Russia is ready to radically change its own strategy for the export of military products. These statements have recently been heard quite often, now from the mouth of the first person of the state. For the first time, Vladimir Putin announced the need to develop a new comprehensive approach to trade in military equipment in November 2018. In June 2019, at a meeting of the Commission on Russian MTC with Foreign Countries, Vladimir Putin reiterated the need to meet the challenges of the time and announced a new draft strategy for military-technical cooperation between the Russian Federation and foreign customers.
Military-technical cooperation of Russia with foreign customers in figures
The annual volume of Russian exports of arms and military equipment in recent years has been steadily near the $ 15 billion mark, and the total order book exceeds $ 50 billion. According to Vladimir Putin, the financial indicators of exports within the framework of the military-technical cooperation of the Russian Federation with foreign states have been growing for four years in a row and today are very close to the $ 16 billion mark. According to the President, the positive dynamics of indicators continues in January-May 2019.
The country's foreign exchange earnings from the export of various military products increased by 45 percent, and the aggregate portfolio of orders for Russian weapons systems and military equipment rose to record levels - almost $ 54 billion. Thanks to these indicators, Russia continues to hold the second place in the world in the export of arms and military equipment, behind only the United States. Positive dynamics in the field of military-technical cooperation has been observed in Russia throughout the 21st century. For example, back in 2007, the volume of annual sales of weapons and military equipment to foreign customers amounted to more than $ 7 billion. Over the past years, this indicator has more than doubled. At the same time, the portfolio of orders for weapons and military equipment in the same 2007 was estimated at 32 billion dollars, over the next years, the portfolio of orders has grown by almost 1.7 times.
Despite the growth in indicators, it can be stated that in modern realities, Russia has practically reached the limit for building up military-technical cooperation. In recent years, the order book of the Russian defense industry has exceeded $ 50 billion, and annual sales revolve around the $ 15 billion mark. Nor can such large orders as the Indian contract for the supply of the S-400 Triumph air defense systems significantly affect the size of the portfolio, although this single contract alone is estimated at about $ 5 billion. While maintaining the level of income from the supply of arms and military equipment to foreign partners, Russia is losing its overall share in the international arms market. According to experts, this could be cause for alarm.
As the newspaper "Vzglyad" reports with reference to Ruslan Pukhov, director of the Center for Analysis of Strategy and Technologies (CAST), in recent years the arms market has shown very high growth, according to various expert estimates, from 30 to 50 percent. Against this background, the volume of contracts concluded by Russia remained the same or even increased in monetary terms, but at the same time, Russia's share in the world market is decreasing. “Roughly speaking, the international arms market is growing faster than Russia's share in this market. In absolute terms, the growth is noticeable, but in relative terms, it is falling, because the market is growing faster,”noted Ruslan Pukhov.
Military-technical cooperation of Russia covered with stability
In November 2018, at a meeting of the next Commission on military-technical cooperation of the Russian Federation with foreign states, Vladimir Putin noted that "in recent years, the volume of export supplies of military products has been at a consistently high level." Translating from the language of Russian high-ranking officials into the common human language, it can be stated that we are talking about stagnation. The figures achieved by the Russian defense industry are really impressive, but they have remained practically unchanged over the past years. There is an increase in comparison with the first two terms of Putin's presidency, but compared to the same 2014, this is marking time. Having opened the website of the Federal Service for Military-Technical Cooperation, we learn that at the end of 2014, the export of Russian military products abroad exceeded $ 15.5 billion and steadily has been holding at this mark for the last three years (that is, since 2012), and the portfolio of export orders stable and exceeds $ 50 billion.
Nothing has changed significantly over the past five years. Yes, there are new large contracts, but they do not provide growth in economic indicators. The military-technical sphere of Russian exports, like the entire country, was covered by a wave of stability. The last such wave in our country belongs to the era of Leonid Brezhnev's rule. The stable Brezhnev years are now known as the era of stagnation. It did not end with anything good for the country. The stable and fat years for the state with high oil prices passed, and no reforms were carried out that could transform the Soviet economy and society. Today the Russian government is in a hurry to step on the same rake without carrying out systemic reforms.
