to Greece for $120 million.

In the opinion of an expert at the Center of Analysis of Strategies and Technologies, Konstantin Makiyenko, the volume of RSK MiG’s sales should exceed last year’s $97 million; this year a number of large contracts concluded last year for the delivery of, for example, MiG-29’s to Yemen, are being filled. The remaining independent exporters will wrack up an undoubted sum of more than $100 million. Thus, this year the Tula KBP should begin filling a contract for $734 million concluded in 2000 with the UAE for the delivery of Pantsir anti-aircraft missile systems.

The steadily growing arms exports since 2000 are encouraging the state’s wish to redirect export earnings to the needs of the Armed Forces and to the development of new weapons. The chairman of the Committee on Military-Technical Cooperation, Mikhail Dmitriyev, said that he supports a “voluntary-compulsory” procedure for taking some of the earnings for the development of new weapons, although specific proposals for this have not yet been worked out.

According to Maksim Pyadushkin, it is now essential to invest in the development of new systems, otherwise in 2-3 years the volume of exports will sharply decline. But the exporters themselves know this, Pyadushkin emphasizes, and an administrative system for redistributing export earnings will hardly be effective.

[Description of Source: Moscow Vedomosti in Russian — Business paper published jointly with The Wall Street Journal and Financial Times; reportedly friendly with Kremlin.]
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