CONTENTS

War And People #1(5), 2006 Political Dimensions of the Crisis in Iran 2 PUBLISHER Centre for Industrial Policy Analysis of Strategies and Evolution of ’s Defense Industry in 2005 4 Technolog ies Consolidation and Restructuring of the Russian CAST Director & Publisher Sector during 2005 8 Ruslan Pukhov Chief Editor Arms Trade Evgeny Belyakov Russia on Iran’s Market for Arms 12 Advisory Editor Konstantin Makienko Russia’s Arms Trade Cooperation with Foreign States in 2005 16 Researcher Ruslan Aliev Facts & Figures Researcher Alexey Pokolyavin Russian Defense Colleges 21 Researcher Major Identified Contracts for Delivery of Russian Arms Dmitry Vasiliev Signed in 2005 26 Editorial Office Major Identified Transfers of Russian Arms Signed in 2005 28 Leninsky prospect str., 45, suite 480 , Russia 119334 Dynamics of Russian State Defense Procurement (Russian and phone: +7 495 135 1378 Foreign estimates ) 30 fax: +7 495 775 0418 http://www.mdb.cast.ru/ To subscribe contact Our Authors 32 phone: +7 495 135 1378 or e-mail: [email protected] Moscow Defense Brief is published by the Centre for Analysis of Strategies and Technologies All rights reserved. No part of this publication may be reproduced in any form or by any means, electronic, mechanical or photocopying, recording or other wise, without reference to Moscow Defense Brief. Please note that, while the Publisher has taken all reasonable care in the compilation of this publication, the Publisher cannot accept responsibility for any errors or omissions in this publication or for any loss arising therefrom. Authors’ opinions do not necessary reflect those of the Publisher or Editor Computer design & pre-press: ZEBRA-GROUP www.zebra-group.ru The editorial team would like to thank Simon Saradzhyan, News Editor, The Moscow Times, for his insightful guidance and generous advice The editorial team would like to thank Gannon Bond, from the Law Faculty of Moscow State University, for his contributions in editing and translating © Centre for Analysis of Strategies and Technologies, 2006 # 1, 2006 Moscow Defense Brief 1 Printed in Russia War And People

Political Dimensions of the Crisis in Iran

Ivan Safranchuk n order to understand the present crisis, one has to go The EU-3 offered a deal: if Tehran renounced uranium Iback a few years, to the discovery in 2002 of Iran’s enrichment, the EU would broaden economic cooperation. undeclared nuclear activities. As a non-nuclear State Party Why did the Troika demand precisely the renunciation of to the Treaty on the Non-Proliferation of Nuclear Weapons enrichment? Their logic is as follows: if Iran had indeed (NPT), Iran is obliged to declare its nuclear activities to the conducted a secret programme for the enrichment of International Atomic Energy Agency (IAEA). However, uranium, the extent of its nuclear capabilities was during the course of regular inspections, the nuclear impossible to determine, and so all work on the enrichment watchdog detected two undeclared nuclear installations. of uranium must be halted before the actual scale of this Moreover, the IAEA took routine air and soil samples that effort was revealed. The paradox of this situation was that were found to contain traces of low and highly enriched around the same time (in early 2004) Bush proposed the uranium. Such traces were not expected, and the IAEA introduction of another obligation for the non-nuclear NPT demanded an explanation of these facts which, taken states: they should not enrich uranium at all, but receive together, suggested that Iran was involved in the undeclared reactor fuel from an international consortium set-up enrichment of uranium. especially for this purpose. In the autumn of 2002, the international community Naturally, it soon became clear that there was no chance was fixated on US preparations for the Iraq war, an of introducing any such amendments to the NPT, and so the endeavour for which the Americans required, at the very proposal was made outside of the Treaty framework with least, Iran’s neutrality. Meanwhile, the EU wanted to respect to two countries that stood on the threshold of showcase its role as an independent player in global politics, achieving full nuclear cycles: Brazil and Iran. For Brazil the and so the European “powers” (France and Germany) question was less politicised. However, keen to demonstrate assumed a critical pose against the aggressive actions of the how it could solve the world’s most complex problems in a Bush administration. The preoccupation with Iraq during non-violent manner, the Euro-Troika started negotiations the first half of 2003 thus afforded Iran some breathing with Iran on the basis of this American idea. Washington space, while Washington and the European “opposition” came quickly to appreciate the upside of this situation and formulated their tactics. France and Germany began to call lent its support to the Euro-Troika. The task of the “bad cop” for a “reasonable compromise” on the Iranian question as consisted of creating a state of affairs in which Iran would distinct from the aggressive approach of the US in Iraq. The have no way out, except by concluding an agreement with Bush administration, busy with the war and dogged by the Euro-Troika. international criticism, gave the Europeans its blessing, and These negotiations continued through 2004. Iran did so the UK joined with France and Germany as a “European not want to renounce enrichment altogether, but it did agree Troika” (EU-3) to begin negotiations with Iran. to a moratorium. In October 2004 the Iran-EU agreement In September 2003, the IAEA presented Iran with a was signed. It stated that the moratorium was a temporary de-facto ultimatum: to sign an additional protocol on measure and, moreover, that it was a “confidence building” inspections and remove all suspicion of a secret nuclear measure on the part of Iran that did not prejudice any future programme by the end of October, or be brought before the decision to resume enrichment. After signing the UNSC and face the prospect of sanctions. This was probably agreement, Iran and the EU showed contradictory a bluff, but the aggressive stance of the IAEA allowed the understandings about the document. Iran stressed the EU-3 to emerge as a kind of “good cop”. Iran agreed to talks temporary nature of the suspension and that it was a with the Euro-Troika, began to cooperate with the IAEA goodwill measure, i.e., temporary and non-binding. But the investigation of undeclared nuclear activities and signed EU announced that the moratorium was the first step in the the protocol on additional inspections. In the second half full renunciation of the enrichment of uranium, whereas of 2003, Iran had good reason to cozy up to the “good cop”: Iran had clearly intended nothing of the kind. the Iraqi army had disintegrated and the triumphant US For the whole of 2005 this clash of interpretations hawks were thinking out loud about “finishing the job” and lurked in the shadows as Iran prepared for elections. The going after Syria, Iran, and the other “bad guys” in the EU hoped for a victory by Rafsanjani, President of Iran from region. Tehran feared a war against Iran launched from 1989-1997. He was expected to revive the grand strategy of Iraqi territory. broadening cooperation with the EU, help bring about the

2 # 1, 2006 Moscow Defense Brief Political Dimensions of the Crisis in Iran War And People

long-awaited triumph of European diplomacy and show the a half years? Two years were spent on talks to stop uranium world there was indeed an alternative to the “Iraq scenario” enrichment, while other questions were treated as second of George Bush. And for the sake of this expected triumph order issues. Indeed, why bother to monitor and control the the EU defended Iran from US criticism. The IAEA uranium enrichment programme if it might soon be banned emphasized that its work in Iran was ongoing and that altogether. However, by not focusing on its basic task, namely, progress was being made. to prevent the proliferation of nuclear activities, the IAEA However, in the summer of 2005 the elections produced became mired with issues outside of its mandate, but which a very different victor: Mahmud Ahmadinejad, who asserted nurtured the vain hope that it could resolve all these very quickly that the Islamic Republic would not renounce problems at a stroke. Iran had no such hopes, and tried as uranium enrichment. EU diplomats opined that well as it could to dispel them. But the EU and international Ahmadinejad was young and inexperienced and would soon bureaucrats from the IAEA could not be dissuaded. come to grips with reality: in September 2005 Iran would face So what preliminary conclusions can we draw from once again the prospect of sanctions. The “Iranian dossier” this story? was before the IAEA Board of Governors and Iran had just 1) The IAEA did not conduct its affairs within the one last chance. But Ahmadinejad, whether he understood framework of those procedures and powers that it posesses. nothing or understood everything, clearly decided that he The international community is unable to support the would not be playing by the old set of rules. The Iranian nuclear weapons non-proliferation regime. If the North President’s rhetoric became much more extreme, and not Korean situation seemed like a worrisome malfunction, then only where nuclear issues are concerned. Iran proves that the nuclear weapons non-proliferation The next session of the IAEA Board of Governors was regime simply does not work; due to take place in November 2005, and at this point the EU 2) On the world stage the EU has no strategy other than finally discarded its illusions: the Euro-Troika spoke in to play on its contrast with the US. (The EU role in the favour of transfering the Iranian question to the UN Security European space of the former Soviet Union is somewhat Council. However, for a variety of reasons, Condoleeza Rice more solid, but even there it is essentially a foil to the US). was not yet ready to deal with Iran at the SC. At first glance The Bush administration deserves credit: inspite of the this appeared quite odd. The US, which had for so long, so avalanche of critique it got from the Europeans in 2003, cleverly and so sincerely played the role of the “bad cop,” was Washington stayed on track, left the transatlantic door open now asking the “good cop” to go on with its work. The EU and eventually the prodigal European sons returned home. agreed with some difficulty, because by this point it was clear (Whether for long or just for a rest, only time will tell). In any that there would be no triumph of Euro-diplomacy. case, the EU should understand that its drive for Russia also played along, proposing to enrich Iranian independence in international affairs will from now on be uranium on Russian territory. In the autumn of 2005 both greeted with skepticism. If the word of the EU had previously the US and the EU suddenly began to underscore the role that been accepted at face value, both China and Russia will now Russia could play in the talks with Iran. Suddenly, everyone seek more extensive guarantees; supported the Russian proposal, even before knowing the 3) The Bush administration has been fully vindicated details. Russia was thus pushed to the foreground of for the invasion of Iraq. Those who opposed the war to negotiations with Iran. The EU, hoping to get out of this demonstrate their independence now find themselves hopeless game, was only too happy for a replacement. Russia, returning to the American position. After two years of having long complained that it had been excluded from the dipomatic dithering (supported in fact by the US), all now international negotiations, was all too eager to play, and was agree that they cannot “do business” with Iran; saved only because Iran rejected its proposals out of hand 4) With the transfer of the Iranian question to the UNSC, (though this year Iran would reconsider this option). the US can now convene its “war cabinet.” Bush has given Rice And so the EU was forced to go on. The EU-3 held one and the State Department a monopoly on foreign policy, more pointless meeting with Iran in January 2006, and then since Bolton was sent to the UN, and Rumsfeld and Cheney saw its chance to get out of the game: the Iranian delegation no longer meddle in the Secretary of State’s business. Rice failed to attend the next scheduled meeting in Vienna and thus far has had little reason to act, but she does now. As the Ahmadinejad launched on a series of extraordinary US ambassador to the UN, Bolton will take over statements that gave the Europeans excellent grounds for not responsibility for the Iran question, and he will make good dealing with him any further. use of the National Security Council, the Pentagon, and Thus the Iranian secret uranium enrichment Cheney’s staff. What course of action will the “war cabinet” programme was uncovered in September 2002, and by early take? There is only one proposal on the table. And who will 2006 the IAEA still does not have a full idea of the dimensions oppose it? Those who wanted to talk with Iran have tried and of this programme. What have they done for the past two and have given up, i.e. the EU and Russia.

