Taking armaments imports seriously, part 2

Yesterday, I discussed some of the findings of a report by Viktor Murakhovsky and Ruslan Aliev on the effectiveness of arms imports, international cooperation and technology transfer in Russia’s military industrial complex. Today, I conclude the discussion by looking at the parts of the report that examine specific examples of import deals, the risks of import dependence, and the report’s overall conclusions.

The report notes that the Russian procurement system has no way of determining the gaps in domestic procurement that have to be addressed through imports. It also has no way of choosing among alternative types of weapons systems when making foreign procurement decisions, given its lack of experience with open international tenders. Finally, it has little experience in formulating advantageous contracts with foreign defense firms through means such as offsets and joint R&D. Instead, decisions on imports are usually made because of the personal or political interests of key decision-makers in the MOD and at the highest levels of government. The report mentions a few examples:

  • Israeli UAVs that were purchased in 2009-10 are relatively outdated, have limited uses, and do not allow for the study and transfer of current technologies. This contradicts the stated purpose of the deal, which (in the words of former Deputy Defense Minister Popovkin were to transfer current technologies to our defense industry so that we can with their help develop our own prototypes of needed weapons and technology.”
  • IVECO LMV M65 “Lynx” armored vehicles, 10 of which were purchased in 2010 for testing. A contract to build 1775 of these armored vehicles at an Oboronservis/Iveco joint venture in Voronezh was signed in 2011, without any kind of open tender being conducted. Furthermore, it was signed before testing on the vehicles was completed and without a discussion of what role the vehicle would play in Russia’s military. According to the report, the likelihood that the plan to use 50% local components in the vehicles’ construction is very doubtful because many of the components belong to other foreign firms that have not agreed to license their production to Russian firms. The contract was signed without an open competition.
  • The Mistral amphibious assault ship has been criticized in Russia because Russia does not need such a ship, does not have the infrastructure to maintain the ship once it is built, and the government’s ability to finance  serial production is highly uncertain. The authors argue that there is no clarity on whether Russia will get useful technology, such as the SENIT 9  tactical combat information system and the SIC-21 battle group C2 system, as part of the deal. Other components, such as the power plant, come from European advances in civilian shipbuilding and could be acquired commercially for a Russian-built ship without any problems. The most attractive feature of the Mistral for the Russian Navy is its multifunctionality; it would be highly useful for the RFN to have a ship that can serve as an all-in-one barracks, HQ, hospital, helicopter carrier, and amphibious landing ship. But there are other options for these types of ships, and a tender could have led to a more advantageous deal.
  • The establishment of a training center in Mulino by the German Rheinmetall Defense Company is the one positive example of foreign procurement cited in the report. In this case, there are well-defined Russian subcontractors on board, the offsets are included in the contract, and Russian companies will benefit from the experience of technical integration by being involved in the project. (There’s no mention of open tenders here, though. I’m not sure why the authors don’t care about this factor in this one case — DPG)

The report’s final substantive section addresses the risks and benefits of dependence on imports of military technology. Risks include the possibility that the selling country will not be able or willing to supply needed parts or armaments in wartime and even blocking functionality of electronic systems and components should the purchasing side get involved in a conflict with an ally of the selling country. Excessive dependence on imports would also have negative consequences for domestic defense industry. However, if done right, imports would provide a number of benefits for Russia, including the ability to study and adopt the technical solutions used in foreign equipment, the ability to quickly fulfill the needs of the military in areas where domestic defense industry is weak, the possibility of establishing joint production of some types of equipment that could then be sold at a profit to third countries. The authors then spell out a number of factors that would allow Russia to have an effective system for importing military equipment. These include open tenders, offsets, requirements for tech transfer and local licensed production, the establishment of clear rules that apply to all decisions on import of foreign military equipment, guarantees that support for imported equipment would be provided regardless of future circumstances, and the depoliticization of future deals. They highlight three criteria for importing equipment: 1) it must be needed by the military, 2) it must not have suitable domestic analogs, and 3) it must not be critical for the military’s needs, reducing the risks of a breakdown in deliveries. Based on these criteria, the types of equipment that Russia might want to import in the near future include communications and navigation systems, aircraft engines, sniper equipment, and UAVs. France and Italy are listed as the most suitable partners, due to the qualifications of their defense enterprises and past experience in cooperation.

