VLADIMIR KARNOZOV / MOSCOW
In its first year, Russia's integrated defence exporter, Rosoboronexport, has eliminated in-house rivalries and exceeded sales targets
Russia's newly merged defence export agency Rosoboronexport recently celebrated its first birthday with $3.6 billion worth of orders - $400 million more than planned. Combat aircraft led the sales, followed by warships, air-defence systems and armour. With a 30% share of the defence industry's output, and a workforce of 500,000, aviation generates around 60% of its hard currency sales. But Rosoboronexport is eager to break Russia's 1996arms sales record of $3.7 billion.
Rosoboronexport was created by President Vladimir Putin to help control Russian arms exports. Three organisations were merged - Rosvooruzhenie (armaments), Oboronexport (defence) and Rossiyskiye Tekhnologii (technologies). Rosoboronexport received exclusive rights to act on behalf of the state in weapons sales. Manufacturers which had earlier acquired licences to sell their products independently were told to work alongside the new organisation. "We have succeeded in eliminating unhealthy internal competition," says Russian vice-premier Ilya Klebanov, admitting that in the past this rivalry led to irregularities.
Restructuring was essential if the industry was to rationalise internal competition. Although Rosoboronexport hopes to sell 400-500 Sukhoi Su-27-family aircraft over the next 10 years, in addition to existing Chinese and Indian orders worth $10 billion, they will be insufficient to fill capacity at the three largely independent producers of the aircraft: IAPO in Irkutsk, which employs 12,000 workers; KnAAPO on Komsomolsk-on-Amur with 15,000; and NAPO in Novosibirsk with 10,000.
Rationalising capacity, and combining resources to create a fifth-generation fighter, were the main reasons behind Putin's creation of the Sukhoi holding company in October. "From that moment on there was no more internal competition. Those who break this order will be punished by the state," Klebanov says. The holding company's marketing department and chief designers, in consultation with Rosoboronexport, will decide from now on which manufacturer supplies aircraft to new customers.
Long-term planning
The industry has been boosted by the Russian National Council's approval of a concept document and other guidelines on the "main principles of the Russian Federation in the sphere of VPK [military-industrial complex] development up to 2010 and beyond", Klebanov adds. This approval, along with predictions for Russian economic development for the next 10 years, has enabled long-term planning of the national defence budget. The economic forecast is key to shaping the recently validated 2001-2010 weapons programme, which is intended to match the country's military appetites with its financial resources.
Klebanov, who is responsible for supervising the Russian defence industry, says: "The weapons programme gives us a firm foundation for national defence planning. The most important thing now is to keep within the agreed parameters and provide cash on time and in full for programmes, moving away from the previous administration's practice when in some years only 20% of the necessary cash was actually provided for national defence."
Faced with a shortfall in domestic funding, Russian industry has come to depend on exports. With the Middle East and South-East Asian markets already well exploited, Rosoboronexport has been given the task of focusing on two areas: Africa and Latin America. "They are complicated markets, which demand barter, cheap long-term credit and certain 'gifts' in weaponry, but we are well prepared, with a properly working arms sales system," says Klebanov, who was given additional responsibility as head of the ministry for science, industry and technologies in October.
Some of the income from weapons sales will be spent on developing new technologies in an effort to maintain Russia's military superpower status and keep its defence industry competitive. "President Putin saw fit to strengthen the apparatus responsible for organising science and industry development, as we need closer co-operation between industry enterprises to fulfil major defence programmes such as the creation of fifth-generation combat aircraft," Klebanov adds.
He says that 50 technologies will be critical to the world's development in the next 10 years, and that Russia can take a leading role in eight to 10 of them if it funds research now. The Russian Academy of Sciences and the defence ministry are in the process of defining these technologies and choosing which to pursue.
"Today the funding for fundamental science is dispersed over a large area. In the future, we shall drop many scientific projects to concentrate funding on eight to 10 promising areas. We will fund the whole chain, from fundamental science studies to real production of the technologies," Klebanov adds.