# 1, 2006 Moscow Defense Brief 3 Political Dimensions of the Crisis in Iran Industrial Policy

Evolution of Russia’s Defense Industry in 2005

Konstantin Makienko

n 2005, the Russian government ramped up its efforts to shipbuilding. In the aviation industry the state declared its Iintegrate the defense industry. The attempt to create a plans to create the Unified Aircraft Corporation (OAK) by Unified Aircraft Corporation was the most important means of a horizontal integration of the sector with the aim instance of this policy, and plans for the integration of the of optimizing production lines and minimizing losses. A shipbuilding industry are also underway. While the dialogue between the state and industry and within the effectiveness of these reforms remains subject to criticism, industry itself was launched within the framework of the the close attention paid by political leaders and bureaucrats non-commercial Associated Aircraft Construction to the defense industry is unprecedented for the post-Soviet Consortium. At the same time, the procedures involved in era. The state has taken the first steps towards financing the creation of the OAK were drawn out and the plan has not large-scale projects in the aviation industry, and policy in yet been approved. the sphere of integration has become less improvised than The consolidation of the construction before and reflects careful planning. industry also made considerable headway in 2005, with a Parallel to the state’s efforts, a natural process of leading role played by -controlled restructuring has been initiated from below, a trend that . Acting quietly and effectively, without any Nezavisimoe Voennoe Obozrenie journalist Sergey Sokut back government strategy document or pompous meeting of the in 1999 described as “spontaneous.” Aviation companies are State Council, Oboronprom overcame the silent opposition in front of this trend, and over the course of the year they of regional governors and factory managers to consolidate formed a kind of informal alliance centered on the Irkut a significant part of the nation’s helicopter assets. It acquired Corporation. 31% of Mil, 29.9% of the Kazan helicopter plant, 63% of Ulan- The investment by EADS in Irkut, the invitation to Ude aviation plant, 60% of the Stupino Machine Production participate in the A-350 long-haul aircraft program, and Plant and 50.5% of Vpered Moscow machine-building plant, Russia’s prospective full-scale participation with Airbus has and is looking to consolidate a controlling share of given a clear, European vector to Russia’s international . Moreover, towards the end of the year it became cooperation. Sukhoi offers an example of another form of clear that AFK had agreed to sell Oboronprom 100% cooperation with the internationalization of its Russian of the shares of -Holding, which includes the Kamov Regional Jet (RRJ) project. Sukhoi was in negotiations with design bureau and the Kumertau aircraft building plant and Alenia Aeronautica throughout 2005, and it is expected that Arsenev plant. All of these firms are expected to be united the board of directors of the Italian firm will vote to join the under a management company called Russian , project sometime in the first quarter of 2006. The Indian with a possible IPO on the Russian market. company HAL has also voiced an interest in this project, As for shipbuilding, the Federal Agency on Industry according to some reports. proposes two state-controlled management companies: the The chief characteristics of the defence-industrial Center for Subsurface Shipbuilding and the Center for complex remain its orientation towards export and Surface Shipbuilding. The high concentration of private escalating attempts to diversify into civilian production. ownership in surface shipbuilding will make the creation The main problems include the continuing low quality of of the latter canter an onerous task, involving drawn out the state’s management of the sector, an insufficient negotiations between the state and private sector. allocation of resources and the exhaustion of a significant A spontaneous process of industry consolidation was part of the technological base and potential for innovation also evident in 2005. Integration on the basis of personal ties, inherited from the USSR. which began with the top management of MiG and Irkut, has filtered down to all levels. These two corporations are now represented by a single team at exhibitions and Consolidation conduct coordinated marketing abroad, which allows for the simultaneous marketing of similar products to The processes of consolidation spread through 2005 different areas of the world (such as the Yak-130 and the to affect aircraft and helicopter construction and MiG-AT trainers), or the offering of complementary 4 # 1, 2006 Moscow Defense Brief Evolution of Russia’s Defense Industry in 2005 Industrial Policy

products to a single market (such as heavy and light fighters The engine-building sector is perhaps the most stagnant, as to North Africa). the integrating processes initiated by Saturn have quieted Against the backdrop of integration between MiG and down, and a clear leader for further consolidation has not Irkut, a new board of directors for Sokol was announced in yet come forth. Saturn and Salut, possessing clear strategies June and fully five of the eleven members are for their respective corporate, technological and product representatives of MiG and Irkut. Rumours that Irkut development, could both aspire to this role. Saturn management was preparing to purchase Sokol shares continued to move closer to the Ufa machine-building began to circulate. The ties between Irkut and Ilyushin will association, and was awarded two large contracts worth inexorably become stronger as the two firms cooperate $550 mln for the development of the AL-55I engine for with India on the mid-sized MTA transport aircraft. and the production of 240 D-30KP-2 engines for China. On Meanwhile, at the MAKS-2005 air show, Tupolev announced the other hand, Salut is mobilizing its contacts with the that it was joining with lead contractor Yakovlev, owned by Baranov motor-building plant in Omsk, and signed an Irkut, in a project to create the MS-21 mid-sized passenger agreement to deliver AL-31FN and AL-31F engines to China jet. In this manner, a kind of informal alliance of former for a total price of $1 bln. Soviet design bureaus, together with affiliated production facilities, has formed around the axis of Irkut-MiG. At the same time, Sukhoi has preserved and Financing strengthened its status as a strong, autonomous player which, having the best Russian design bureau among its More than any previous year, 2005 saw a positive assets and moving forward with the RRJ project, is quite self- tendency in the development of financing for the defence sufficient and can in principle ignore the above- and aviation industries. After fifteen years of just barely mentioned, “spontaneous” processes of integration. Thus, surviving on the proceeds of exports, the industry started to until such time as the United Aircraft Corporation is receive substantial, if still insufficient, funding from the formed, if it ever does happen, a bi-polar structure to the federal budget. This is due first of all to the healthy financial aviation industry will be preserved. situation of Russia as a whole, but two other factors also The most important development in the surface deserve mention. First, the management of certain shipbuilding industry was the concentration in the hands companies began to demonstrate levels of competence, of United Industrial Corporation (OPK) of the two largest strategic vision and a sense of public interest to such a degree in St. Petersburg, the Baltiysky Zavod that even the most conservative and careful state structures and the Severnaya Verf shipyard. This deal finally brought now feel secure in allotting them budgetary funds. Secondly, to an end the long-lasting and destructive conflict over who the bureaucracy itself began to turn towards the machine- would lead structural reform in the non-strategic sub- building and high-technology sectors of industry. Now, the sector of the shipbuilding industry. Ministry for Economic Development and Trade (MERT) and That said, there is still one strong player at the market the Ministry of Industry and Energy (Minpromenergo) are with strong potential: the Kaliningrad-based Yantar providing even more financing to the defence industry than shipyard and the Interregional Investment Bank (MIB), the Defence Ministry itself. which controls it through the Concern of the Middle and Despite nominal growth, state defence procurement is Small Tonnage Shipbuilding (KSMK). The bank has two still too small to promote the development of the industry. strong points. First, it counts in its inventory two escort- Part of the increased spending is clawed back by inflation, class ships that could be offered for export at a reasonable and the rest dissolves in an excessive number of research price. And second, it has strong lobbying power based on and development projects with no clear outcome or its long-standing relations with Rosoboronexport. The products for serial production. To the extent that the leading Russian Navy has signalled that it may not encourage the defence-industrial companies with strategically-minded concentration of all defence orders to the Northern management are diversifying into civilian production, the Shipyard and may give some contracts for the construction financing of these corporations is focused on their civilian of new corvettes and frigates to plants falling under the lines. Thus, a state contract of 7.9 bln roubles was signed KSMK. Most recently, a tender to construct the second during the MAKS-2005 air show for the research and batch of Project 11356 frigates for India was awarded to development of the RRJ. Moreover, a pool of state banks Yantar. If this works out, then KSMK and Yantar would offered credits for this project under sovereign guarantees. compete at the same level as OPK and the Petersburg The state will also finance the development of the MS-21 shipyards. short-to-mid range aircraft. The past year has thus turned out to be remarkably The financing of military Research and Development productive for the restructuring of the defence industry. (R&D) has also improved somewhat. Over the course of the