The report ends with a set of overall conclusions:

  • The military needs to import arms and equipment because of the prevalence of outdated equipment in the military and the defense industry’s inability to produce equipment of all types.
  • The import of military equipment carries significant risks for security and for the future of domestic defense industry.
  • The import of military equipment must be organized so that all decisions are made according to a single set of rules, with the involvement of both the state and domestic defense industry representatives. Tenders, offsets, and guarantees of support must be part of all contracts.
  • In most areas of military production, there is no need for imports. In some areas imports are needed in order to study foreign experience so as to improve future domestic production.
  • Tech transfer and joint production are of greatest interest for Russia.
  • Laws on the import of high tech components need to be simplified.
  • The MOD must take the needs of defense industry into account in formulating its procurement and import policies, in order to ensure that defense industry capabilities are maintained and improved.
  • Russian defense industry needs to be subjected to a technology audit in order to clearly formulate its problems and goals. This audit would help in formulating an import strategy.
  • All import contracts need to be audited to ensure that they are financially and technically sound. Doubtful contracts should be suspended.
  • Institutional imbalances between the MOD and defense industry need to be corrected.

 

 

Taking armaments imports seriously, part 1

The Military Industrial Commission’s Public Chamber is considering a report on the effectiveness of arms imports, international cooperation and technology transfer in Russia’s military industrial complex. The report is authored by Viktor Murakhovsky and Ruslan Aliev. The report addresses the history of Russian military imports, going back to World War I. It also looks at the comparative experience of other major military produces around the world, especially the US and France. It then plunges into the issues surrounding the Russian MOD’s recent forays into importing military technology, concluding with recommendations on how to make the process more effective. The entire report is quite long, 25 pages, so I’ll just focus on some of the highlights, including the conclusions and recommendations.

The history section has three conclusions, as follows:

  • Russia has always been an active importer of military hardware (including from the US during WWII and from Warsaw Pact countries throughout the post-war period).
  • Excessive dependence on imports at the start of the 20th century had a negative impact on national security and was one of the primary causes of Russia’s failures in World War I.
  • During the industrialization period, the wide use of various forms of import (including samples, equipment, and technologies) allowed for the rapid development of domestic defense industry. This positive example should be taken into account during the current “new industrialization” period.

The comparative section lists the following conclusions:

  • Military production around the world is becoming increasingly integrated, for both economic and political reasons.
  • At the same time, foreign states retain firm control over the transfer of military technologies and production.
  • Strong competition on the international arms market is partially caused by strong protectionist measures of leading states in military production.
  • States that conduct independent foreign and domestic policies (Russia, China, Latin America) are subject to even stricter export controls by the governments of these states.
  • Russia can derive practical benefit from following France’s example, both in terms of institutions and in terms of import policy.
  • The European market for arms suggests the benefits of using offsets that allow countries to import military technology on more advantageous terms.

The report’s discussion of the French example is interesting. The authors highlight the responsibility placed on the French Defense Ministry for supporting national defense industry and note that this is done primarily through Europe-wide cooperation in military R&D and high tech projects. They focus on the annually updated 30 year plan for military needs and future procurement, developed by the main directorate for armaments. The technical characteristics of new military technology is formulated by the defense industry council, which is headed by the defense minister and includes the heads of the major defense enterprises. They highlight how French efforts to use defense procurement to support national R&D and the country’s industrial base are close to what Russia needs.

