Armament business of Russia promises to be profitable


Preliminary results of Russia’s arms exports show that the export of armament and combat hardware in 2006 will be the largest during the post-Soviet time. Recently, Alexander Denisov, Senior Deputy Director of the Federal Service for Military Technological Cooperation, announced that it might “exceed $6 billion.”

According to Denisov, like in the past, the main supply of armament exports were provided by the federal state unitary enterprise Rosoboronexport (approximately 82%). The remaining 18% were provided by RSK MiG (more than 6%), Instrument Building Design Bureau (approximately 5%) and enterprises that had the right to independently export of spare parts and maintain combat hardware operated abroad (5-6%).

Denisov said that Machine Building Design Bureau in Kolomna (Moscow Region) and Research and Production Association of Machine Building in Reutov (Moscow Region) also produced well, but that they exported a much smaller amount than other arms exporters.

Meanwhile, this fact evidently served as the reason for Russian authorities to again put an end to multiple suppliers of armament exports, with President Vladimir Putin recently signing a decree “on some issues concerning Russian military technological cooperation with foreign countries.”

As of the signing of the decree, Rosoboronexport will be the only company in Russia that has the right to conduct foreign trade of any military products.

Other companies that had such right before the publication of the decree will be allowed to fulfill existing contractual obligations.

Businesses that develop and produce military products and that have formerly received a limited right to engage in foreign trade activities (supplying spare parts, performing of services of some kind, etc) will retain their right for the remaining original term. Their rights may be renewed in the future by a resolution of the Russian President.

Many experts believe that the decision to grant monopoly rights to Rosoboronexport for the exportation of Russian armament and combat hardware will contribute to the growth of Russian weapon exports. According to unofficial information, in 2006 Rosoboronexport earned a record sum of $5.3 billion from armament and combat hardware exports. Along with this, experts point out that in the last few years Rosoboronexport has demonstrated a vigorous increase in the volume of exports. In 2003, the company exceeded the $5-billion level for the first time having earned $5.075 billion. In 2004, exports reached $5.120 billion and in 2005 they amounted to $5.226 billion.

Despite the negative impact of competitors and US sanctions, the company strengthened positions in many segments of the global market. For example, new contracts with Venezuela to supply aircraft and light small arms was a breakthrough of Russian military products into Latin America.

At present, the company cooperates with more than 60 countries and has representative offices in 44 countries and 26 regions of Russia. In foreign markets Rosoboronexport promotes the products of 700 Russian military industrial complex companies and organizations. The company’s order portfolio is estimated at $21 billion.

According to the Federal Service for Military Technological Cooperation, naval armament accounted for 45.2% of arms export and aircraft accounted for 38.3% of it in 2006.

Russian military products are exported to 72 countries of which India and China account for 70%. Other large importers of Russian arms are Algeria, Venezuela, Malaysia, Vietnam and Indonesia. Russia is actively cooperating with member states of the Collective Security Treaty Organization (Armenia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan) by selling weapons to them at discounted prices.