In Full Swing

The Russian armaments continue to enjoy the high demand on the global market. In 2009 Russia managed to increase its defense export, but also made significant deliveries to the national armed forces. The export revenues and generous financial support from the government allowed the Russian defense industry to overcome the consequences of the financial crisis, but further growth will require the expansion of production capacities.
In February the Russian government reported that in 2009 the defense export sales reached $8.6 billion. The last year sales showed a slight growth compared to $8.35 billion in 2008, but they have increased tremendously since 2001 when Russia managed to export weapons only at $3.7 billion.
As the arms export is a state monopoly in Russia, the most of the sales were made through the government-controlled Rosoboronexport arms trading agency while the rest is exported directly by government-owned manufacturing companies. According to Rosoboronexport’s head Anatoly Isaikin, in 2009 the agency exported weapons at $7.4 billion that is a 10% higher that in previous year. He expressed his hope that in 2010 the agency’s defense sales will continue to grow due to high order portfolio. In 2009 Rosoboronexport gained new orders worth $15 billion while its total order book is estimated at $34 billion.
According to Isaikin, India continue to be the major client for the Russian defense manufacturers. He didn’t specified India’s share for the last year, but in 2008 this importer accounted for 25% of Russia’s defense export deliveries. The former leading importer – China has reduced its share in total deliveries up to 18%, but in the future it can fall up to 15%, said Isaikin. Among other top importers of the Russian weapons he mentioned Algeria, Venezuela, Malaysia and Syria.
Russian combat aircraft and airborne weapons continue to meet the highest demand from the foreign customers. Their share in Rosoboronexport’s total sales in 2009 amounted to 50%. The agency reported that the share of land armaments was 19% while air defense weapons and naval defense products took 13% each. The other defense products accounted for about 4% of the total export.
The heavy fighters of Su-30 family are still the major export product. According to the president of the United Aircraft Corporation Alexey Fyodorov, in 2009 more than 30 such fighters were delivered to foreign clients what is on the level of the previous year. The Indian Air Force received four Su-30MKI fighter and 12 production kits to be assembled locally in India at HAL facilities. Besides, Irkut Corporation has completed the deliveries of Su-30 fighters to Algeria and Malaysia. In 2009 Algeria received the last 8 Su-30MKAs out of 28 aircraft ordered in 2006 while Malaysia has got the last 6 Su-30MKM fighters closing the order for 18 such aircraft. Sukhoi also handed over one Su-27SKM fighter to the Indonesian Air Force.
MiG jet maker showed more modest results, but the company started the deliveries of the MiG-29K ship-based fighters after the completion of the flight trials. In 2009 the Indian Navy received the first 6 aircraft out of 16 ordered. These fighters will be deployed on ex-Russian Vikramiditya aircraft carrier that is expected to be handed over to India after a deep modernization in 2012.
Along with the record deliveries, the Russian aircraft manufacturers managed to get a number of new orders in 2009. MiG added to its order book 20 MiG-29 fighter ordered by Myanmar for $650 million while Sukhoi signed a contract for delivery of 8 Su-30 fighters to Vietnam valued at $320 million. Although China has stopped the procurement of Russian fighter, it continued to order engines for domestically designed aircraft. In 2009 China reportedly purchased about 220 Russian engines for its J-10 and FC-1 fighters as well as for H-6 bombers with the total value of up to $900 million.
According to the head of Federal Service for Military Technical Cooperation Mikhail Dmitriev, the current backlog of the defense orders worth $34 billion will allow Russia to keep the defense export at the annual level of $9-10 billion for the next few years.
Beside the export revenues the Russian defense industry enjoyed serious financial support from the government. As the Minister of Industry and Trade Viktor Khristenko explained in February, trying to minimize the influence of the financial crisis upon the defense sector, in 2009 the government allocated more than 60 billion rubles ($2 billion) as direct investments in the manufacturing companies. Additional 6 billion rubles were spent as subsidies for bank loans for the defense enterprises. According to Khristenko, these measures allowed the defense industry to increase production volumes by 10% in 2009.
But the Russian defense sector had another serious source of revenues as the national Armed Forces kept increasing their procurement expenditures. The defense procurement budget approved for 2009 amounted to 1.3 trillion rubles. As for the Air Force, last year the service switched from the repair of the existing fleet to the serious purchase program for the first time for the last decade. According to Alexey Fyodorov, in 2009 the Russian Air Force received from UAC 31 MiG-29SMT fighters. These are the aircraft previously ordered by Algeria, but later refused by the customer. The last three MiG-29s from the rejected batch will be supplied to the Russian military in the first quarter of 2010, said Fyodorov. He also mentioned the deliveries of two Sukhoi Su-34 fighter-bombers and three new Yak130 jet trainers. Beside the newly assembled aircraft the Air Force also received 8 modernized Su-27Sm fighters in 2009.
Moreover, in 2009 the Air Force signed new contracts for delivery of 64 aircraft in 2010-2015, including 12 single-seat Su-27SM and 4 Su-30M2 double-seat fighters and 48 new Su-35 multirole combat jets. These contracts were supplemented by large order of air-launched weapons for Su-35 and MiG-31BM aircraft.
According to the government officials, because of the large orders both foreign and domestic, some Russian defense manufacturers, especially in aircraft and air defense sectors, have the production capacities fully loaded until 2016-2017. Predicting the continued growth in demand for Russian weapons in the nearest future the government already discusses the possibility to extend the production capacities of the national defense industry.