The rest of the report focuses on Russia’s recent history of importing military technology, with the first section addressing the institutional structure for concluding import deals. They note that reform of the various structures responsible for military procurement have been undergoing reform for the last decade. The common thread is that until quite recently none of these structures were able to function. First Rosoboronzakaz, then the Military Industrial Commission, and then Rosoboronpostavka were all launched with great fanfare but failed to turn into agencies that could develop a full-fledged procurement policy or to conduct it. Between 2007 and 2010, a procurement system was created, with the exception of the development of mechanisms to formulate a long-term procurement policy (which would establish the role of imported equipment in the procurement plan). The lack of a long-term policy has meant that each import decision has been made based on political considerations, rather than an overall vision of the Russian military’s needs and the domestic defense industry’s gaps in fulfilling those needs.

Here are the report’s conclusions on this section:

  • Until 2000, there were no procedures in place for armaments procurement. The system remained incomplete through 2007.
  • In 2010, procurement and supervision over procurement were both concentrated at the MOD. Without a planning mechanism, decisions were made based primarily on political considerations. The imbalance of power in favor of the MOD led to a political crisis surrounding the fulfillment of the State Armaments Program for 2011-2020.
  • Importing various weapons systems is a completely acceptable scenario for Russia as long as the criteria are formulated in advance.
  • Existing import deals do not meet the needs of the military and do not match the interests of the state’s industrial and technological policies.
  • They key problem for the import of military equipment revolves around finding the optimal balance between the interests of the MOD and of defense industry.
  • This requires the reconstruction of the existing system of requirements planning and military strategy formulation at the MOD.
  • The government, probably through the Military Industrial Commission, should take on the role of analyzing the needs for future weapons systems and making decisions on whether to import them or produce them domestically.

Tomorrow, I will discuss the parts of the report that examine specific examples of import deals, the risks of import dependence, and the overall conclusions.

New report on Russian interests in Syria, part 2: Russian arms sales

I’ve covered Russian arms exports to Syria on this blog before, but the CAST report has some useful new information on this topic. Barabanov and Aliev note that Russian arms exports to Syria were very limited until the restructuring of Soviet-era Syrian debt to Russia in 2005.  Shortly after that, the two countries signed a series of arms contracts with a total value of 4.5 billion dollars. While these contracts were not publicized, available information indicates that they included the following:

  • 8 MiG-31E interceptors. This contract was annulled in 2009, most likely because of Israeli objections. No aircraft were ever transferred.
  • 12 MiG-29M/M2 fighter jets, with an option for an additional 12. The first set of aircraft, and possibly all 12, are to be transferred towards the end of this year. No information is available on the option for an additional 12 aircraft.
  • 8 battalions of Buk-M2E missile systems (total value $1 billion). Four were shipped in 2010-11, with the rest to be transferred by 2013.
  • 12  battalions of S-125-2M Pechora-2M SAMs ($200 million). Four were shipped in 2011, and another four were shipped on the MV Alaed, which was recently forced to return to Russia after its insurance was cancelled.
  • 36 Pantsir-S1 anti-aircraft missile systems ($700 million). According to the CAST report, only 12 have been delivered so far. SIPRI, on the other hand, believes that all 36 have been delivered.
  • 2 K-300-P Bastion coastal defense systems, armed with 36 Yakhont anti-ship missiles ($250 million). Contract completed in 2011.
  • an unknown number of 9M123 Chrystanthemum self-propelled anti-tank missile systems. Most likely, none have been delivered to date.
  • an unstated number of Igla-S surface to air missiles (200 according to SIPRI). Contract completed in 2010.
  • modernization of 1000 T-72 tanks to T-72M1M level ($1 billion). Little work completed to date.

There was another set of contracts completed in 2007-08 to modernize Syria’s air force. This included the following:

  • 15 Su-24MK bombers. Work began in 2010. These are to be armed with Kh-31A anti-ship missiles, 87 of which were produced through 2010.
  • unknown number of MiG-29 fighters to SM level. (24 according to a previous CAST report). First four completed in 2011.
  • unknown number of MiG-23 fighters to MLD level. Seven completed through 2011.
  • 20 Mi-25 combat helicopters. 17 delivered so far. Last three were supposed to be delivered on the MV Alaed earlier this month.
  • 2 Ka-28 anti-submarine helicopters. Contract completed.

The most recent contract was completed in December 2011, for 36 Yak-130 trainer aircraft ($550 million). However, this contract has not yet been approved by the Russian government.