# 1, 2006 Moscow Defense Brief 5 Evolution of Russia’s Defense Industry in 2005 Industrial Policy

Table 1. Factors Initiating the Consolidation of the Defence Industry in 2005

Actor Personality Sector Company Object of Consolidation Dynamics State Viktor Khristenko, Aircraft construction Unified Aircraft Sukhoi, Irkut, MiG, Stagnation (Minpromenergo, Boris Aleshin, Corporation Tupolev, Ilyushin, BASO, MERT) German Gref Aviastar, KAPO Rosoboronexport Helicopter Mil and Kamov plants and Expansion construction Corporation design bureaus Mezhprombank Sergey Pugachev, Surface Shipbuilding Unified Industrial Baltiysky Zavod shipyard, Expansion Aleksandr Gnusarev Corporation (OPK) Severnaya Verf shipyard NRK/Ilyushin Aleksandr Lebedev, Aircraft construction VASO-Ilyushin VASO, Aviastar-SP Marginalization Finance Aleksandr Rubtsov Finance, attempt to create ENAK Interregional Igor Krugliakov, Surface Shipbuilding Concern of Medium Yantar, Vympel and Amur Mobilization Investment bank Mikhail Heifitz and Small Tonnage shipyards (MIB) Shipbuilding Vneshtorgbank Andrey Kostikov, Engine building Perm engine building Stagnation Igor Zavialov cluster

year, news that Saturn had made progress on an interim- The stances of the Air Force and Navy are also strikingly generation engine known as “work piece 117C” emerged. different in terms of Russia’s need to achieve military- Moreover, the first indications of the new “Irbis” radar technical independence from a hostile and unpredictable appeared in the press. These two systems are key to the Ukraine. Thus, the Navy has ensured that Saturn is engaged creation of a thoroughly modernized version of the Su-35, in a program to produce an array of gas-turbine units that which will be Russia’s main export offering until the belong to Russia and which meet the demands of all basic appearance of a fifth-generation fighter. In addition, there classes of ships, from the corvette to next-generation have been veiled signals that the financing of R&D for the . And yet the Air Force (which is now also fifth-generation fighter has radically improved. The responsible for army aviation) appears indifferent to the sudden interest displayed by MiG in advancing its product absence of any helicopter engine production capacity in for the 20-ton class craft is one such sign. Russia. This is first of all a political issue that must be decided, However, the situation regarding the purchase of new since the required financing (in the order of $80-150 mln) aviation remains completely unsatisfactory. The Air Force can easily be raised by interested firms themselves or is not placing any orders for the construction of new aircraft through credit. and is limiting itself to the extremely humble modernization of its Sukhoi craft to the Su-27SM version. What’s more, it is not even paying for this work. Product Development Against this background, the naval procurements come across in a very different light. The Navy has been able The main event of 2005 was the sudden mobilization of to secure the laying down and construction, even if rather the RRJ project, which seemed at first to most observers as slow, of two non-nuclear Project 677 submarines, three new nothing more than the personal self-promotion of Sukhoi generation corvettes, and has also decided on the layout of general director Mikhail Pogosyan. However, as the project a Project 22350 frigate. These orders not only keep at least gained political support, a pool of banks solved the financing two firms employed (the Admiralteyskie Verfi shipyard issue and, most importantly, the first orders were secured, and Severnaya Verf shipyard) but have also stimulated the including a large and politically essential order from development of new generation strike and air defence Aeroflot, the national airline. In all, Sukhoi Civilian Aircraft systems. While the work that these procurements have received 60 firm orders and options for another 20 craft. In generated for the shipbuilding industry is most welcome, principle, Aeroflot’s order put an end to the difficult issue of it bears mention that for the preservation and development competing with the An-148, an alternative, Ukrainian of high-technology industries, and for Russia’s defence regional jet, the licensed assembly of which was to have been capacity as a whole, the health of the aviation industry is of established on a small scale at the Voronezh Aircraft Plant much greater importance. (VASO). The Russian Regional Jet thus became the first

6 # 1, 2006 Moscow Defense Brief Evolution of Russia’s Defense Industry in 2005 Industrial Policy

domestic civil aviation project that followed international The determination of a layout for the Project 22350 practice by gathering orders for several dozen aircraft long next generation far sea zone escort ship was an important before the beginning of serial production. event for the shipbuilding sector. While the details have yet There is only piecemeal information on the dynamics to be disclosed, it seems that the ship will be armed with a of military programs. To all appearances, the most active 130 mm calibre A-192 gun and a Kalibr and/or Yakhont project was the full modernization of the Su-27 fighter as the missile system. There is no public information concerning Su-27BM, which will be offered for export as the Su-35. The the ship’s air defence missile system. completion of the development of the multi-role, medium- The most important event in engine-building was the class MiG-29SMT and the beginning of serial production for simultaneous progress towards the creation of a foreign orders is a clear success. The introduction of 20 such modernized version of the AL-31 made by two companies: aircraft into active duty with the Yemeni Air Force was a Saturn and Salut. strong factor contributing to the successful conclusion of Thus, the defence industry saw during 2005 the birth the new and very large contract with Algeria. of some preconditions for a real breakthrough. These It is regrettable that Russia and India were unable to latent but important factors include an improvement in begin development of the MTA mid-range transport financing, better management and the announcement of aircraft. Even if the can meet its needs on large-scale projects, including civilian projects aimed at a temporary basis with the An-12, the proposed program global markets. The principal risks are the extremely low would have a great impact in terms of generating experience level of state procurement on the part of the Defence with international projects, and also in terms of preserving Ministry and the inability of Minpromenergo to Russia’s potential for the manufacture of transport planes implement its well-thought out plans for the restructuring to compete with the Ukrainian Antonov plant. and consolidation of the defense industry.

# 1, 2006 Moscow Defense Brief 7 Evolution of Russia’s Defense Industry in 2005 Industrial Policy

Consolidation and Restructuring of the Russian Shipbuilding Sector during 2005

Konstantin Makienko

uring the past calendar year Russia has seen substantial condition not shared, for example, by the Severnaya Verf Dprogress towards the consolidation of its shipbuilding shipyard, which could in theory be left out of the picture. industry. As with the aviation sector, shipbuilding is Moreover, the Baltiysky Zavod shipyard leads the sector in affected by two parallel processes: restructuring “from the application of new technologies. For its part, the IST above” by the state and spontaneous consolidation Group had tremendous experience in the shipbuilding initiated “from below” by the non-state owners of business and benefited from personal ties between IST shipbuilding assets. Indeed, the process of “spontaneous” owner Aleksandr Nesis and the shipbuilding sector, the consolidation has engulfed surface shipbuilding, where the Baltiysky Zavod shipyard in particular, where Nesis once most important assets are in private hands. worked as a technician. On the negative side, IST had rather This culminated in the formation by International poor relations with the Navy and no privileged access to the Industrial Bank (Mezhprombank) of the United Industrial dominant political patron-client networks such as the Corporation (OPK), which after August 2005 controls two Petersburg, siloviki, or other such clan. crucial industrial assets, namely, the Baltiysky Zavod and OPK and Severnaya Verf shipyard enjoy good relations Severnaya Verf shipyards. Meanwhile, the state’s efforts with the Navy, which helped them win all tenders placed by were concentrated in the area of submarine construction, the Fleet for Project 20380 near coastal zone ships, and where it holds the majority of assets. Finally, the Russian which gives them a good chance to win the analogous State Agency for Industry (Rosprom) prepared a “Concept tender for the Project 22350 far sea zone frigate. However, for the Structural Transformation of the Shipbuilding bearing in mind the frequent lapses in state financing of Industry of the Defense-Industrial Complex of Russia.” defense contracts, the close ties between Severnaya Verf shipyard and the Navy might also be counted as a liability. Mezhprombank, which controls OPK, is thought to enjoy 1. Surface Shipbuilding: the establishment of a good relations with the siloviki crowd. In addition, the “Petersburg” industrial node Severnaya Verf shipyard has a major export contract for the $1.4 bln sale of two Project 956EM destroyers to China. At the beginning of 2005 there were three major players The and the International Investment in shipbuilding: Bank (MIB) occupy a specific niche on this competitive IST group, which controlled the Baltiysky Zavod field. In theory, MIB could bring substantial financing to shipyard; bear on Yantar shipyard projects, and the bank enjoys close Mezhprombank’s OPK, which owned Severnaya Verf ties with Rosoboronexport. Moreover, the shipyard has two shipyard; Project 11540 ships close to completion that could be sold Interregional Investment Bank (MIB) which for export. de-facto controlled the Yantar shipyard, as well as The focus of competition took place among the other assets falling under the Concern of Medium owners of St. Petersburg plants, which enjoy a high level of and Small Tonnage Shipbuilding. technological complementarity and territorial proximity Each of these players had its strong and weak points. to centers of innovation. The merging of these two Technology, for example, was the strategic advantage of the shipyards under a single owner or the creation of a joint IST group. The Baltiysky Zavod shipyard is a major machine venture would result in strong synergies in terms of the building enterprise that plays an integral role in the optimization of production lines and a reduction of assembly of the majority of the boats and ships built by its expenses. Such a consolidation could have occurred in one competitors. In this sense, the Baltiysky Zavod shipyard is of three ways. First, IST could have sold its shipyards to OPK. an essential part of any plan to restructure the industry, a Second, OPK could have sold the Severnaya Verf shipyard