Technology development and the creation of new weapon systems are to be carried out in collaboration with countries which are ready to provide intellectual and financial capital. "Russia is one of the very few nations that can set the standard for international co-operation in defence and technology. We are ready to co-operate closely with other countries. We more often make proposals than receive them," Klebanov says. Indeed, Chinese, Indian, Malaysian and South Korean governments have a hard job sorting through the numerous Russian proposals on military-industrial co-operation.
Combining direct sales with technology transfer has so far been the norm - China purchased 80 Su-30MKKs and secured production licences for 200 Su-27SKs, while India ordered 50 Su-30K/MKIs and will assemble 140 more under licence.
Sharing technology
The Russians have been more willing to share technology with India than with China. There is provision in the Su-30MKI agreement for assembly in India of the aircraft's phased-array radar. But the Chinese are not allowed to make radars or engines.
Malaysia, which has a requirement for 12-18 multi-role fighters, is being offered local assembly of avionics, including mission computers and multifunction displays. Barter deals involving delivery of Malaysian goods to Russia are also being encouraged. South Korea, which is running a competition for 40 aircraft, has been offered the manufacture of parts for the Su-35, plus test equipment, software packages and technologies for making composite and titanium components.
The practice of combining direct sales with technology transfer is also being applied to helicopters. In the Turkish contest for 145 attack helicopters, the joint Russian-Israeli Kamov Ka-50-2 Erdogan proposal offers substantial technology and production transfers, sweetened by licences to sell Turkish-assembled helicopters to third parties. In the South Korean AH-X competition for up to 40 attack helicopters, Kamov is ready to meet the 50% offset requirement to sell its Ka-52K.
Restoring relations
Iran, Libya and Yugoslavia are among countries with which the Russian defence industry has recently restored or is restoring relations. Iran is expected to spend $7 billion on Russian arms in the next four to five years, making it the industry's third-largest customer after China and India. It has already ordered Mil Mi-17 helicopters, and is considering buying combat aircraft and radars.
Iran has also expressed interest in theS-300 long-range air-defence system, 3M-80E submarine-launched missile and Iskander-E ballistic missile. It has acquired licence production of the Antonov An-140 regional turboprop, and local manufacture of combat aircraft could follow.
The issue of technology transfer and the sale of advanced offensive weapons to "terrorist-supporting" states has often been the cause of heated debate between Russia and the USA. Backed by threats of economic sanctions, US demands that Russia abandon lucrative weapons deals with suspect countries have often been successful.
The USA is particularly concerned about the transfer of rocket technologies in the developing world, although Russia has signed the international anti-proliferation treaty on missile technology. Russian officials say the country is observing its obligations, but feels free to sell missiles not covered by the treaty. The Iskander-E tactical ballistic missile, for example, has been developed by the TKB design bureau with exports in mind - its 150nm (280km) range is only just short of the 160nm limit set by the treaty.
Similar considerations - a range just below 160nm - guided development of the Yakhont supersonic cruise missile. In 1998 India and Russia established the BraMos joint venture to develop the PJ-10, which combines the Yakhont's airframe with a flight control system and software developed with the Indians. Tested in June, the PJ-10 will go into production in 2003. Intended for Indian naval ships and air force aircraft, the PJ-10 will also be available for export.
Export restrictions
US concerns led to the Chernomyrdin-Gore deal, forged at the time of the Clinton and Yeltsin administrations, under which Russia agreed not to sell weapons to Iran, and to restrict the supply of high-thrust rocket engines to certain countries in exchange for US financial help. This policy deprived the troubled Russian state-owned defence industry of much-needed orders. In November 2000, with Rosoboronexport's creation, the Putin administration ended the policy, removing a major obstacle to Russian exports.
Abandonment of the agreement came at a point when Russia had finally worked out a national defence policy reflecting post-Cold War realities, and was developing a plan for restructuring its arms industry and the way it sold armaments.
"Russia has one of the world's strictest weapons sales control systems," says Klebanov. "We have a list of weapons permitted for sale and a list of countries to which we can sell them. No armaments that might be considered 'terrorist' weapons' are on the list.
"If a foreign country requests such a weapon, it is carefully evaluated by the ministries of defence and foreign affairs, and then by the president. There are only rumours of Russia breaking rules - nobody can prove accusations that we are breaking the obligations we have agreed to observe," he adds. n
Source: Flight International