To summarize, Russia has completed about $5.5 billion worth of military contracts with Syria since 2006, primarily for air force and air defense modernization. The report notes that despite prompt payment by the Syrian side, fulfillment of many of the contracts was dragged out (and in the case of the MiG-31s, cancelled) by the Russian government. So far, Syria has received only $1 billion worth of equipment from these contracts.

The authors argue that Russia has been very cautious in selling arms to Syria, making sure that Western powers and especially Israel did not object to the equipment being provided. In particular, Russia has refused to sell Iskander ballistic missile systems and S-300 anti-aircraft missile systems to Syria. In other words, the report argues that Russia has valued its relationship with Western states and Israel more than the financial and political gains from selling more weapons to Syria. Furthermore, even if Assad’s government survives, it will not be able to afford to pay for more Russian weapons for the foreseeable future, limiting its role as a customer for the Russian defense industry.

New report on Russian interests in Syria, part 1: Russian motivations

The Russian defense think tank CAST has produced a new report on Russian interests in Syria, by Mikhail Barabanov and Ruslan Aliev. This report largely supports my recent contention that while Russia has significant material interests in Syria, they are not the main reason for its support of the Assad regime. Let me first address what the report says about Russian motivations. Tomorrow, I’ll address the part of the report that spells out Russian material interests in Syria, since CAST provides some interesting new information on this topic.

One thing that the report notes at the outset is that there is a widespread consensus in Russia on support for the Assad regime. This includes not just political leaders, but also most experts and the public as well. The authors describe the Russian position as a strong consensus to defend Russian interests and limit Western willfulness. Of course, this just begs the question of what are Russian interests in this case.

The authors mention that Putin may have some sympathy for Assad as a fellow authoritarian leader facing internal protests that have Western support. But they judge that Putin is too pragmatic and opportunistic to allow such considerations to affect Russian policy.

They argue instead that the greatest role in determining  Russian policy is played by the elite and expert consensus that Syria must not be lost, as Assad’s defeat would mean the loss of Russia’s last client and ally in the Middle East. Syria is seen in some quarters as one of the last symbolic remnants of Russia’s superpower status. For supporters of this view, Western intervention in Syria would be seen as the destruction of one of the few remaining symbols of Russia’s great power status.

Barabanov and Aliev then argue that this view is support by skepticism about the results of the Arab spring in general and the possible outcome of the Syrian revolution in particular. Russian elites believe that the Arab spring has destabilized the Middle East and opened the door for Islamist forces to take power. As they see it, only secular authoritarian regimes such as that of Assad can counter the rise of Islamist forces. The strong support being given by Saudi Arabia and Qatar to the Syrian rebels only deepens Russian suspicions in this regard, given Russian beliefs about past Saudi efforts to export “wahhabism” to the North Caucasus and Central Asia.

Finally, Russian dislike for unilateral Western interventionism plays a role as well, augmented by Russian views that Western powers used the potential of a humanitarian crisis in Benghazi to push through a UN Security Council resolution authorizing Western intervention in Libya that was then cynically interpreted in a way that allowed Western powers to overthrow the Gaddhafi regime.

The authors conclude by noting that the Syrian situation thus combines all the phobias and complexes of Russian politics and public opinion. What is actually happening in Syria thus plays second fiddle to Russian perceptions about Russia’s role in the international system and pathologies related to the collapse of the Soviet Union and Russia’s subsequent decline.

All of this is broadly in line with my recent memo on this topic, so I’m naturally quite sympathetic to the argument in the report. I put more emphasis in my analysis on Russia’s role in the international community versus concern about Islamism and regional stability, but these are relatively fine distinctions that don’t really change the overall point: Russia is not backing Assad because of its commercial relationship or desire to maintain a military outpost there. It is backing Assad because it perceives that Assad’s downfall would have serious and long-lasting negative repercussions for Russia’s position in the Middle East and in the world, as well as for regional stability in the Middle East. This makes it far less likely that Russia would be willing to change its position in exchange for concessions on other material issues.