8 # 1, 2006 Moscow Defense Brief Consolidation and Restructuring of the Russian Shipbuilding Sector during 2005 Industrial Policy

to IST. Third, a new joint venture could have been formed According to unofficial sources, he paid up to $170 mln with the participation of both competitors. for 88% of the Baltiysky Zavod shipyard. If this price is Over the course of the year, the aggressive competitive accurate, it would be one of the largest deals in the Russian positions previously maintained by IST and OPK began to machine-building sector. The purchase of the Baltiysky soften, a clear signal that negotiations for the sale or Zavod shipyard for such an inflated price can be explained merging of assets were underway. A visible signal of this chiefly in terms of Pugachev’s political ambitions. As the softening was the agreement of April 11 on the “joint owner of such a strategic asset, he has become more than realization of projects in the sphere of military just a businessman but a political figure of national shipbuilding,” according to which IST agreed to hold off importance. His decision could also be explained by his from competing for military tenders and to provide all privileged knowledge of the soon-to-be-signed contract necessary technological support to Severnaya Verf with India for the purchase of several Project 11356 frigates shipyard for the execution of such orders. IST sold its 18% at a cost of up to $1.6 bln, and the fact that the technological packet of Severnaya Verf shipyard shares to OPK, which put base for the construction of these ships is housed mainly at fully 72.19% of Severnaya Verf shipyard shares in the hands the Baltiysky Zavod shipyard. of OPK. The state owns 21%. Another theory points to the recent fire on the The agreement shows that IST had withdrawn from being built for China, which represented a loss of the race to lead the consolidation of the shipbuilding $50 to $70 mln, of which only half would be covered by industry. It clearly had such ambitions in 2002-2003, during insurance. This factor could have weakened the the final phase of the execution of the Indian contract for competitive position of OPK vis-a-vis IST, and thus frigates. It was precisely at that time that IST invested in motivated the purchase of the Baltiysky Zavod shipyard as refurbishing its plant, exploited its monopoly position in a sort of remedy for this weakness. several technological niches, and undertook the The status of OPK as a possible center for surface extravagant and politically risky step of refusing to supply shipbuilding was consolidated by the award of a Navy equipment that Severnaya Verf shipyard needed to fulfill tender for the construction of Russia’s next generation the Chinese destroyer contract. At that point IST had frigate – the Project 22350 distant sea zone destroyer escort. launched the creation of the Baltic Unified Shipbuilding The cost of building the main ship is estimated at $300 mln. Company, which was clearly meant to be the base for the This tender also represented an opportunity for MIB to consolidation of the industry. preserve its position as a leader in the financing of surface Finally, on August 12 IST announced the sale of its shipbuilding. 88.2% share of Baltiysky Zavod shipyard to its main At present the main business opportunities for the competitor – OPK. This sale marked the final culmination Yantar shipyard arise from its contract to build a second of the long conflict between these two largest and technically set of Project 11356 frigates for the . It is well best equipped shipyards of St. Petersburg and indeed of all known that the government’s interdepartmental Russia. The principal node for the consolidation of Russian commission recommended Yantar as the contractor for shipbuilding is now clearly the merger of the Baltiysky this project, but it is equally clear that Mezhprombank will Zavod shipyard and Severnaya Verf shipyard under the actively resist a final decision along these lines, and will in control of Mezhprombank. For OPK, the following options all likelihood launch a media and administrative war have now appeared: similar to that which played out between the Baltiysky to monopolize the construction of new generation Zavod shipyard and Severnaya Verf shipyard over the military surface ships for the Russian Navy (Project second Chinese order for destroyers. Aside from that, 10380 Corvette, Project 22350 Frigate) and for export Yantar can count on the export sale of the Yaroslav Mudry (Project 11356 Frigate, Project 20382 Corvette); and the Tuman of Project 11540 frigates. to optimize the production; to reassign part of the area occupied by Baltiysky Zavod shipyard in the center of St. Petersburg on 2. State policy on the integration of the surface Vasilievsky Island for real estate development. shipbuilding industry It seems that until the very last minute, IST was looking to purchase the Severnaya Verf shipyard from Although one might argue that Center for Surface Mezhprombank, while Sergey Pugachev was making Shipbuilding has been formed, the process of integrating counter-offers to purchase the Baltiysky Zavod shipyard. the industry has not yet finished. The government still During one of several rounds of negotiation, IST offered to controls several key assets essential to project sell at a price that was clearly inflated, an offer which development in the sector. Several design bureaus are at Pugachev unexpectedly accepted. issue: the Severnoe Project office, Nevskoe, Almaz Central # 1, 2006 Moscow Defense Brief 9 Consolidation and Restructuring of the Russian Shipbuilding Sector during 2005 Industrial Policy

Marine and the Zelenodolsk design bureaus. During the 3. The Center for Subsurface Shipbuilding first stage all of these bureaus will be united into one Design Center for Surface Shipbuilding, which will be As distinct from the situation with surface ships, incorporated as a joint-stock company with 100% state submarine shipbuilding is dominated by state ownership. ownership. The Lazurit design bureau and the Amur shipyard are the This presupposes the restructuring of the federal state only significant assets in the sector held in private hands. unitary firms (Severnoye project office, Almaz and As a result, in its efforts at integration the state is free from Zelenodolsk design bureaus as joint-stock enterprises with the burden of conducting complicated and unpredictable 100% state ownership. Plans are also afoot to transfer the negotiations with non-state actors. Five firms are expected state’s 60% share in the Nevskoye design bureau to the to be included among the assets of the Center for Center. Subsurface Shipbuilding: the Rubin central design bureau The second stage involves the creation of a Center for of marine engineering, the Malakhit central marine- Surface Shipbuilding, which would include both state and engineering design bureau, Admiralteyskie Verfi shipyard, private assets. Obviously, this will require complex the and the Zvezdochka machine building negotiations between the state and private owners to enterprises. Each of these are presently incorporated as achieve a compromise and agreement regarding the federal state unitary firms. modalities of participation by each side. According to the The Concept recognizes that none of the Concept, the state would own at least 51% of the shares of aforementioned companies is able to lead sectoral the joint-stock company. In this respect an essential point integration on its own, and thus envisages the creation of a is that the only valuable asset which the state could transfer directing agency incorporated as a joint-stock company to the joint-stock company is the Surface Ship Design called Center for Subsurface Shipbuilding with 100% state Bureau. ownership. The state unitary corporations subject to The remaining assets, including the Khabarovsk and consolidation would be converted to joint-stock Middle-Niva shipyards, the Zelenodolsk plant, the companies during the period 2006-2008; these shares controlling stake of Yantar and the state shares (20%) of would form the charter capital of the Center. Severnaya Verf shipyard are not terribly valuable. In any The Amur shipyard, which has two Project 971 nuclear case it seems obvious that the combined value of the submarines near completion on its books, is a somewhat Baltiysky Zavod and Severnaya Verf shipyards is higher glaring omission from the Concept. These submarines than what the state is bringing to the table. could be sold for export, and for a large sum of money. MIB This approach to the integration of the industry shows controls over 50% of the shares of this firm, and if the that the statist principles established by then Deputy Prime hypothetical export sale of the Project 971 submarines Minister Ilya Klebanov continue to exercise an influence, becomes a reality, MIB could reinvest the earnings to even under the much more liberal leadership of Rosprom become an important player in the consolidation of the head Boris Alyoshin. submarine shipbuilding industry.

