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Grigory Pasko: Billions in Russia-Venezuela Arms Deals

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Russia’s main business – arms

Grigory Pasko, journalist

Not too long ago the magazine Kommersant-Vlast published a detailed article about the volumes or Russian arms export in the years 2004-2008.  According to the data of the publication, in the year 2008, the volume of shipments attained yet another record number — $8.35 bln, having exceeded the result of the previous year by about $700 mln. The economic crisis and the absence of new contracts could make this indicator unattainable for the Russian arms-industry complex (AIC) in the next few years.

The publication notes that the main transformations in the structure of military-technical cooperation ended last year. The integrational idea of “Rostekhnologii” director-general Sergey Chemezov about the creation of a single military-industrial corporation on the basis of “Rosoboronexport” and its industrial assets has received factual formalization. Currently in the corporation “Rossiyskie tekhnologii” are numbered 180 unitary enterprises and state stakes in 249 joint-stock companies. Among the largest assets — subsidiary companies of “Rosoboronexport” such as “VSMPO-Avisma”, AvtoVAZ, KamAZ, “Russpetzstal”, “Oboronprom”.

In March of the year 2007, president Vladimir Putin signed an ukaseabout granting FGUP “Rosoboronexport” the exclusive right to export thefinal output of military designation. A second export monopoly after”Gazprom” was founded in such a manner.

The economic crisis touched all the enterprises of the MIC to oneextent or another. “Rostekhnologii” were forced to ask for money fromthe state. Access to the credit resources of the state was drasticallyreduced. Large-scale investment projects were forgotten. Of the overallsum for anti-crisis support of industry (629 bln rub. for the year2009), defense enterprises were allocated 50 bln for increasingcapitalization and 100 bln — for state guarantees on credits. Inconsideration of the fact that “Rostekhnologii” and other defense”champions” will get money in first order, for the entire MIC this sumturned out to be very modest indeed.

The publication cites the following numbers. The portfolio of ordersas of the end of the hear had achieved $34 bln, of which $16 bln is dueto Indian contracts. At the same time, the main point of tension in thearea of MTC became precisely Russo-Indian relations. After longnegotiations, the Indian side agreed to additional financing of acontract for the restoration of the heavy aircraft-carrying cruiser(TAKR) “Admiral Gorshkov”, which was supposed to have been handed overat the end of last year. However, this term, at the insistence of theRussian side, was carried over to the year 2012. According to thedeclaration of the management of “Sevmash”, the TAKR “Admiral Gorshkov”is half-ready.

For the first time in many years, China did not enter the list ofthe largest importers of Russian arms and military hardware by value ofcontracts signed over the year. For a long time already, the Chineseare insisting on the transfer to them of military high technologies, inwhich the Russian side invariably refuses them. In the main,Russo-Chinese cooperation comes down to scientific-research andexperimental-and-design works on special orders or deliveries ofsupplementary units and assemblies for military hardware alreadypurchased.

As concerns agreements already entered into with the eccentricpresident of Venezuela, colonel Hugo Chavez (overall sum $4.4 bln),nearly all the large contracts were fulfilled last year. This isdeliveries of 24 multi-functional Su-30MK2V fighters, 34 Mi-17V-5transport helicopters, ten Mi-35M and three Mi-26T. Likewise completedis a transaction for Kalashnikov machine-guns — a hundred thousandAK-103 and AK-104, and all that’s left in accordance with the contractis to build a plant for their production. Besides this, a delivery toVenezuela of “Tor-M1” and “Pechora-2M” anti-aircraft missile systems ispossible. Negotiations were being conducted last year, howevercontracts for the delivery to this country of BMP-3M and similar boatsof design 636 never were entered into. But now, taking intoconsideration the low prices for oil and the frailty of the position ofpresident Chavez, to expect new serious arms deals with Venezuela israther complex.

From this publication I, as just an ordinary reader and taxpayer, canreach a conclusion about how the leadership of my country is activelypromoting on the world market, in essence, just one kind of exportoutput – arms. It is obvious that such a business, first, is notlong-term (sooner or later, any importer country will want to acquirefrom a supplier country a license for the independent manufacture ofkinds of arms, as China has already done). Second, such a businessinevitably leads to the arising of conflicts in the regions of deliveryof Russian arms. Third, speaking about the non-long-term nature of thearms business of Russia with Venezuela, for example, is also the factthat many are sensing the frailty of the position of president Chavez.Many, only not the leadership of Russia.