Beruflich Dokumente
Kultur Dokumente
#4 (10), 2007
PUBLISHER
Center for
Analysis of
Strategies and
Technologies
CAST Director & Publisher
Ruslan Pukhov
Advisory Editor
Konstantin Makienko
Advisory Editor
Alexey Pokolyavin
Researcher
Ruslan Aliev
Researcher
Dmitry Vasiliev
Researcher
Polina Temerina
Editorial Office
3 Tverskaya-Yamskaya, 24, office 5,
Moscow, Russia 125047
phone: +7 495 251 9069
fax: +7 495 775 0418
http://www.mdb.cast.ru/
To subscribe contact
phone: +7 495 251 9069
or e-mail: mdb@cast.ru
Moscow Defense Brief is published by the Centre for Analysis of Strategies
and Technologies
All rights reserved. No part of this publication may be reproduced in any
form or by any means, electronic, mechanical or photocopying, recording
or otherwise, without reference to Moscow Defense Brief. Please note that,
while the Publisher has taken all reasonable care in the compilation of this
publication, the Publisher cannot accept responsibility for any errors or
omissions in this publication or for any loss arising therefrom. Authors
opinions do not necessary reflect those of the Publisher or Editor
International Policy
Russian Foreign Policy in 2007: Change of Tactics
Arktika-2007 Showcases Might of Russian
Sea Power in the Arctic
2
4
International Cooperation
Russo-Indian Military-Technical Cooperation:
New Challenges and New Opportunities
The Incredible Lightness of Boeing
6
8
Arms Trade
Anniversary of Russias First Offset Agreement
Preliminary Results of Russias Arms Trade in 2007
10
11
Industrial Policy
Russias Defence Industrial Complex in 2007
18
23
24
Our Authors
27
International Policy
International Policy
functions and capabilities that were lost in the preceding
period. An analogous approach has been adopted for foreign
policy, which reflects not only domestic trends, but also an
understanding of global processes. The majority of Russian
analysts concur that under conditions of growing global
anarchy, the role of the state as an actor is key.
To successfully compete in this arena, the state must be
consolidated, confident in its internal stability, and focused
on attaining results. This means that the regulatory role of
the state is growing, as highlighted by the pervasive growth
of protectionist moods and uncertainty flowing from global
financial instability.
So until the time is right to design a new set of
multilateral rules, it would be wiser to rely on the traditional
mode of interstate relations and agreements between leading
world powers on specific issues. Notably, the most successful
examples of recent international action were pursued in
specially tailored formats negotiated by participating states,
like the six on North Korea and the five on Iran.
Indeed, efforts to work with existing institutions have
not produced any results. In the spring, Russia called an
OSCE summit to discuss the CFE, but the meeting came to a
naught. The same has been true for attempts to raise missile
defence at the European level and to engage the European
partners of the US and Russia from NATO and the EU.
Unfortunately, these organizations prefer to have the issue
decided on a bilateral level and are not willing to accept even
partial responsibility for strategic questions.
International Policy
International Policy
International Cooperation
Russo-Indian Military-Technical
Cooperation: New Challenges and New
Opportunities
Konstantin Makienko
ver the last few months, several new trends have surfaced
in military-technical cooperation (MTC) between
Russia and India. While some of these trends represent new
opportunities for Russia on the Indian market, others signal
a rise of new challenges.
The critical status of the contract for the modernization
and refitting of the Admiral Gorshkov aircraft carrier
represents the major negative news for the year. Aside
from the slippage of the delivery date from 2008 to 2010, at
the earliest, Russia has also admitted its inability to meet
contractual obligations on the terms agreed in 2004. This
is mainly due to the sharp fall in the value of the dollar and
the rise in operating costs within Russias defence industry.
Moreover, its likely that the price originally negotiated was
lower than what Sevmash Shipyard could have reasonably
agreed to even at that time. If so, this would be the second
time that Rosoboronexport has signed a contract on terms
that are virtually impossible for the industry to meet. The
first such contract, for delivery of 38 Il-76MD and Il-78MK
military-transport aircraft and refuelling tankers to China,
was ultimately cancelled. As for the Gorshkov, the Russian
party has reportedly asked for an extra 380 million USD for
completion of the project.
It should be noted that slippage and delays due to
technical problems have virtually become the norm in RussoIndian defence trade. For instance, these issues were present
at the early stages of the Su-30MKI program as well as during
the construction of the Talwar-class frigates. The problems
occurred in part because the Indian military set very high
specifications, considerably raising the technological risk of
each program. However, the Indians also displayed a certain
tolerance of the delays in both projects; in any case, they did
not impose penalties on the Russian producers.