However, stability, which is presented as a plus, for the citizens of Russia is a product of purely domestic consumption. Where it comes to the export of products, this term is no longer acceptable, especially in such a sensitive area as the export of arms. For the Russian economy, which is more than 3/4 dependent on supplies of energy resources and metals abroad, the defense industry is the only competitive industry that drives a finished technologically complex product abroad on a commercial scale. The supply of weapons and military equipment is not just a living currency and revenues to the country's budget, but also the prestige of the state. It is no coincidence that we decided to deal with stability in military-technical cooperation at the highest level.
New strategy for military-technical cooperation
The new strategy of military-technical cooperation with foreign customers, which Putin spoke about, should increase the efficiency of this activity. It is known that the new strategy should coordinate measures of a financial-economic, technical and political-diplomatic nature. At the same time, the specific details of the strategy remain unknown to the general public.
According to Putin, a new challenge that the Russian defense-industrial complex must meet is the growing interest of foreign customers in localizing the production of military products on their own territory and involvement in joint research and development work. Russia is striving to meet new challenges.“Over the past five years, the volume of joint research and development with the aim of developing new types of weapons and modernizing existing equipment has increased by 35 percent. This practice should be developed, especially the successful experience of cooperation in the production of military equipment and various weapons. In cases where it meets mutual interests, it is also necessary to engage in joint development work and consider the possibility of transferring Russian technologies to foreign customers,”the Russian president said.
Russia has achieved the greatest success in this area today with its long-standing partner, India. The Russian main battle tanks T-90S and the multifunctional fighters of the fourth generation, the Su-30MKI, are being successfully assembled in India (230 kits for licensed assembly were supplied). At the same time, Russia and India are working together on a sea- and air-based BrahMos missile, as well as a BrahMos-2 hypersonic missile. Also, a separate line of cooperation between Russia and India in the military-technical sphere is the transfer of nuclear submarines to Delhi. According to the Indian military, Russia is ready to share such technologies only with Delhi. The first nuclear submarine Nerpa was leased to the Indian side for a period of 10 years in 2012. The boat became part of the Indian Navy under the new name "Chakra".
Also, a new challenge for the Russian military-technical cooperation is foreign sanctions, primarily American ones. The sanctions did not lead to a drop in the volume of supplies of Russian military products, but they certainly interfere with the growth of exports of such products. Today we can talk about this directly. According to Ruslan Pukhov, director of the Center for Analysis of Strategy and Technology, US sanctions can be a threat that leads to a reduction in Russia's client base on the international arms market. For example, representatives of the Philippines have already publicly stated that, due to the sanctions imposed by the United States, they cannot transfer funds, therefore they will not acquire Russian weapons at all their will. Another example is Kuwait, which has frozen a major contract for the supply of Russian T-90MS tanks. The Kuwaiti military says the contract has not been canceled, but postponed. The fate of this deal also lies in the plane of the existing sanctions, in the conditions of which the Russian defense industry and diplomats should work. At the same time, it was Kuwait who was supposed to become the starting customer of the modernized version of the T-90 tank, and the number of purchased vehicles was estimated at 146 pieces.
True, in some aspects, the sanctions imposed by the United States can play into the hands of Russia. This can happen in the situation with Turkey. Ankara, which acquired the S-400 Triumph air defense systems, angered Washington, the White House is seriously discussing the possibility of refusing to cooperate with Turkey on the production of the fifth generation F-35 aircraft and canceling the contract for the supply of fighters to the Turkish Air Force. Under these conditions, Turkish officials have repeatedly stated that if the United States refuses to sell fifth-generation F-35 fighters to Turkey, Ankara will seriously consider purchasing combat aircraft from Russia. At the same time, Turkey is preparing for possible sanctions from Washington by purchasing spare parts for weapons that were purchased in the United States, Bloomberg reports.
Another challenge for Russia in the international arms market is the growth of offers from countries that until recently were not serious players in this market. The number of countries that are able to produce competitive models of weapons and military equipment is growing every year. China, which recently was the main buyer of Russian weapons, is gradually expanding its own production and actively promoting high-tech weapons and military equipment for export that compete with Russian products.
South Korea and Turkey also made a big leap forward. South Korea, in addition to successful self-propelled artillery systems, is actively promoting warships and equipment for the navy on the world market, and Turkey is actively promoting unmanned systems on the market, including attack drones, which are only being tested in Russia. At the same time, Turkey also actively sells lightly armored wheeled vehicles, other samples of which are in no way inferior to Russian ones, and in a number of positions are superior to domestic vehicles. All this suggests that competition in the world arms market is only growing.