10 # 1, 2006 Moscow Defense Brief Consolidation and Restructuring of the Russian Shipbuilding Sector during 2005 Institutional Framework of Russian Shipbuilding Industry and System of Corporate and Product Dependancies

Source: scheme by CAST Industrial Policy

Russia on Iran’s Market for Arms

Mikhail Barabanov

ussia’s long-standing history of arms trade with Iran thought that Russian companies delivered new engines and Rentered a new phase in the late 1980s with a series of spare parts, and that Russian specialists were involved in agreements for the delivery of about $5.1 bln worth of arms. the repair of the Soviet-made aircraft. In 1994 the Kazan The first agreement, signed on November 5, 1989, helicopter plant delivered 12 Mi-17, and the Ulan-Ude stipulated the delivery of 2 MiG-29 fighters and four MiG- aviation plant delivered five Mi-171 helicopters in civilian 29UB trainers, twelve SU-24MK tactical bombers and two configuration from 1999-2000 in fulfilment of a contract S-200VE Vega-E (SA-5) long-range air defence missile signed in 1998.6 systems for a total of $1.3 bln, most of which were received in 1990-1991. From 1990-1994 a set of R-27 (AA-10) and R-60MK (AA-8) air-to-air missiles were delivered for the The Gore-Chernomyrdin Memorandum MiG-29 fighters. The deal also provided for spare parts for 10 years from the date of the last delivery of equipment. The US objected to these sales from the start and A second agreement, signed on May 17, 1990, was for aggressively lobbied the new, “democratic” Russian the construction of Project 877EKM (Kilo-class) diesel- leadership on this issue from 1992 onwards. The campaign electric submarines and the delivery of related armaments was successful, and in May 1995 Bill Clinton and Boris Yeltsin and equipment. Built at the Admiralteyskie Verfi shipyard agreed on a plan whereby Russia would undertake to fulfill in St. Petersburg, the first two craft were delivered in agreements already signed with Iran by the end of 1999, at 1992-1993. Another four were planned, but it seems that due which point it would cease all deliveries and servicing and to Iran’s financial troubles in the early nineties and, perhaps, would sign no further agreements on arms trade. This pressure from the US, only one more submarine was bilateral agreement took the form of a secret but infamous delivered to Iran’s Navy in 1996. The provision of technical “memorandum” signed by Russian Prime Minister Viktor assistance for the construction of six bases for the Chernomyrdin and US Vice-President Al Gore on June 20, submarines in Bender-Abbas was the subject of a third 1995. The memorandum outlined further details regarding agreement reached on April 24, 1991. The total cost of these Russia’s obligations before the last delivery of military arms two projects reached $1.6 bln. and equipment to Iran on December 31, 1999. For its part, The fourth and the largest ($2.2 bln) contract was the US agreed to respect the confidentiality of the signed on November 13, 1991 for the licensed production agreement, to prevent the unsanctioned delivery of in Iran of 1000 T72S tanks and 1500 infantry fighting American arms from states of the Near and Middle East to vehicles, as well as ammunition and delivery of parts not Russia’s neighbours and to ramp up cooperation with licensed for production until 2011. Russia built the tank Russia in the sphere of defence technologies with the goal factory, which began production on July 8, 1997 in Dorud of opening new markets for the products of both countries.7 (Lurestan province),1 and the BMP-2 factory, which started Thus, in exchange for important and concrete work in 1998, in Tehran.2 concessions, Russia received only a vague and empty delivered 100 T-72S tanks to Iran in declaration. In pursuing this unprecedented agreement, it 1994 and another two in 1996 to fulfill an agreement signed appears that Yeltsin’s main objective was to secure US in 1993,3 and from 1996 to 1999 delivered 300 T-72S kits to support for the forthcoming Presidential elections in 1996. Dordud. The assembled tanks were first brought into By the time the memorandum was signed, Russia had service in July 1998.4 The Kurgansk machine building plant fulfilled only the first of the Iranian contracts: the one of sent 80 BMP-2 in 1993 and another two in 1996, and then November 5, 1989 for the delivery of aircraft and AD missile delivered 331 kits for licensed assembly in Tehran. Thus, systems. The other three Soviet-Iranian agreements were from 1993-2000, Iran received 422 T-72S tanks and annulled, as stipulated in the memorandum, by 2000, such 413 BMP-2 infantry fighting vehicles for a total cost of that the total sum of deliveries under all four contracts was $668 mln.5 less than $3 bln. The November 1991 contract for the There were only a few other miscellaneous projects licensed production of tanks and infantry fighting vehicles following the collapse of the USSR. For example, during the of was only 30% fulfilled: arms and equipment not sent 1991 Gulf War, 115 Iraqi military aircraft were flown to Iran, included 578 T-72S and 1087 BMP-2 kits, technical where they were at first interned and then confiscated. It is documentation relating to the license, equipment,

12 # 1, 2006 Moscow Defense Brief Russia on Iran’s Market for Arms Arms Trade

ammunition and services with a total value of over $1.5 bln.8 There was a report in early 2003 of a new contract for the The contract for the construction of submarines and docks delivery of 300 BMP-2 from Kurganmash to Iran in 2004, 11 was only about half-finished. Thus Russia’s total financial but these deliveries have not in fact occurred to the present losses resulting from the memorandum exceeded $2.2 bln, day. Thus the chapter of Russia’s arms trade cooperation while large factories like Uralvagonzavod and Kurganmash with Iran that began with the late-Soviet period were deprived of large and, by the standards of the day, agreements seems to be finished. guaranteed orders that could have kept their workers busy The signing of an agreement on Arms Trade until 2005. Cooperation between the defence ministers of Russia and The damage to Russia’s interests arising from the Iran on October 2, 2001 did not lead to the breakthrough Gore-Chernomyrdin Memorandum was clear even to that some people in Moscow wished so badly to see. For the Yeltsin’s government, which sought immediately after the past five years Iran has limited its purchases to a few 1996 elections to revise its terms. In 1997 the President inexpensive aviation products. In April 2001, Iran agreed signed off on a comprehensive plan to renew arms trade to purchase 21 Mi-171 transport helicopters from the Ulan- cooperation with Iran, which included among other things Ude aviation plant and these were delivered in full by a directive to engage the US to enlarge the framework of the January 2002.12 In late 2001 - early 2002, reports of a new Memorandum and eliminate limitations on arms trade contract worth $150 mln for the purchase of 30 Mi-171Sh cooperation with Iran.9 multi-role military transport helicopters armed with the It should be noted that the Americans soon provided 9M114 Shturm (AT-6) anti-tank guided missile were Russia with very good legal grounds to revise their published. The helicopters were to be built at the Ulan-Ude agreement, insofar as the US showed no interest whatsoever aviation plant in 2002-2003.13 However, in January 2005 a in increasing its cooperation with Russia in the area of representative of this company said that since 1998 they defence technologies or helping Russia gain market access. had delivered to Iran only 38 Mi-171, which, counting With the departure from the political scene of the Russian deliveries made under the contracts of 1998 and 2001, initiators of the Memorandum, and after its existence was allows one to conclude that only 12 Mi-171Sh were disclosed during the course of the US presidential delivered. At the same time, in 2000-2001, the Ulan-Ude campaign in 2000, Russia announced on November 3, 2000 plant began talks on a project to organize the licensed that it intended to withdraw from the agreement and assembly of Mi-171 on the bases of Iranian enterprise resume deliveries of military arms and equipment to Iran IHSRC but these negotiations ultimately failed to produce as of December 1, 2000. After some informal discussion, the an agreement.14 For its part the Kazan helicopter plant Americans agreed with this decision while calling on delivered three Mi-17V-5 with VK-2500 engines to the Russia to display restraint in its deliveries of conventional Iranian Red Crescent in March 2005.15 arms to Iran.10 One might conclude that the formula of The Ulan-Ude plant delivered three Su-25UBK “restraint” signals a more detailed modus vivendi reached ground-attack fighter-trainers to Iran in 2003, and signed between Russia and the US on this issue. a contract for the sale of three double-seat Su-25UBT ground attack fighters.16 Russia has also sent specialists to assist with the development of a few types of aviation The Current State of Arms Trade Cooperation equipment. with Iran The civilian space sector is another area that has seen some activity. In October 2005 the first Iranian remote The demise of the Gore-Chernomyrdin Memorandum earth sensing satellite Sinah-1 (ZS-1) was launched from led the Russian media and expert community to offer Plesetsk. The spacecraft was developed by the Omsk Polyot extremely optimistic scenarios for the renewal of arms design bureau and an Iranian institute of applied research sales to Iran. The figure of $7 bln in potential orders, first on a contract managed by Rosoboroneksport for $8 mln. mentioned by the current chair of the Duma defence The Russian research-production association of applied committee, was cited over and over again. Following mechanics in Zheleznogorsk, Krasnoyarsk, is working on Defence Minister Igor Sergeyev’s visit to Tehran in the Zoreh geostationary communications satellite. The December 2000, the press reported on alleged Iranian cost of this project as of January 2005 had already reached interest in aviation and air defence purchases. $132 mln and is planned for launch at Baykonur in 2007.17 However, these expectations were disappointed, and In other sectors, military sales to Iran to the end of 2005 not because of any America plotting, but by the Iranians were limited to deliveries of spare parts and ammunition, themselves. From the information currently available, it the servicing and repair of previously sold equipment, as seems that deliveries of kits for the licensed production of well as the negotiation of a few insignificant contracts that T-72S tanks and BMP-2 combat vehicles never did resume. are rarely mentioned in the press. Thus, in August 2003, the

