Despite my best efforts, I can’t seem to get away from the Russian Navy these last couple of weeks. Just when I was about to move on to the air force, I got an email from a colleague doing a study of the Mistral sale who points out that negotiations have hit a snag over price disagreements. More specifically, the issue is that the Russian side expected to get the two ships for 980 million euros, while the signed agreement is actually for 1.15 billion euros. The difference consists of 131 million for logistics and 39 million for crew training.
The hangup is that Vice Admiral Borisov, the deputy commander in chief of the navy for armaments and one of the lead negotiators for the Mistral contract, signed a protocol back in December that included these two extra items, without clearing the price increase with Rosoboronexport back home. Doing so very much exceeded his authority. As a result, Borisov is now facing an early retirement (4 years ahead of schedule).
Gazeta.ru cites Ruslan Pukhov’s argument that Borisov’s removal will allow both sides to return to the negotiating table to settle the price difference issue. My guess is that this is just a minor roadblock that will be resolved in fairly short order, as both sides have too much invested in the deal to get hung up on a 15 percent price difference. There may be a delay of a month or two in the signing of the final contract, but in the end some compromise will be made and things will get back on track.
I have seen a bit of discussion here and there about how Russian leaders are reluctant to support anti-government protests in the Middle East and North Africa because of fears that similar protests may occur in Russia. While fear of domestic instability is a major aspect of the calculus for Russian politicians on this issue, it’s not the only issue. Russian defense industry stands to lose a great deal of money from military contracts should some of the existing regimes collapse. Libya, Algeria and Syria are particularly important customers for Russia, while there are smaller contracts with Yemen, Egypt, Jordan and Lebanon.
The New York Times reported a couple of days ago that lost opportunity costs from unfulfilled arms contracts with Libya amount to $4 billion, while total losses in the region if other regimes fall could add up to $10 billion, which is equivalent to the total value of Russia’s military exports in 2010.
The Times report did not list specific export programs, but some information (though incomplete) is readily obtainable from SIPRI and from CAST. SIPRIs databases are currently offline for an update, so the following is based exclusively on the tables in CAST’s Eksport Vooruzheniia journal from November 2010.
Known contracts with Libya include (prices listed where available):
- modernization of Libyan S-125 Pechora-2 SAMs (SA-3 in NATO parlance) to the Pechora-2M level
- modernization of 145 T-72 tanks
- purchase of BMP-3M infantry fighting vehicles ($300 million)
- purchase of 6 Yak-130 training aircraft ($90 million)
- building a factory in Libya to produce AK-103 machine guns under license ($600 million)
- purchase of 9M123 Chrystanthemum self-propelled anti-tank missile systems
- purchase of Molnia missile boat
Known contracts with Algeria are even more extensive:
- purchase of 16 SU-30MKI fighter jets ($1 billion)
- modernization of 250 T-72M tanks (150 already completed) (total value $200 million)
- purchase of at least 10 Yak-130 training aircraft
- modernization of one Koni-class frigate and one Nanuchka-class corvette ($100 million)
- Purchase of 3 S-300 air defense systems and 38 Pantsir-S1 anti-aircraft missile systems (part of $8 billion deal signed in 2006)
Other contracts with potentially vulnerable states in the region include:
- Syria: MiG-29 modernization
- Syria: purchase of 8 battalions of Buk-M2E missile systems ($1 billion)
- Syria: modernization of S-125 Pechora-2 SAMs to the Pechora-2M level
- Syria: modernization of 200 T-72 tanks to T-72M1M level (part of $500 million contract to modernize 1000 tanks, 800 already completed)
- Syria: purchase of 9M123 Chrystanthemum self-propelled anti-tank missile systems
- Syria: purchase of 30 Pantsir-S1 anti-aircraft missile systems (part of 2006 contract)
- Yemen: purchase of 100 BTR-80A armored vehicles and 50 120-mm towed mortars ($60 million)
- Egypt: modernization of 20 S-125 Pechora-2 SAMs to the Pechora-2M level
- Kuwait: purchase of BMP-3 infantry fighting vehicles
- Jordan: construction of factory to make Khashim RPGs
- Lebanon: purchase of Mi-24 helicopters
Obviously, Russia is not unique in this regard. I’m sure that a list of U.S. arms deals with vulnerable Middle Eastern states would be much longer. (And notice the contortions that U.S. leaders have gone through to act like they’re supporting popular protests while maintaining channels of communication with friendly regimes in Egypt, Bahrain, Yemen, etc.) So please don’t take this post as a condemnation of Russian actions. I’m just trying to spell out some of the specifics behind the top-line numbers.