An attempt to change the financial terms of the
contract would be unprecedented for Russo-Indian defence
cooperation. If such a demand was indeed made, it suggests
that the steep fall in the value of the dollar, the currency
in which most, if not all, Russian arms trade contracts are
denominated, is having a serious impact on the ability of the
Russian defence industrial complex to fulfil export contracts,
International Cooperation
For example, two new, though previously anticipated,
contracts for the delivery of a total of 58 Su-30MKI fighters
were consummated in 2007. The first of these agreements is
for the delivery of 18 aircraft in exchange for the same number
of Su-30K, while the second agreement for the delivery of 40
fighters goes beyond the framework agreements reached in
1996, 1998, and 2000 for the deployment of 190 Su-30MKI
to India. Additionally, New Delhi has also signed a contract
for the delivery of 347 of T-90S main battle tanks valued at
1,237 million USD.
The BrahMos cruise missile project is moving forward
steadily. Along with the Su-30MKI and the Project 11356
(Talwar) frigates, it has a special place in the history of
Russian-Indian military-technical cooperation.The BrahMos
serves in effect as a pilot project for the joint development of a
new weapons system by Russia and India: the administrative,
legal and financial framework developed for this project
will likely be applied for the creation of a fifth-generation
fighter and a multi-role transport aircraft. The research and
development (R&D) for the BrahMos has been completed and
large-scale production of missile systems for the Indian Navy
has begun. With the deployment of land-based systems and
the creation of air and sea-launch versions, the total number
of orders could reach up to 1000 units. Notably, the success
of the BrahMos project facilitates the promotion of other
Russian air and naval (surface and undersea) platforms.
The most important accomplishment in Russo-Indian
relations during 2007 was the signature of the long-awaited
intergovernmental agreement on the joint development
of a fifth-generation fighter and the multi-role transport
aircraft. After two years the Indian Air Force finally chose
Sukhois T-50 over MiGs light fighter, which carried a greater
technological risk. Indias participation in development of the
advanced tactical frontline fighter (PAK-FA), formalized in
an intergovernmental agreement, gives the project greater
International Cooperation
n the early 1990s, Boeing began to establish designengineering centres in low-income jurisdictions as a costsaving measure. With the collapse of the Soviet aerospace
industry, Russia, with a surplus of highly qualified engineers
earning less than 100 USD per month, was an ideal location.
Today, the Moscow Boeing Design Centre (MBDC),
a subsidiary of Boeing Russia, is engaged in a wide range
of projects, including the design of new aircraft, upgrades,
and provision of engineering support for manufacturing.
Professor Sergey Kravchenko, doctor of technical sciences,
has been the director of MBDC since its establishment in
1993.
By the end of 2007, MBDC employed about 1,500
engineers (an increase of 30 percent over the year before) and
played a key role in Boeings strategy to penetrate the Russian
market. And with Aeroflots announcement of a tender for
a large purchase of airliners, the stakes have become quite
high.
However, this recent surge of activity masks a
fundamental problem with the business model of
Boeings design operations in Russia. The country today is
fundamentally different than it was in the early nineties, and,
therefore, the future of MBDC on the new Russian market is
unclear.
Current Activities
MBDCs design and engineering activities are divided
into three units: engineering support for manufacturing,
modernization of current models of aircraft, and the
development of new models.
The engineering support unit is engaged in projects
related to all models of Boeing civilian aircraft currently
under production: the 737, 747, 767 and 777, including all of
their modifications. In addition, the Centre designs service
equipment for the repair and servicing of aircraft. The
modernization work unit has the longest list of completed
and ongoing programs.
The new development unit began work on the Boeing787
Dreamliner in November 2004. Over 200 engineers are
currently designing components , including wing parts, the
nose of the fuselage, the central section of the fuselage, interior
elements, and the chassis, for this aircraft the Moscow unit.
The unit has also conducted integrity testing and reparability
analysis.
Business Model
To avoid the obligation to register its activities in Russia
as aircraft manufacturing, which would subject MBDC
to Russian legislation limiting foreign ownership of such
companies, Boeing does not directly employ the engineers
who work on its premises. Instead, it enters into general
engineering contracts with several firms that hire engineers
on a project-by-project basis, and pays these firms on the
number of man-hours they provide.
The Ilyushin Aviation Complex was Boeings first
Russian partner to provide engineering services. The
Ilyushin also housed MBDC on the premises of its complex
for the first three years of the Centres operations. MBDCs
other partners have been essentially intermediary firms,
formed by representatives of Russian aviation enterprises.
For example, NIK was formed by specialists from the
Myasishchev plant in 2003, and it currently employees about
400 former Myasishchev engineers on behalf of MBDC.