# 1, 2006 Moscow Defense Brief 13 Russia on Iran’s Market for Arms Arms Trade

Table 1. Identified contracts for military and dual-use arms and equipment (not including civilian planes) to Iran from Russia concluded after 2000

Contents of Producer or the contract supplier Cost ($ mln) Date of contract Schedule of delivery Notes 21 Mi-171 transport Ulan-Ude aviation plant 100 April 2001 Late 2001 – Early 2002 helicopters (estimate) 12 Mi171Sh military Ulan-Ude aviation plant 60 (estimate) End of 2001 2002 – 2003 By some accounts, transport helicopters delivery of 30 helicopters was planned. Development and launch Polyot research 8 2001 Launched in October of the Sinah-1 (ZS-1), a production association, (development) 2005 small remote earth sensing Omsk + satellite 1.6 (launch) 3 Su-25UBK ground attack Ulan-Ude aviation plant 30 (estimate) 2003 2003 fighter-trainers Krasnopol 155 mm laser- Tula Instrument Design * * 2003 (?) Reports of delivery guided artillery shells Bureau denied by officials. 3 Mi-17B-5 medical Kazan helicopter plant 15 (estimate) * March 2005 For the Iranian Red helicopters Crescent. Development of the Research Production 132 January 2005 Launch planned for 2007 Zohreh, a geostationary Association of applied telecommunications mechanics, satellite Zheleznogorsk 3 Su-25UBK ground attack Ulan-Ude aviation plant * 2005 2006 Possible that what really fighter trainers is in question is the Su- 25UBT, rather than the Su-25UBK. Repair and modernization Zvezdochka shipbuilding * 2005 (?) Work in Iran on one The subs reportedly may of 3 Project 877EKM plant, Severodvinsk submarine began in 2005 be equipped with the submarines for the Iranian Club-S system. Navy 29 Tor-M1 air defence Kupol electromechanical 700 December 2005 2006 According to other missile systems plant, Izhevsk sources, 32 systems. Repair and modernization * 700 December 2005 * of MiG-29 and Su-24 fighters for the Iranian Air Force, and the delivery of an escort cutter

US announced that it was introducing sanctions against the for the other two submarines would be given to the Tula Instrument Design Bureau for providing Iran with Admiralteyskie Verfi shipyard, but no information is yet 155 mm Krasnopol-M laser-guided artillery projectiles. The available.20 Russian company denied the accusation,18 and a highly- The total value of contracts concluded with Iran from placed source from within the Russian Arms Trade 2000 to 2005 can be estimated at approximately $300-400 Cooperation Committee then said that “Russia currently mln (not counting the space contracts), and even then the has not a single contract with Iran.”19 News spread in the bulk of this sum is due to the delivery of principally dual- summer of 2005 that work to repair and modernize Iranian use helicopters. This rather stagnant scenario was suddenly Project 887EKM submarines equipped with Club-S missile interrupted on 2nd December 2005 with news of a contract systems (probably with 3M54E1 anti-ship missiles for the delivery of 29 Tor-M1 (SA-15) low-to-medium SS-N-27) would take place both in Russia and Iran. altitude air defence missile systems for about $700 mln. According to some reports, the repair of one ship has Reportedly, 19 of these systems had already been prepared already begun in Iran with the participation of the Russian for an option held but not realized by Greece, and the rest Zvezdochka shipyard. One might suppose that the contract would be built from scratch. It was also affirmed that Iran 14 # 1, 2006 Moscow Defense Brief Russia on Iran’s Market for Arms Arms Trade

had contracted for 32, not 29 air defence systems: 16 self- negotiations on deliveries of the S-300.”24 However, by early propelled (from among those destined for Greece) and 16 2006 Russian officials had repeatedly and firmly refuted towed (a modification developed to Iranian reports of any negotiations with Iran for the delivery of the specifications). Russia will also reportedly deliver a patrol S-300PMU1.25 In any case, for fear of spoiling relations with cutter to the Iranian Navy, and modernize the Iranian Su- the US, the Russian government would hardly sell such 24MK and MiG-29 fighters for a total price of approximately modern and high-altitude systems like the S-300PMU1, $1.4 bln.21 especially in view of the current crisis over Iran’s nuclear At first it was announced that the Tor-M1 systems program. And so for this reason the Iranians were offered would be delivered to Iran in 2009. However, by the end of either the short-altitude Tor-M1 or the Pechora-2A, December a Russian Defense Ministry representative said essentially the improved version of an obsolete system. that deliveries would begin in January 2006 and conclude Thus, following the collapse of the Soviet Union, within a year.22 ARMS-TASS reported that pre-contractual Russia’s arms trade cooperation with Iran has to a large discussions had also touched upon possible deliveries of degree been determined by the position of the US and the S-300PMU1 (SA-10) air defence missile systems and the undermined by inability of the “new Russia” to conduct a Nebo, Kasta, Gamma and Polyana air-defense radars. Iran truly independent foreign and defence policy. In hindsight, also reportedly showed an interest in acquiring T-90S tanks Russia’s exit from the Gore-Chernomyrdin agreement and and the Nona-K 120 mm towed gun.23 the limited renewal of defence contacts with Iran that By the middle of December 2005, citing to a source followed (always with a sideways glance to the US), is not so within the Federal Agency for Arms Trade Cooperation, the much a demonstration of independence, as the Kremlin press noted an agreement for the sale to Iran of the Pechora- was keen to emphasize at the time, but rather a graphic 2A air defence missile system, a radical modernization of demonstration of the real limits of that “independence”. the old S-125M (SA-3), adding that deliveries could begin From this point of view, Moscow’s measured and restrained as early as the second quarter of 2006. The source also approach to military sales to Iran is indeed an appropriate asserted that the Iranians “are determined to renew response to the political realities of the times.

1 “Biznes po-belorusski,” Belorusskij rynok, 23.03.1998. 2 Ibid. 3 It is possible that another three of four T-72 tanks were delivered to Iran in 1998. It is not clear whether these are counted among the 422 said to have been delivered under the 1991 contract. 4 Trofimov, A. “Voenno-tehnicheskoe sotrudnichestvo Islamskoj Respubliki Iran s zarubezhnymi stranami: politicheskie, jekonomicheskie i voennye aspekty,” [www.iimes.ru]. 5 Korotchenko, I., “Rossija i Iran vozobnovili sotrudnichestvo,” Nezavisimoe voennoe obozrenie, 12.01.2001. Data on the number of T-72S and BMP-2 kits were calculated by the author. 6 Kozyrev. M., “Vtoroe iranskoe dyhanie,” Ve dom ost i, 01.11.2001. 7 Kozjulin, V., “Rossija – Iran: chto stoit za novym startom voenno-tehnicheskogo sotrudnichestva?” Voprosy bezopasnosti. ¹5 (95), March 2001. 8 Ibid. 9 Ibid. 10 Statement by the US Ambassador to the Russian Federation D. Collins on 08.12.2000. 11 Nikol’skij, A., “Rossija vooruzhaet Iran,” Vedomosti, 12.02.2003. 12 “Respublika Burjatija: Polozhenie predprijatij VPK,” [ia.vpk.ru/vpkrus/regvpk/1_2_vl_04.htm] 13 Ibid. See also: “Kozyrev M. Vtoroe iranskoe dyhanie,” Vedomosti, 01.11.2001. 14 Kukushkin, M., “Aviaprom Irana: ‘Sdelano na Ukraine’” Vremja novostej, 21.01.2005. 15 “KVZ postavil tri Mi-17 v Iran,” Vzljot. ¹4, 2005; Kukushkin, M., “Aviaprom Irana: ‘Sdelano na Ukraine’,” Vremja novostej, 21.01.2005. 16 “Iran zakupit u Rossii tri dvuhmestnyh shturmovika Su-25UBT,”ARMS-TASS, 10.02.2006. 17 Safronov, I., Zygar’ I., “Iran Rossii bol’she ne sputnik,” Kommersant, 28.10.2005. 18 “Tul’skoe KB priborostroenija snova v centre mirovogo skandala,” [www.plus12.ru], 16.09.2003. 19 “SShA vveli sankcii protiv tul’skogo KBP” RIA Novosti, 19.09.2003. 20 “Den’gi iz glubin,” Kommersant. 21 “Rossija i Iran podpisali kontrakt na postavku rossijskih ViVT na summu bolee 1 mlrd doll,” ARMS-TASS 02.12.2005. 22 “Kontrakt s Iranom na postavku kompleksov PVO «Tor-M1» obeshhajut vypolnit’ s operezheniem grafika,” [www.lenta.ru] 27.12.2005. 23 “Rossija i Iran podpisali kontrakt na postavku rossijskih ViVT na summu bolee 1 mlrd doll,” ARMS-TASS 02.12.2005. 24 “Iran gotov vooruzhit’sja rossijskim ZRK ‘Pechora-2A,’” [grani.ru] 15.12.2005. 25 “Rossija ne provodila peregovorov s Iranom o prodazhe S-300,” Soobshhenie RIA Novosti, 13.01.2006.

