Russian Arms Exports Set to Widen

Western defense manufacturers heartened by recent upsurge in arms sales in Asia and the Middle East are finding a potent new competitor in Russia.

Russia's isn't quite a new challenge but what makes it a forbidding challenge for military businesses in Europe and North America is Moscow's express willingness to bankroll the country's arms sales campaigns worldwide.

And "bankroll" isn't quite the term, either, because what Russian President Vladimir Putin is doing is simply to get the exports going and worry about the payments later.

Putin said he would pursue the arms export program on "market principles" and not copy the Soviet Union's practice of giving weapons on loans that seldom got repaid. In practice, that's exactly what he's been doing in Latin America, especially with Venezuela under late President Hugo Chavez, and that's also exactly what Moscow is continuing to do in Syria.

Russia's arms shipments to Libya under former leader Moammar Gadhafi ran into billions of dollars and unspecified unpaid sums are seen as unrecoverable

Being ready to export sophisticated weapons on soft loan terms and other flexible financial deals give Moscow an unparalleled edge over other defense exporters. China has the cash but not the technology that can match Russian hardware; Europe needs the cash from arms export and North America's military exporters have neither the deep pockets of Putin's government structure nor the freedom exercised by Moscow.

U.S. arms exporters, in contrast, are unable to do military handouts and most remain at the mercy of congressional wrangles, many triggered by partisan politics.

U.S. defense exporters' constraints in relation to congressional safeguards are a reason why the exporters are finding it hard to reignite Latin American interest in U.S. hardware and software.

Brazilians looking for a new generation of strategic fighter aircraft are known to want U.S. military equipment but only with maximum technology transfer provisions and stringent guarantees that their acquisitions will not be hampered by Capitol Hill politics.

In contrast, Putin entertains no such concerns. He said he would encourage more Russian arms industry firms to innovate and produce weapons, become financially independent and take on old style, monopolistic manufacturers, such as Rosoboronexport.

Putin said Russia needed to develop its defense industry on market principles, a normal practice around the world, Defense Industry News reported.

Timely loans made on market terms will help to promote Russian goods and create markets for subsequent maintenance of goods and for later sales of additional equipment and spare parts, Putin said.

Putin's comments raised speculation that emerging Soviet defense industries would be entering the military marketplace on their own bat, rather than remain dependent on Rosoboronexport.

JSC Rosoboronexport is Russia's principal state intermediary agency for exports and imports of defense-related and dual-use products, technologies and services.

Rosoboronexport ranks as Russia's key arms trader but already its share has gone down to 90 percent of total Russian trade in the sector.

Moscow has indicated it wants more independent defense deals within the framework of Russian foreign policy.

Unlike the open arms-related proceedings in U.S. Congress, the workings of Russian defense trade remain largely a mystery, except to a handful of specialists.

Russian arms sales in 2012 reached $15.2 billion, an increase of 12 percent compared to 2011, ITAR-Tass and Interfax Russian news agencies reported.

Russian manufacturers exported arms and military equipment to 66 countries in 2012 and currently have contracts worth some $46 billion with 75 countries, Putin said.

"The only country ahead of us is the United States. We have more than one-fourth of the world's market," Putin said.

Putin's comments follow a U.N. treaty aiming to regulate the international arms trade. Ambiguity about current arms transfers in conflict zones such as Syria indicate the treaty isn't likely to be taken seriously even by many of those who've signed it, analysts said.

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