Khrunichev-Aviatekhnika, predictably a subsidiary of the
Khrunichev State Research and Production Space Centre,
has been engaged by Boeing on projects related to the
International Space Station. Progresstekh started working
with MBDC about seven years ago and employs about 600
engineers at present.
International Cooperation
For the intermediaries, the arrangement has been
advantageous because of the ability to make immediate
revenue without investment in plant or training. However,
this structure is less attractive for the employees. Specialists
at Boeings head office in Seattle make all of the important
technical decisions, leaving mostly routine work orders and
no autonomy for the engineers based in Moscow.
Working for a foreign company was previously
considered prestigious and stable in Russia; however, this
is not necessarily the case today. Moreover, Boeing Russia
offers very few opportunities for advancement to Russian
engineers, while wages at Russian enterprises are rising every
year.
As a result, the MBDC has had trouble attracting new
talent. Each new recruiting drive in the recent past has set
lower requirements for candidates. Previously, they needed to
have specialized education, work experience and knowledge
of English. Now, any higher technical education will do.
Industry insiders estimate that MBDC is losing about twenty
employees per month at present.
Prospects
In retrospect, the MBDC has played a positive role on
the labour market for Russian aviation specialists. Having
created 1,500 jobs for aviation engineers, the Centre has
contributed to the stable growth of wages within the
profession. Many specialists received quality training and
raised their professional qualifications at MBDC.
Arms Trade
10
Arms Trade
5226
5120
5075
6100
Total deliveries
Rosoboronexport
Independent equipment
suppliers
5300
Million USD
5400
6460
6126
5780
366
220
2003
2004
349
300
2005
2006
2007 (estimate)
11
Arms Trade
Identified Deliveries
Details concerning the export of Russian arms worth
only 5.44 billion USD, or about three quarters of total
announced revenues. This level of details is higher than
last year, when only about 60 percent could be identified.
Consequently, the following analysis is based on the details of
arms transfers as published in open sources, and, therefore,
the nature of the figures presented should be considered
provisional until new and complete official information
becomes available.
Exports by Type of Arms
The structure of deliveries according to the type of
armament in question is quite unusual. While transfers of
aviation once again played a dominant role at 61 percent,
transfers of land armaments unexpectedly rose to second
place at 21 percent (see Figure 2). This change occurred
because of the deliveries of T-90 tanks and Smerch multiple
launch rocket systems.5
The third and fourth spots were taken by air defence
systems and naval armaments (10percent and 8percent,
respectively). However, due to the lack of transparency on
export of this type of defence goods, our figures are lower
than reality. For example,Vladimir Pakhomov, ROEs Deputy
Figure 2. Structure of Identified Deliveries of Russian Arms in 2007 by Type and Destination
Venezuela
16%
Land armaments
21%
Aviation
61%
China
21%
Malaysia
9%
Air Defence
10%
Ships
8%
Source: CAST
12
Algeria
14%
India
28%
Vietnam
5%
Other
7%
Arms Trade
13
Arms Trade
Regional Structure
India took first place in terms of the volume of arms
received (28 percent of all exports), largely due to the transfer
of a large batch of Su-30MKI fighters. China took second place
with 21 percent, thanks to the transfer of the S-300PMU2 air
defence systems. Venezuela was in third, having received 12
Su-30MK2V fighters (16 percent). Algeria fell to fourth place,
although, if it were not for problems with certain deliveries,
it would have been in second place. Malaysia and Vietnam
closed the list of the main recipients of Russian arms. Thus,
the geographic distribution of Russian arms exports in 2007
was quite diversified.
Identified Contracts
By Type of Armament
Judging from compiled press reports, the total dollar
value of contracts signed in 2007 was 5.52 billion USD, of
which 65 percent come from aviation deals. Contracts for
the delivery of land armaments followed at 27 percent, while
air defence and naval armaments were at 4 percent each
(see Figure 3). The relatively high value of contracts for land
armaments stands out compared to other years due mainly
to contracts for the delivery of T-90S tanks to India and an
additional batch of Smerch systems to India.
Aviation. According to our estimates, aviation
contracts amounted to 3.62 billion USD. This includes a
contract with India for an additional batch of Su30MKI
(aircraft and kits), for a total value of 2.35 billion
USD. 32 In addition, Russia and India signed important
Aviation
65%
Ships
4%
Air Defence
4%
Source: CAST
14
Indonesia
8%
Land armaments
27%
India
73%
China
6%
Syria 4%
Algeria 4%
Other 5%
Arms Trade
Outlook
As noted above, the 32 billion USD portfolio of orders
should allow Russia to maintain its current level of arms
exports at about 7-7.5 billion USD for the next 4-5 years.