# 1, 2006 Moscow Defense Brief 15 Russia on Iran’s Market for Arms Arms Trade

Russia’s Arms Trade Cooperation with Foreign States in 2005

Dmitry Vasiliev

n quantitative terms, the export of Russian arms reached front, accounting for 45% of total deliveries. Published Ia new peak in 2005 with total deliveries of $6.126 bln, figures give 38.3% to aviation, with the remainder going to 6% above the record set in 2004.1 However, to sustain such sales of air defense systems and equipment for the land levels, significant new investments in the defense industry forces. and substantial improvements in the quality of the state’s The large share of naval contracts is due to the management of the sector are essential. The system of Arms fulfillment of two agreements from recent years for the Trade Cooperation has indeed become more effective, as delivery to the Chinese Navy of eight Project 636 (Kilo- demonstrated by the increase in volumes of the deliveries class) diesel-electric submarines and two Project 956EM of spare parts, the opening of new technical centers, and (Modified Sovremenny class) destroyers. Six submarines legislative initiatives of Rosoboronexport, but efforts to and one destroyer were transferred in 2005 for a total sum address basic problems confronting the defense industry of about $2.2 bln. The final stage of this contract is expected have just begun. Despite the growth in exports, the defense to close in 2006.2 industry continues to suffer from a surplus of production Other significant naval deliveries include the transfer capacity and a shortage of financial resources, skilled to India of a third modernized Project 877EKM (Kilo-class) workers and management. submarine.3 The high cost of this job, in the range of $80 mln, is due to the equipping of the submarine with the multi-target Club-S missile complex. Refurbishing and Structure of Deliveries modernization was done at the Zvezdochka shipyard, which has now begun the modernization of a 4-th Project 877EKM By Types of Arms submarine. In addition, the Khabarovsk shipyard The structure of Russian export by types of arms transferred the first of 3 Project 12061E Murena-E (Tsaplya changed significantly in 2005. Naval deliveries came out class) air-cushion landing ships contracted in 2002.4

Diagram 1. Export of Russian Arms 2002-2005 $ mln 7000 6126 6000 5780 5400 4810 5075 5120 5200 5000 4030 4000 Total Deliveries Rosoboronexport 3000 Independent Suppliers of Components 2000

1000 120 220 366 300 0 2002 2003 2004 2005 Source: CAST; Kommersant, 10.02.2006 16 # 1, 2006 Moscow Defense Brief Russia’s Arms Trade Cooperation with Foreign States in 2005 Arms Trade

Arms and equipment transfers for the air forces were 2002, several T-80U main battle tanks, BMP-3 and BTR-80 primarily to fulfill a contract with Yemen for the delivery of armoured vehicles and the Metis-M (AT-13) anti-tank MiG-29SMT aircraft and the modernization to this version missile systems were delivered to South Korea in lieu of of the MiG-29B/UB fighters delivered earlier. In 2005, MiG payment for Russian debts.14 The Ural motor plant corporation modernized twelve and supplied six new completed its contract with Mexico for the delivery of 22 aircraft. The corporation also fulfilled its contract with Ural trucks,15 while the Army Repair Plant No. 144, together Eritrea for the modernization of two MiG-29 and with the Kurgan machine plant, probably fulfilled its MiG29SMT and dispatched 19 IL-103 piston-engine contract with Yemen for the delivery of 180 BMP-2, having trainers as per its agreement with South Korea for the dispatched the last 52 vehicles. delivery of 23 aircraft. In addition, MiG corporation In the light weapons category, Izhmash concern continued to work on the repair of the Syrian MiG-23 and probably completed the first half of its contract for the began to modernize the Slovak MiG-29 fighters.5 In total delivery of 100 000 AK-103 machine-guns to Venezuela in the export earnings of MiG corporation in 2005 reached 2005.16 The Tula instrument manufacture design bureau $306 mln, almost twice the figure for 2004. appears to have begun to dispatch the Kornet-E (AT-14) Other large deliveries of the past year include the anti-tank missile complex to Eritrea,17 and according to transfer of five kits to India for the licensed production of the announcement of the deputy head of the Federal Su-30MKI fighters. Keeping in mind that three complete Agency for Arms Trade Cooperation Aleksandr Denisov, sets were dispatched to India in 2004, we can expect that by the Tula instrument design bureau also delivered an March 2006 the will possess eight such unnamed anti-tank missile systems to Oman.18 fighters, assembled at HAL corporation factories. Deliveries of spare parts were quite successful. Total The completion of the large contract between Sokol transfers amounted to $700 mln, of which $400 mln were (together with Phazotron-NIIR) and India for the handled by Rosobornexport and another $300 mln by modernization of 125 MiG-21bis and the MiG-21-93 independent exporters.19 The aggregate result for the configuration signals another significant delivery of independent exporters of spare parts was somewhat less aviation equipment, since it appears that the last 25 aircraft than the previous year, and was led by the same two were modernized in 2005.6 Moreover, Irkut delivered companies: Sukhoi with $180 mln and Salut with $50 mln.20 another five Su-30MKI kits for licensed assembly to India, Meanwhile, in view of plans to liberalize the export of spare while Sukhoi finally fulfilled its contract with Algeria for parts and the imminent granting of export licenses to the delivery of 22 supported Su-24MK bombers, having defense industry corporation Oboronprom and the dispatched the last aircraft.7 Ilyushin aviation complex, the volume of spare parts Deliveries of helicopter equipment continued during deliveries should rise considerably: according to 2005 in fulfillment of agreements struck in recent years and Aleksandr Denisov, up to $1 bln.21 for new contracts as well. In total, 85 helicopters were produced: 50 at the Kazan helicopter plant and 35 at the By Region Ulan-Ude aviation plant. It seems that the majority of these China was the clear leader in terms of the regional aircraft were destined for export. Sixteen Mi-17 and seven destination for Russian military sales in 2005, a position Mi-35 were delivered to the Czech Republic in lieu of secured by the aforementioned transfer of Project 636 payment of Russian debt for $150 mln.8 Small batches of submarines and Project 956EM destroyers. India kept its Mi-8/17 helicopters were delivered to Vietnam, Malaysia, traditional second place with the licensed production of China, Iran, Sudan, Burkina-Faso, Venezuela, Kazakhstan Su-30MKI and the modernization of the Project 8773 ship. and Latvia.9 Projects for the repair and modernization of Yemen and Vietnam share third place with import volumes helicopter equipment were conducted with Peru, Mexico of $300 mln, thanks to the transfer of MiG-29SMT fighters and Kazakhstan. Aside from that, 10 Ka-32 helicopters were to Yemen the S-300PMU1 air defense missile system to delivered to the Republic of Korea, which now possesses 50 Vietnam. such helicopters.10 Finally, the contract for the delivery of 100 AL-31FN engines to China began to be fulfilled.11 Large-scale transfers of air-defense system were New Contracts another hallmark of 2005. Almaz-Antey transferred two S-300PMU1 air defense missile systems for $250 mln to By Types of Arms Vietnam.12 The Concern also began a project to modernize New contracts in 2005 were concluded mainly in the the Kvadrat ADM system for the armed forces of Egypt.13 area of aircraft engine deliveries. The key contract was Deliveries of land forces equipment were relatively with India for the development and licensed production insignificant. In fulfillment of an agreement dating back to of AL-55I engines for the Indian HJT-39 training aircraft

