Russian Arms Export Market

Discussion in 'Europe and Russia' started by Ganesh2691, Feb 7, 2013.

  1. Ganesh2691

    Ganesh2691 Regular Member

    Mar 4, 2012
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    Russia is losing arms markets in Asia and the Middle East, two of its traditional strongholds, but gaining new ones in Latin America and Africa, a major buyer of Russian weaponry that has recently been opting for Western hardware.

    While losing some, Russia have gained new markets, like Venezuela for instance. They are getting back forgotten, old Soviet markets, like Peru for example. In Africa – Mali, Ghana, Tanzania, Uganda. In Asia – Oman.

    Though Russia had lost a number of clients for its weapons due to recent events in the Middle East and North Africa. This is connected to the conflicts and wars there. Cooperation with Libya has stopped temporarily, and there's a slump in deliveries to Egypt and Iran. Russia have lost Iraq and have almost lost Afghanistan. The quality of products had gotten poorer this could be one of the reason of loosing markets and percentage of share.

    Russian arms exports reached a record $14 billion this year, extending a run of record-breaking sales in recent years that have included deliveries to Syria despite the civil war raging there. The world no. 2 arms exporter has cultivated new weapons clients in Southeast Asia and Africa, despite criticism that it is failing to deliver the technological benefits of Western suppliers or the low costs of emerging weapons exporter China.

    India, which has traditionally bought the vast majority of its weaponry from the Soviet Union and then Russia, signed a string of deals in recent years with the United States and Western European nations for new hardware, in preference to Russian systems.
    That includes Boeing C-17 Globemaster and Lockheed Martin C-130J transport planes, Boeing AH-64 Apache helicopter gunships, Boeing CH-47 Chinook helicopters, Boeing P-8 Poseidon anti-submarine warfare planes, and a massive $10 billion deal with France's Dassault for the Rafale fighter jet. Delhi also bought the UK's BAE Systems Hawk trainer, and last month selected Airbus A330 tanker aircraft in preference to the Russian Ilyushin Il-78.

    India became the world's largest arms buyer in 2012, India received 9 percent of the volume of international arms transfers during 2006-2012, with Russian deliveries accounting for 82 percent" of its imports.

    In 2012 Russian arms exporters suffered two painful losses at Indian tenders. Russia did not win the contract to supply 22 helicopters to India, which preferred the US AH-64D Apache to Russia’s Mi-28N.

    During the Medium Multi-Role Combat Aircraft (MMRCA) tender announced by the Indian Air Force to replace the aging MiG-21s, the Russian MiG-35 did not even make it to the finals, where the Eurofighter Typhoon twin-engine multirole fighter lost a contract worth at least $10 billion to France’s Dassault Rafale.

    Russian Arms driven Market
    In the late 1980s the changes in foreign policy initiated by President Mikhail Gorbachev and Foreign Minister Eduard Shevardnadze transformed the pattern of Soviet arms exports. After 1992 decisions by Russia about foreign, domestic and economic policy altered the size and pattern of arms exports further.

    The Soviet Union accounted for roughly 40 per cent of international transfers (deliveries) for major conventional arms in the late 1980s. By 1991 this share had been reduced to less than 20 per cent. By 1994 Russia accounted for less than 10 per cent of international transfers (deliveries) of major conventional arms. By 1996–97, Russia accounted for roughly 15 per cent of international transfers (deliveries).

    According to the Office of the President, in 1996 military–technical cooperation generated $2.5 billion in revenue of which $2.1 billion was in convertible currency and the rest in currencies that could not be freely converted. Russia also delivered arms and military equipment against debts owed to several foreign countries.

    Between 1990 and 1994 the volume and value of Russian arms transfers collapsed as military–technical cooperation with countries in Central Europe and with friends and treaty partners in developing countries was sharply reduced.

    By 1994 Russian arms exports were concentrated in a small number of bilateral cooperation arrangements. The most important are with China, India and Iran.

    After 1994 Russia opened some new markets—including cases where the Soviet Union had never been a supplier. Examples of recent successes include Brazil, Cyprus, South Korea, Malaysia, Turkey and the United Arab Emirates.

    Russian manufacturers have begun to restore cooperation with partners in the Commonwealth of Independent States and, on a limited basis, have begun to cooperate with manufacturers in Europe.

    Nevertheless, further large increases in the value or volume of Russian arms exports beyond the levels recorded for 1996–97 seem unlikely.
    The previous decline in military production is beginning to level out, simultaneously with a continued concentration in the arms industry in most parts of the world, particularly in the United States.

    While Russia has been willing to participate in the international discussion of conventional arms exports, it has not always been welcome among the group of states conducting this discussion.

    Russia participated in talks among the five permanent members of the United Nations (UN) Security Council in 1991 which led to the establishment of guidelines on conventional arms exports in October 1991. Russia also participated in the creation of the UN Register of Conventional Arms.

    Members of the Coordinating Committee for Multilateral Export Control (COCOM) decided to initiate a new forum for discussing conventional arms export questions in 1993. However, it was not until 1995 that Russia was invited to participate in these discussions (which subsequently led to the creation of the Wassenaar Arrangement on Export Controls in 1996).

    Russia has been prepared to modify its policies and procedures in response to arguments and information received from other countries. National regulations have incorporated guidelines and control lists developed in international discussions. In response to a request from the United States, Russia agreed not to conclude any new agreements for conventional arms with Iran—although existing agreements are being completed and equipment already transferred will be kept in service.

    Russia has not agreed primary legislation on arms exports in the form of a parliamentary decision or law. A draft law introduced in 1997 was vetoed by President Boris Yeltsin. This reflects the lack of consensus in Russia on issues such as the proper role of government vis-à-vis industry, the proper role of the different branches of government and the proper role of parliament.

    In the absence of a law, Russian arms exports and military–technical cooperation have been regulated by decrees issued by the President or by the Chairman of the Council of Ministers (the Prime Minister).

    Since 1991 the Russian Government has made many changes to decision-making procedures in an effort to find an optimal approach. Authority has been placed under the Council of Ministers and under the President at different times. It is not certain that the latest changes (introduced in mid-1997) represent a lasting arrangement.

    1992–94. The initial procedures stressed a commercial approach. Manufacturing and trading enterprises required licences issued by the Ministry for Foreign Economic Relations after inter-agency consultation.
    1994–95. Decision authority was brought under the Presidential apparatus through a State Committee on Military–Technical Policy that reported to the President. New regulations strictly limited the number of industrial entities that could engage in foreign military–technical cooperation and a state agency—Rosvooruzheniye—was given the main authority to engage in foreign military–technical cooperation.

    1996–97. The Presidential apparatus dealing with arms export issues was abolished and decision authority was returned to the Government, with the Prime Minister charged with coordinating an inter-agency decision-making process.

    The Russian defence industry was mainly developed to meet the demand of the Soviet armed forces and WTO allies. After the end of the cold war the dramatic reduction in orders for equipment from the Russian Ministry of Defence created a crisis in the defence industry and dependence on exports—previously relatively low—increased dramatically.

    According to Russian defence industry spokesmen, in 1996 exports accounted for around 65 per cent of total production and in 1997 this share is expected to have grown.

    The profitability of exports to industry is contested. Exports are the main means of obtaining payment for production because the Ministry of Defence is habitually late in paying for equipment and sometimes does so with a substitute for money. Others argue that even exports are only profitable for a small number of participants because no equitable payments system has been developed. Proceeds from foreign sales are, it is alleged, retained in the banks which finance transfers and the prime contractors which assemble finished products.

    Weapon and Technology: Russian Arms Export Market

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