In 2008, deliveries of Su-27/30 to India (about 20
kits and two new Su-30MKI), Algeria (10-12 SU-30MKA),
Venezuela (eight Su-30MK2V), Malaysia (eight Su-30MKM)
and Indonesia (2-3 Su-27/30) will continue. Further transfers
of MiG-29 fighters are expected to India (for the Admiral
Gorshkov aircraft carrier) and Algeria (10-12 planes). The
first six Yak-130 trainer-fighters are scheduled to be delivered
to Algeria. Finally, implementation of the contract with Jordan
for the delivery of two Il-76MF transport planes may begin.
Therefore, the volume of aircraft deliveries may again lead
deliveries of all other types of armament.
In the air defence systems sphere, we are likely to see
the completion of the contract with China for the delivery
of the Favorit S-300PMU2 systems. Transfers of the S-300 to
Algeria and Iran may also begin. In addition, we can hope to
see the first deliveries of the Pantsir-S1 to the UAE and, likely,
to Syria and Algeria.
Further, repairs and modernization of another
Sindhukirti Project 877EKM diesel submarine should be
completed. The licensed production of Project 12418 cutters
in Vietnam should begin, and Algeria should receive two new
Project 636 diesel submarines.
Finally, the delivery of T-90S tanks to India and Algeria
will account for the main transfers of land armaments.
As for new contracts, negotiations with Iran for
the purchase of engines for the fighters currently under
development are taking place. In addition, it is likely that
Indonesia will make use of its loan from Russia to purchase
two Project 636 diesel submarines, while Greece may ratify
its purchase of 415 BMP-3. Moreover, China may purchase
seven divisions of the S-300PMU2, if it had not already
done so in 2006, an issue to which Chemezov referred to
obliquely in a recent statement.49 Finally, we can expect an
agreement with Venezuela for the delivery of Top-M1 air
defence systems.
1
2
3
4
5
15
Arms Trade
16
Arms Trade
17
Industrial Policy
18
Industrial Policy
19
Industrial Policy
20
Industrial Policy
21
Industrial Policy
1 Unless otherwise indicated, references for the events summarized in this article can be found in prior issues of
MDB published in 2007.
2 Formally, Rosoboronexport owns just 31.13 per cent of Oboronprom, and another 51.01 per cent is owned by
the federal property agency Rosimushchestvo.
3 A. Nikolsky. Serdiukov uskoril rotatskii, Vedomosti, 18.09.2007.
4 While formally the right to export armaments remains with ROE (the state corporation is given only marketing
functions) the dependence of ROE on its parent structure makes this a moot issue.
5 E. Kiseleva. Korporativnoe dvizhenie, Kommersant, 04.09.2007.
6 The Samara enterprises were initially expected to form their own separate structure and thus there would have
been four holdings.
7 Interview with Deputy Minister of Industry Denis Manturov, Kommersant, 17.09.2007.
8 Oboronprom and UMPO press release, 25.12.2007.
9 The real owners are hidden behind nominal shareholders. The government of the Republic of Tatarstan owns
a golden share.
10 E. Kisileva, A. Gritskova, A. Pushkarskaya. Baltiyskiy zavod poshol pod snos, Kommersant, 14.08.2007.
11 A. Shestakov, Tankoviy zavod postaviat na relsy, Kommersant Sibir, 28.12.2007.
12 A. Gritskova, D. Belikov. Gosposrednik peresazhivaetsia na BMP, Kommersant, 29.11.2007.
13 A. Gritskova, K. Lantratov, Italianskim vertoletam nashals ploshchadka v Rossii, Kommersant, 22.06.2007.
14 I. Rusanova, Okhotnik I sobiratel, SmartMoney, 03.09.2007.
15 Elektronaya strana. Official site of Minpromenergo [minprom.gov.ru] 11.09.2007.
16 Osnovnye itogi deiatelnost federalnykh organov ispolnitelnoi vlasti v 2007 g. I zadachi na 2008 g.
[www.government.ru] 29.12.2007.
17 Kommersant Yug, 15.08.2006.
18 Interview with Deputy Minister of Industry Denis Manturov, Kommersant, 17.09.2007.
22
Weapon designation
No. ordered
Year(s) of deliveries
China
2008-2009
320
India
Su-30MKI fighters
18
2007
750
Su-30MKI kits
RD-33 (series 3)
jet engine license
production
T-90S main battle
tanks
Smerch MLRS
systems
Su-27SKM / 30MK2
fighters
Mi-17/ Mi-35
helicopters
40
120
2008-2010
2007-2010
1,600
300
347
2008-2011
1,237
14
2008-?
