#8
FEATURE - Gunshots and mortars as Russia boosts arms
exports
July 28, 2002
By Clara Ferreira-Marques
NIZHNY TAGIL, Russia (Reuters) - A team of North Korean engineers in neatly-pressed shirts and badges featuring the smiling face of leader Kim Jong-il chat excitedly as they scrutinize Kalashnikov rifles.
Russian salesmen in sharp suits and dark sunglasses glide by, whisking Angolan and Nigerian buyers to a display of new tanks. Outside, in the intense central Russian heat, piercing explosions and mortar shells rip through the air thick with the acrid smell of gunpowder.
Russia's ear-splitting sales pitch is part of its desperate attempt to claw back a sizable share of the arms market once held by the Soviet Union.
One of the world's most spectacular displays of firepower and modern hardware, the presentation in the Urals town of Nizhny Tagil, some 800 miles east of Moscow, embraces Russia's wide-ranging defense industry -- from MiG fighter jets to Smerch rocket launchers and T-90S tanks.
"It's all very impressive. The Smerch needed only four to five minutes of preparation," said a Kuwaiti military attache, part of a large delegation from the Gulf State.
The Nizhny Tagil exhibition, complete with brass bands, dancing girls and Populist politician Vladimir Zhirinovsky, is a testament to Russia's improving marketing techniques -- far from the Soviet-style customer service of the early 1990s.
"We were bad sellers and we are better now, thanks to specialists. Even after-sale maintenance, our weak spot, is improving," said Vladimir Shvaryov of the specialist military journal Rynki Vooruzhenie.
FOURTH-LARGEST EXPORTER
Russia, currently estimated to be fourth in the world arms export rankings, has recovered some ground since bottoming out in 1997, with 2001 exports reaching some $4.3 billion and 2002 forecast to hit similar figures.
"Contracts are being fulfilled, contracts are being signed, so we can speak of a fruitful path ahead of us," said Andrei Belyaninov, head of the arms export monopoly Rosoboronexport.
"We have sales agreements to the value of $13.5 billion, with contracts maturing in years to come."
But Russia is still lagging behind its top competitors, despite Rosoboronexport's efforts to attract clients outside its traditional Soviet-era markets and to move beyond its two strongest Asian partners, China and India.
The state-controlled monopoly has said it will target countries including Iran, part of what President Bush has called an "axis of evil," in its bid to seek cash-paying clients, despite clear unease in Washington.
"Russia can no longer afford to link its arms sales to political interests. For Russia, arms exports represent the major source of survival for its struggling defense industry," said Alexander Pikayev of the Carnegie Endowment think-tank in Moscow.
"Regarding conventional weapons, there is no international obligation not to sell to Iran, and there is an argument (that) conventional arms sales may keep Iran from further developing its nuclear program." Defense Ministry procurement has slumped since the collapse of the Soviet Union, making conventional arms exports the only remaining means of survival for most of the country's unwieldy defense corporations.
That means Russia cannot afford to be too selective.
"The factories that have work are those that are surviving off exports. The rest will slowly die," Shvaryov said.
COST OF REFORM
Moscow has long promised to overhaul the ailing military-industrial complex, but the social cost of reform may be more than it is ready to handle.
"The authorities lack the political will to accept high-level unemployment," Pikayev said. "According to official data, we have 1,700 enterprises linked to the Defense Ministry, and if you close half of them you would face hundreds of thousands of unemployed."
But despite the post-Soviet soul-searching still shaking exporters, clients and experts agreed Russia could regain its heavyweight status.
Russia, unlike other top exporters, has captive audiences -- countries including China, unable to shop in Western markets for ideological reasons.
And thanks to prolific sales of tanks and aircraft during the Soviet period, upgrades could bring in much-needed hard currency even from countries unable to afford new materiel.
The T-72M1 upgrade of the T-72 tank, a simplified version of a Soviet battle tank exported to some 30 Warsaw Pact countries and other allies, could alone bring in some $5 billion to $6 billion of revenue according to Russian experts.
"We have some (Russian) light tanks and have had no problems, so we expect the same standards. Our army may be looking for some modifications," a Kuwaiti delegate said.
And with the global arms market moving toward modifications of existing machinery rather than new acquisitions, Russia, already cooperating with several Western partners on modifications, could be well placed to seize opportunities.
France is working to help upgrade Russia's Mi-38 transport helicopters, while Russia is helping South Africa to modify the French-built Mirage 3 fighter jets, experts say. Germany is set to cooperate with Moscow on upgrading MiG-28 planes inherited from the former East Germany.
"Russia is able to upgrade ammunition, make it go further even in the same artillery (piece). It has showed it off here and foreign delegates have been impressed," a South Korean military attache said.
"Russian weapons are less convenient than NATO weapons, but they are certainly more powerful."
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