Despite recent reports that Russia, along with the United States and China, is a top military exporter, "Russian military equipment manufacturers are becoming less competitive in the global arms market and have been forced to withdraw from key sectors."
That at least is the view of Alexander Brindikov, chairman of the advisory group to the general director of Rosoboronexport, Russia's main arms export entity. Global competition from countries using technologies analogous to Russia's, such as Ukrainian and Chinese exports, challenges Russia in arms markets that are increasingly crowded. Prior to the fighting in Eastern Ukraine and the conflict over Crimea, Ukraine used to deliver technical components and technology to its Russian counterparts, maintaining the relationship established in the Soviet era, when certain key military industries were based in Ukraine. According to Brindikov, there are "internal problems" with specific Russian industries, such as electronics and high-tech equipment. Russian daily Svobpodnaya Pressa (SV) decided to verify these conclusions and investigate the outlook for Russia's military exports in 2015. "For example," continued Brindikov, "Russian armored vehicles face increasing competition from Germany, China, and even Ukraine. We have become uncompetitive, we had problems with the industry, with the delivery of the equipment. Among the industries where Russian arms manufacturers are facing difficulties to compete are artillery systems. We are in a bad position there."
Despite such pessimism, there is little reason to think that Russian arms exports are going to suffer. Alexander Fomin, head of the Federal Service for Military-Technical Cooperation (FSMTC), recently said that over the past 11 years, the supply of Russian arms abroad tripled. Russia's arms exports in 2014 exceeded $15.5 billion. The current portfolio of military orders amounts to $48 billion, according to Fomin. Responding to global instability and the proliferation of conflict, Russia has re-established military-technical cooperation and concluded contracts with Nigeria, Namibia, and Rwanda. "Our Asian portfolio accounts for about 60 percent, Africa for more than 30 percent," said Fomin. Russia is also keen on expanding military exports to Venezuela, Peru, Argentina, and Brazil.
However, this year, according to Fomin, exporting weapons will be more difficult, due both to sanctions and to violations of industrial integration, primarily with Ukrainian enterprises, and the resultant scarcity of parts. Svobodnaya Pressa asked several military experts whether Brindikov's statements are reason for real concern; whether Russian industry is indeed becoming less competitive; and whether Ukrainian and Chinese technology could in fact oust Russia from global arms markets.
Vladimir Shvarev, deputy director of the Center for Analysis of World Arms Trade (TSAMTO), told Svobodnaya Pressa that he believes Brindikov exaggerated - Russia was already uncompetitive in certain arms markets. "When it comes to unmanned aerial vehicles, various types of electronic equipment, communications, etcetera, we have been traditionally poorly represented in these markets. However, recently the situation concerning domestic UAVs is quietly changing. For example, we entered into several contracts for light drones, including with Vietnam. When it comes to field artillery systems, Sweden was and remains the traditional leader, as well as the US and UK, although we are not conceding our small market share."
Shvarev further noted that Russia has to address gaps in precision electronic equipment and indigenous production. "Our country has actively pursued a program of import substitution. In particular, the domestic VK-2500 helicopter engine will replace its Ukrainian counterpart in all helicopters. Of course, such a transformation is not possible without certain delays."
Competition and quality
Addressing Chinese competition, Shvarev noted that Beijing actively competes with Russia in the market segments where Russian exports are most competitive. "China strengthens its presence in certain markets due low cost of their equipment, and by providing easy loans for the purchase of this equipment," he said. "This is the power of China, and I consider them our main global competitors."
Viktor Murakhovski, chief editor of Arsenal of the Fatherland and a member of the Expert Council to the Chairman of Russia's Military-Industrial Commission, disagreed with Brindikov. "Russian naval artillery ammunition of the 130mm, 100mm and 76mm calibers is popular in the global markets," Murakhovski said. "India alone purchased an extra batch of our ammunition for their T-90S tanks. We are quite confident when it comes to international markets that have traditionally used Russian ammo and supplies."
Murakhovsi added that Ukrainian situation had almost no effect on Russian exports.
SV further asked whether Ukraine really offers serious competition to Russian arms exports. "I strongly doubt that," said Murakhovski. "Now everyone prefers to break all contacts with the Ukrainians. Judge for yourself - Kiev recently decided to terminate a contract with the Democratic Republic of Congo for the delivery of 50 modernized T-64BM1M tanks. As I understand it, their contract with Thailand for the delivery of the Oplot main battle tank is on the rocks - the Thai army was supposed to replace its outdated M41 American tanks with Ukrainian machines. Then there is the story of the 42 armored personnel carriers which Iraq sent back to Ukraine, refusing even to unload military equipment from the vessel."
Murakhovski said Ukraine's military industry has dried up. Clearly it has indeed suffered considerably since the start of hostilities with Russia-backed rebels, although there is still hope that Kiev can rebuild its domestic and export capacity following the cessation of hostilities. Military industry accounts for a good percentage of Ukrainian gross domestic product and involves large segments of the country's economy.
To be fair, Russia's defense industry has had its own issues securing sales on the global market. A few years back, Algeria refused delivery of Mig-29 Russian fighter jets due to the poor quality of the aircraft. In fact, such quality issues were severe enough that the Russian government began purchases of these aircraft in order to keep Mig manufacturers from going bankrupt. Russia also faced difficulties with its long-term client India when it came to the sale and modernization of an old Soviet aircraft carrier for Indian use.
Murakhovski further commented on China: "Despite the fact that Beijing came in third place in the export of arms and military equipment, by our own indicators they are still very far behind. We are close competitors, but mainly in those markets where buyers have limited budgets. Yes, Beijing is actively dumping and refuses to enter into a variety of offset agreements. But I must say that China agrees to the terms to which Russia will never agree. We are working with foreign customers for real money."