200
3/3
2008-2010
335
10 / 3
n/a
105
2009
200
2008
60
n/a
200
Indonesia
Algeria
Kazakhstan
Syria
Notes
23
China
India
24
Weapon
designation
Year of
contract
24
2006
2006-2007
100
12
complete
180
2005
2006-2007
430
140
complete
2005
2006-2008
71,4
30
60
2005
2005-2008
33.3
S-300PMU2
Favorit SAM
systems
Su-30MKI kits
2004
2007-2008
490
140
2000
2004-2012
(2014)
190
39
Su-30MKI
fighters
18
2007
2007-2008
666
16
16
Su-30MKI
simulators
Conversion of
Beriev A-50
AWACS platform
for installing IAI
Phalcon radar
2007
2007
complete
2003
2007-2009
50
NK-12MPT jet
engines
RD-33 (series 3)
jet engine license
production
Smerch MLRS
systems
BrahMos antiship
missiles
2005
2007
n/a
complete
120
2007
2007-2010
62,5
25
25
38
2005
2007-2008
225
19
19
1 batt.
2005
2007
135
1 batt.
complete
Mi-171
helicopters
AL-31F jet
engines
Year(s) of
deliveries
Delivered in 2007
No.
ordered
mln USD
units
Delivered by
2008, units
Notes
Recipient
No.
ordered
Year of
contract
12
2003
2007-2010
200
Laguna simulator 1
for missile boats
(Project 1241RE
and 12418)
Su-30MKM
18
fighters
2006
2007
n/a
complete
2003
2007-2008
505
10
10
Su-30MKA
fighters
28
2005
2007-2009
160
T-90SA main
battle tanks
185
2006
2006-2011
320
60
90
BMP-2 IFVs
300
upgrade program
2005
2007-2010
175
75
75
2005
2007
100
complete
24
2006
2006-2008
750
12
16
34 / 2
/2
2006
2007-2008
70
?/2/2
?/2/2
2006
2007-2010
221
n/a
2007
221
complete
2006
2007-2010
100
200
200
2005
2006-2008
33.3
UAE
BMP-3 IFVs
653
upgrade program
2005
2007-2009
60
200
200
Germany
Launch of
Sar-Lupe
reconnaissance
satellites
2003
2006-2008
22.4
Vietnam
Malaysia
Algeria
Weapon
designation
Molniya missile
boats (Project
12418)
Morocco
Year(s) of
deliveries
Delivered in 2007
mln USD
units
Delivered by
2008, units
Notes
25
Recipient
Bulgaria
Serbia
Croatia
Weapon
designation
No.
ordered
MiG-29 fighters 16
overhaul program
MiG-29 fighters 5
upgrade program
Mi-171Sh
10
helicopters
Year of
contract
Year(s) of
deliveries
units
Delivered by
2008, units
2006
2007-2008
18
2006
2007-2008
26.9
2006
2007-2008
13
26
Delivered in 2007
mln USD
Notes
Our Authors
Mikhail Barabanov. Graduated from the Moscow State University of Culture. Currently employed by the Moscow city
government. Independent expert on naval history and armaments.
Victor Dmitriev is an advisor at the Federal Service for Military and Technical Cooperation of Russia. He has been working
in arms trade field since 1972. Since the middle 1990s he took significant activity in creating and developing a new unit
responsible for the offset deals in state arms export company Rosvooruzheniye. This kind of deal first appeared with signing
a contract to deliver MiG-29 fighters to Malaysia, when the Russian side successfully fulfiled the obligations to establish the
School of Aerospace Engineering at the Malaysia University of Science (Universiti Sains Malaysia).
Fyodor Lukyanov is Editor-in-Chief of the Russia in Global Affairs journal, published in Russian and English with participation
of Foreign Affairs, and an international columnist with the Kommersant daily, Vedomosti, The Moscow Times and Gazeta.ru
online source; leading national radio stations and TV channels. Fyodor Lykyanov graduated from Moscow State University 1991
as a Germanist. He worked as a correspondent, commentator and editor for many Russia media. Member of the Presidium of the
Russian Council on Foreign and Defense Policy, an influential independent organization providing foreign policy expertise.
Konstantin Makienko. Graduated from the Oriental Department at the Moscow State Institute for International Relations
in 1995 and the French-Russian Masters School of Political Science and International Relations in 1996. Head of a project on
conventional armaments at the Center for Policy Studies in Russia (PIR-Center), 19961997. Since September 1997, Deputy
Director of CAST. Author of numerous articles on Russias military-technical cooperation with other countries.
27