Actuality January 12, 2008

   The first Vice Prime Minister of Russian Federation (RF) Sergey Ivanov declared that according to 2007 results the Russian weapon export would attain the next record, exceeding $7bln. Thus, Russia received about $1 bln less because of problems with ship building and cooling relations with Algeria. For seven years, within which the former head of Rosoboronexport Federal State Unitary Enterprise (FSUE) and now director general of Rostecnology public corporation Sergey Chemezov was engaged in weapon export, the sales volume grew twice.

   According to Mr. Ivanov, "in the current year there are all grounds to talk about crossing $7 bln mark". It is a record: in 2006 the Russian weapon was sold for $6,5 bln. Growth of weapon export became the result of large contracts concluded in 2004-2006. The situation in the world favored their conclusion, when on the background of the USA operations in Afghanistan and Iraq some moslem countries began to carry out the mass purchases of military equipment in Russia, perceiving it as if not the enemy of America, but at least as the competitor. At the same time, Russian defensive industry on export contracts gradually went out from the crisis of the 90th, that allowed beginning large serial deliveries from 2006-2007.

   The main volume of concluded contracts fell to the stake of created in November, 2000 public intermediary – FSUE Rosoboronexport (producers and developers of armaments are now allowed to export only repair parts independently, and also to conduct repair and modernization of the installed technique). At first, Rosoboronexport director general was Andrey Belyaninov, but the main work on preparation of the largest contracts conducted his first deputy Sergey Chemezov. And in April, 2004 he headed the company. The old acquaintance of Mr. Chemezov with Vladimir Putin contributed to the more active state support of export projects of the Russian armorers. On November, 26 Mr. Chemezov headed Rostecnology public corporation, which joined Rosoboronexport. Thus, for seven years of Sergey Chemezov work in Rosoboronexport the sales volume of the Russian weapon grew from $3,68 bln (in 2000) up to more than $7 bln.

   In Rosoboronexport they did not comment the statement of Mr. Ivanov. According to the head of Federal Service of Military-Technical Cooperation (FSVTS) Mikhail Dmitriev, the aviation technique continues to be in the most demand: Su and MiG airplanes, Mi helicopters. Indeed, this year Russia supplies about 70 Su-30 fighters to India, Algeria, Venezuela, Malaysia to the sum about $3 bln. "This year became the record one for us", declared Oleg Demchenko, the president of the Irkut corporation. "Irkutsk plant will assemble 43 fighters Su-30MKI, Su-30MKM and Su-30MKI(A) by the year end. We did not assemble so much even in the soviet years". In 2007 large deliveries were executed in the Air Defense field. At the beginning of the year Mr. Ivanov again officially declared about contract execution with Iran on the short-range complexes "Tor-M1". In addition, continued contract execution on supplies of long-range systems S-300PMU to China.

   Execution of the planned deliveries in naval armaments has failed. In September the Indian fleet representatives reported that the lease transfer of nuclear-power submarine Chakra of project 971 Schuka-B, planned for August, 15, is postponed till June, 15, 2008, as the Amur shipbuilding plant in Komsomolsk-on-Amur detains its building for ten months. Russia insisted on the increase of the contract cost from $650 mln to $785 mln. India agreed on the postponement, but refused to reconsider the price.

   Execution of some contracts with Algeria was stopped, agreements included in the package for $8 bln, signed in March, 2006 during Vladimir Putin visit to this country. Initiative to freeze the already agreed purchase of the Russian weapon belongs to Algeria authorities. Relations cooling, apparently, was caused by both domestic political situation in Algeria and sudden activation on African direction of France.

   In a short-term perspective it is possible to expect further volumes´ growth of military equipment supplies from Russia. Portfolio growth of weapon exporters’ orders testifies it. In February Mr. Dmitriev declared, that it totals $30 bln, from which "about $20 bln falls to Rosoboronexport stake", and that allows the Russian export to remain at the level of 2007 the next two-three years. The FSVTS head reported: "The present portfolio volume of export orders of Military-Technical Cooperation subjects – over $32bln – allows quite optimistically to look at collaboration perspectives in military-technical sphere. The basic reserve is created by Rosoboronexport, in its asset the orders portfolio totals $24 bln". It is expected that in 2008 aviation deliveries will prevail in export also – fighters Su and MiG to India, Venezuela, Indonesia, Syria. Supplies of air defense systems are also planned to China and Syria, warships to Vietnam, submarines to India and Algeria.

   However, experts do not eliminate decline of the Russian weapon deliveries in three-four years. "With the output of $7 bln we face some "plateau". Our export will stay at this level at least the nearest three-four years, if the existent international state of affairs remains", declared Ruslan Pukhov, the director of Centre for Analysis of Strategies and Technologies. "However, dramatic falling can expect this "plateau" then. In expert opinion, Russian defensive industry experiences the staff hunger, especially for highly skilled workers. At the same time inflation in defensive industry substantially exceeds the general level over the country: if in 2007 inflation in Russia makes up about 12%, in the military industrial complex it exceeds 20%. Moreover, in Mr. Pukhov opinion, in defensive industry rapidly grow overhead costs because of non-use of energy conservation technologies. As a result, Russia can not produce part of armaments at all, and others can occur noncompetitive in price.