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| PHÎÒÎ:AP |
Russia has for several years been trying to convince the government of Egypt to purchase 40 MiG-29 fighter jets. Now, Beijing may breach this contract. Simultaneously, Egypt’s military were in talks with China and Pakistan on the production of Chinese JF-17 (FC-1) fighters in Egypt.
Although the Chinese JF-17 fighter cannot be compared to the Russian MiG in terms of specifications, it is 3.5 times cheaper at US $10 mn. Obviously, the price was the decisive factor for the Egyptians
Chinese creeping tiger
The zest of this situation is that JF-17 planes are equipped with Russian RD-93 engines. It turns out that Russia is cooperating with its direct competitor in the production of fighter jets, one of the main export products for Russia’s defense industry.
Director of the MiG RAC and Sukhoi AHC sent to the Federal Military Technical Cooperation Service and RosOboronExport an open letter protesting the signing of a major contract for the supply of 100 RD-93 engines to China scheduled for May.
Rosoboroneksport reacted to this letter – but in favor of China. “Re-exporting is executed in compliance with the decrees of the Russian government. There is no procedure for agreeing such contracts with the manufacturers of the end product,” a representative of Rosoboroneksport responded.
Whether this decision was motivated by kickbacks or was due to negligence or incompetence remains unclear. The fact is that such a failure will cost Russia’s national treasury a pretty sum.
In any case, the Russian leadership finally realized the threat posed by its Chinese competitors. Recently, a tender for research and development dedicated to Distinctive Features of the Strategy and Tactics of Chinese Weapons and Military Hardware Exporters: the Phenomenon of Success and Main Competitive Advantages was posted on the website of the Russia’s Public Procurement Department under the presidential administration. The contract is worth 200,000 rubles. The results of the research will be used in preparation of a report to the Russian president.
Along with the issue of the Chinese model of arms export, the research should focus on how the Chinese operate on the markets that Russia considers her own.
As noted in the tender proposal, the results of the research should contain suggestion for the reform of the legislation that “regulates Russian military and technical cooperation with foreign countries”.
While the Russians are planning to study the competitive edge of China’s arms exporters, the Chinese continue working to creating such advantages. The Chinese government stated the China’s aviation industry must over the next 5 years become independent of imported Russian fighter jet engines. At the moment, China imports two kinds of Russian-made engines: AL-31 (US $3.5 mn per unit), Su-27/30, J-11, J-10 and RD-93, which is an alternative for the MiG-29 (US $2.5 mn per unit) and FC-1 for the JF-17.
Market is shrinking
Industry experts forecast strengthening of China’s positions on global arms markets and gradual squeezing of Russia out of the market long ago. The main reason for this is that the technological backlog and groundwork that Russia inherited from its designers and industrial workers in the Soviet times is coming to an end.
Over the last 20 years, Russia’s MIC gradually wasted its staff, production techniques and manufacturing capabilities. Compensating such losses, even with billions of “oil dollars”, is not that easy.
An analytical report by a commission of the Russian Defense and Industrial Department reviewing the state of affairs in the sector found that 1/3 of the enterprises have basically gone belly up, financing and investments into R&D in Russia were 10 times lower than in industrialized countries, investments into the main funds and expenses on staff training were by 5 times lower than in industrialized countries, labor efficiency was 5–10 times lower than global indicators; over 50% of unique technologies meeting production requirements of the main samples of arms were either lost or got physically obsolete and the state of most defense enterprises was extremely poor according to many indices – over 50% of their equipment was 100% worn out.
Special attention was paid to the excessively high losses in the production of defense hardware. On average, the Russian defense industry sustained losses of 97 kopecks of expenses for every ruble, which means the real profitability of most companies is at 3%.
The technological breakdown of the Russian defense industry is also clearly outlined by Moscow’s latest decisions on purchasing French helicopter carriers, Italian armored personnel carriers and Israeli unmanned aerial vehicles, not to mention separate components and technologies such as German armor plating or French infrared imagers.
In essence, Russia’s export potential ran dry. And though Russia is capable of maintaining as one of the world’s top arms exporters for another 5 – 7 years, objective factors of technological nature provide no reason for optimism.
By the end of this decade, most of the leading arms exporting countries in the world will gradually switch to weapons of the next generation. Moreover, there is no doubt that China and India will also strive for this. Logically, this means that China will occupy the market of cheap and simple, albeit efficient weapons mainly in former third world countries.
In any case, Russia will most likely not be able to compete with them should it maintain the course of the current trends.
INFO
India throws itself into Obama’s arms
Russia’s position on the global arms market may be substantially shaken after India reconsiders its foreign policy preferences in favor of the U.S. Indian media reported that New Delhi and Washington might sign defense contracts to the tune of approximately US $5 bn during Barack Obama’s visit to India this November.
Specifically, the Indian government is holding talks about the possible purchase of MIM-104 Patriot surface-to-air missile (SAM) systems and Boeing aerial refuelers). It also plans to increase the number of light howitzers it buys from the U.S. However, the plans to sign the contracts directly with the U.S. government within the framework of the Foreign Military Sales (FMS) program is the key element in this situation, as this would allow potential American bidders from participating in tenders.
Signing of the End-Use Monitoring Agreement (EUMA) between the U.S. and India in 2009 made it possible for the signatories to enter into talks on the massive exports of U.S.-made armaments to India. The agreement envisages supplier’s control over the further usage of sold weapons or sensory technologies. As a result of the signing of the EUMA, the U.S. gained access to participation in all Indian armaments programs, which call for US $100 bn in financing until 2020.
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