SERGEI CHEMEZOV BOMBARDED BY SANCTIONS

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Dmitri Medvedev accuses the United States of unfair competition

President Medvedev says that the latest US sanctions are unfair competition, but will not have a tangible impact on Russia. Russia’s defense export orders portfolio is worth $30 billion. Rosoboronexport should sign contracts worth over $6 billion this year alone. And none of those contracts are with the United States.


Russia has responded to the United States regarding sanctions imposed against Rosoboronexport (Russian Defense Exports) last week. At a meeting of the government’s Military Technology Cooperation Commission, President Dmitri Medvedev said that the sanctions are unfair competition, but will not have a tangible impact on Russia. According to Medvedev, Russia’s defense export orders portfolio is worth $30 billion. Rosoboronexport should sign contracts worth over $6 billion this year alone. And none of those contracts are with the United States.

The US State Department initiated sanctions against Rosoboronexport last week. They apply to Rosoboronexport itself and to all its subsidiaries – and to any Rosoboronexport successor (that is, the Russian Technologies state corporation). The grounds for the sanctions: supplying arms or WMD technologies to Iran. For the next two years, US government agencies are not allowed to enter into any contractual agreements with Rosoboronexport or its subsidiaries, sell them any military-use goods, or issue any new import licenses for goods covered by US import controls. All US government agencies are forbidden to cooperate with Rosoboronexport in any way, to buy its products, or to use its services. The Russian company will not be able to buy any military hardware in the USA.

But there is no military hardware trade turnover between the USA and Russia. Defense analyst Ruslan Pukhov, director of the Center for Analysis of Strategies and Technologies, says that Russia supplies the United States with RD-148 rocket engines for Atlas rockets, and cooperates with the Americans on the International Space Station project – but space cooperation is done via the Federal Space Agency (RosCosmos), not Rosoboronexport.

The bans could have a substantial impact on Boeing – since its second-largest supplier of titanium is a Russian company called VSMPO Avisma, controlled by Rosoboronexport. If VSMPO Avisma stops supplying titanium, that would be a heavy blow for Boeing, which is already experiencing difficulties.

VSMPO Avisma supplies Boeing with 8-9,000 tons of metal a year – worth $400-500 million. Sergei Chemezov, chief executive of Russian Technologies, said earlier that Boeing has never expressed any concerns about these supplies. When we approached Boeing, we were told that the sanctions are not expected to affect contracts with Russian suppliers. “We have taken measures to ensure that all our programs in Russia are fully compliant with Russian and US law, and we shall continue to evaluate this situation in coordination with the US State Department,” said Dmitri Khrol, PR manager at Boeing’s Russian office.

Aside from possibly halting titanium supplies to Boeing, Russia’s response to US sanctions and missile defense deployment in Eastern Europe will also include establishing a joint air defense system within the CIS Collective Security Treaty Organization (CSTO). Medvedev said yesterday: “New opportunities – and this may be a central cooperation direction for us – are opening up in the course of our contacts with CSTO countries: primarily in the course of work on establishing a joint air defense system and a regional system for CSTO military forces communications and management.” According to Medvedev, Russia should also participate more actively in joint research and development for new forms of military hardware. Activization of military cooperation within the CSTO framework was started at the CSTO summit in Moscow in September. Medvedev named a new direction for CSTO activities: more in-depth coalition military planning and development of the military component.

Anatoly Tsyganok, head of the Military Forecasting Center: “We have hardly any air defenses in the north and the west. The primary focus is on the option of cooperating with Belarus and Armenia in this area. Russia is already firing real missiles at joint exercises with these countries.”

At the Military Technology Cooperation Commission meeting, Medvedev also noted that the state will support major defense sector enterprises during the crisis – especially Russian Technologies and Rosoboronexport. Defense industry support measures were announced last week by Deputy Prime Minister Sergei Ivanov.

They include special credit terms, postponing tax payments, long-term procurement for state needs, and 100% advance payment for orders. In exchange for this support, Medvedev called on the defense industry to ensure that its products are high-quality and delivered on schedule. He stressed that military exports are an important revenue channel for the federal budget – especially now that oil prices are low.

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