# 1, 2006 Moscow Defense Brief 17 Russia’s Arms Trade Cooperation with Foreign States in 2005 Arms Trade

and the training fighter HJT-39, for $250 mln.22 In addition, The principal helicopter contracts were concluded large contracts were concluded with China for the delivery with Venezuela, including agreements for the delivery of six of AL-31F/FN engines and related parts for a total cost of $1 Mi-17, eight Mi-35M and one Mi-26T2, for a total of $201 mln. bln.23 and for the delivery of RD-93 turbofan engines for In all, Venezuela plans on acquiring 33 helicopters, including the FC-1 fighters for $267 mln.24 The conclusion of the 20 Mi-17, 10 Mi-35 and three Mi-26T for a total of $400 mln.31 contract for AL-31 turbofan engines was probably The Indian order for the delivery of one battery of the stipulated by the need for replacements to aircraft BrahMos antiship missile for $275 mln is noteworthy among purchased through earlier contracts. naval sales,32 along with a few agreements for the repair and The largest contract for air defense systems was modernization of Project 877EKM submarines for the concluded with Iran. In 2006 the delivery of 29 Top-M1 air Indian and Algerian navies. As distinct from the Indian, the defense missile systems is envisaged for a total sum of about Algerian ship will not be equipped with the Club-S system.33 $780 mln.25 The expedited fulfillment of this contract was Among space contracts, Iran has agreed to pay $132 possible since the systems are taken from reserves mln for the production and launch of the Zohreh (Venus) prepared for an expected Greek order of Tor in 2000. communications satellite,34 while the Energomash Another contract was concluded with India of Research and Production Association signed a contract 24 Tunguska-M1 (SA-19) air defense missile systems for a with the US for the modernization of the RD-181 rocket total of $400 mln.26 India also contracted for probably 36 engine for the US Atlas V launch vehicles.35 Smerch multiple-launch rocket systems costing about $500 Work on the development of post-sale servicing mln for its land forces.27 We recall that prior deliveries networks for Russian arms and equipment continued contracted in 2002 of the Tunguska and Smerch were through 2005. Rosoboronservice (India), a Russian-Indian suspended due to a review by the government-owned service center, was established for the repair and technical installation (GOI) of its Arms Trade agreements in 2004. servicing of surface ships, submarines and costal facilities Another contract for the purchase of the Tunguska- of the Indian Navy. The service center was established by M1 was struck with Morocco for $100 mln, and according several Russian defense firms, together with to ARMS-TASS, negotiations for the purchase of this system Rosoboronexport as the leading participant.36 have reached the final stages with yet another two Rosoboronexport also opened a technical center in Mexico countries.28 Recent information suggests that one of these to service Mi helicopters. is Algeria.29 The largest contract of 2005 for the delivery of aircraft equipment was with China for 34 IL-76 military-transport Perspectives aircraft and four IL-78 flying tankers for a total of $1.2 bln, to be fulfilled over the course of six years. The aircraft will The above analysis leads to several conclusions be assembled at the Tchkalov aviation plant together with regarding the main trends in the Russian export of arms and Ilyushin and the Saturn aircraft production association equipment. (the last of which is to deliver 240 D-30KP-2 engines). The current portfolio of military orders should provide Tchkalov and Ilyushin will also service the contract with for about $4.5 bln in military sales for 2006, with the largest Jordan for the delivery of two IL-76MF military transport share going to aviation equipment (including engines) and aircraft for $100 mln.30 air-defense systems. This derives from new contracts, the majority of which will be executed in 2006, as well as from the execution of several large contracts concluded in past Table 1. Export Earnings of Independent Exporters of years, such as with Malaysia for the delivery of 18 Su-30MKM Military Armaments and Equipment in 2005; $ mln fighters, with China for the delivery of eight Favorit S- 300PMU2 (SA-100) missile systems, and with the United Arab Emirates for the delivery of 50 Pantsir-1S missile-gun Company Export Earnings air defense systems. Naval sales will take third place thanks MiG corporation 306 to the conclusion of the contract with China for the delivery Tula Instrument Design Bureau (Tula KBP) 230 of the Project 636 diesel-electric submarine and the Project 956EM destroyer. machine-building design bureau 60 As for regional distribution, China will again take first NPO Mashinostroyenia 30 place, with India close behind along with Iran and possibly Malaysia, if deadlines for the delivery of the Su-30MKM are Source: Kommersant, 10.02.2006 met. According to the latest statements of Boris Bregman,

18 # 1, 2006 Moscow Defense Brief Russia’s Arms Trade Cooperation with Foreign States in 2005 Arms Trade

first deputy general director of Sukhoi, the fulfillment of of this contract, including training for the crew, after-sales the Malaysian contract is far behind schedule.37 servicing and delivery of spare parts should exceed $1.5 bln. Judging from open sources, several contracts will be And if, as expected, the Yantar shipyard is chosen as the lead concluded in 2006 with countries in South-East Asia. A contractor, this project will have a profound effect on the contract with Thailand for the delivery of 12 Su-30MKI and structure of the Russian shipbuilding industry.39 several Mi-171 helicopters is almost ready to be signed. The large packet of contracts signed during Putin’s Negotiations with Vietnam for the delivery of an additional visit to Algeria in March 2006 for the delivery of batch of Mi-171 helicopters and with Indonesia for the 36 MiG-29SMT fighters, 28 Su-30MKA, eight S-300PMU1 air purchase of another 12 Su-27/30 fighters are ongoing. In defense missile systems and about 200 T-90S main battle addition, the Almaz-Antey air defense concern expects to tanks, make Algeria’s share of the portfolio for 2006 sign a contract with Vietnam for another delivery of the comparable to that of China and India.40 S-300PMU1 missile system, while the Zelenodolsk shipyard Finally, we note that India remains as before the sole plans to deliver to Hanoi two Project 11661 Gephard escort driver of scientific-technical development of Russia’s ships.38 Should the above-mentioned contracts be signed, military-industrial complex, and one of two countries, their total value will exceed $1.5 bln. along with France, which is currently or planning to In addition, a new order for the next in line of the three conduct joint high-tech projects on the basis of risk sharing Project 11356 frigates can be expected from India. The cost with Russian firms.

1 Safronov, I., Gritskova, A., “Oruzhie massovogo potreblenia,” Kommersant, 10.02.20006. 2 Gritskova, A., Lantratov, K., Barabanov, M., “Rossia otstraivaet kitaiskiy flot,” Kommersant, 22.12.2005. 3 “Predstaviteli VMS Indii priniali v Severodvinske modernizirovannuyu podlodku,” Xinhua, 18.10.2005. 4 “Rossia rasplachivaetsia s Yuzhnoy Koreey voennymi korabliami,” Rossiyskiy sudostroitel’niy portal, 09.11.2005. 5 “MiG ozvuchil plany,” Kommersant, 21.11.2005. 6 “OAO NAZ Sokol provelo godovoe obshchee sobranie aktsionerov,” AviaPort.Ru, 05.06.2005. 7 Public information released by the company. 8 “Ulan-Udenskie vertoletostroiteli zavershayut postavku partii vertoletov v Cheshkuyu Respubliku,” ITAR-TASS, 20.11.2005; “Rosvertol otprovil v Chekhiyu tri poslednikh vertoleta Mi-35 iz partii v 10 mashin etogo tipa,” ARMS- TASS, 24.01.2006. 9 “Fakty i tsiffry,” Eksport vooruzheniy, No. 3-6, 2005. 10 “V Yuzhnuju Koreju postavlen 50-y vertolet Ka-32,” Interfax-AVN, 19.12.2005. 11 Pervaya partia dvigateley AL-31 FN dlia VVS Kitaia postavlena zakazchiku,” ITAR-TASS, 20.10.2005. 12 Kontsern PVO “Almaz-Antey” zavershil vypolnenie kontrakta na postavku vo Vietnam zenitniky raketniky sistem S- 300PMU1,” Interfax-AVN, 07.12.2005. 13 Rossia moderniziruet zenitnye raketnye kompleksy “Kvadrat” Vooruzhennykh sil Egipta,” ITAR-TASS, 09.12.2005. 14 Sanzhiev, A., “Voenno-tekhnicheskoe sotrudnichestvo Rossii i Respubliki Koreia,” Eksport vooruzheniy, ¹3, 2005, p. 4. 15 “Ural v Meksike idet na ura,” Gudok, 06.09.2005. 16 “Kontrakt na postavku Venesuele sta tysiach rossiyskiky avtomatov podpisan v Karakase,” ITAR-TASS, 17.05.2005. 17 Gankin, L., Lantratov, K., “Vsev sestram po stvolam,” Kommersant, 15.04.2005. 18 Khazbiev, A., “Interviu s pervym zamestitelem FS VTS Aleksandrom Denisovym,” Ekspert, 05.12.2005. 19 Kedrov, I., “Izyskanie vnutrennih rezervov,” Voenno-promyshlennyj kur’er, 07.12.2005. 20 “Ob’’em eksportnyh postavok rossijskoj PVN v 2005 g. sostavil 6 mlrd doll,” Voenno-promyshlennyj kur’er – lenta novostej, 19.01.2006. 21 Kedrov, I., “Izyskanie vnutrennih rezervov,” Voenno-promyshlennyj kur’er, 07.12.2005. 22 Nikol’skij, A., “Rossija zarabotaet na motorah,” Vedomosti, 17.08.2005. 23 Lantratov, K., “Kitaj skupaet rossijskie aviadvigateli optom,” Kommersant, 16.12.2005; Lantratov, K., “Rossijskie motory uhodjat v kitajskoe podnebes’e,” Kommersant, 11.07.2005. 24 Lantratov, K., Grickova, A., “Motor bez prava peredachi,” Kommersant, 19.04.2005. 25 Nikol’skij, A., Kashin, V., Kudashkina, E., “Dohod ot izgoja,” Ve dom ost i, 02.12.2005. 26 Nikol’skij, A. “Tunguski dlja Indii,” Vedomosti, 21.12.2005. 27 “Motovilihinskie zavody zarabotajut bolee 500 mln doll,” Vedomosti, 20.01.2006. 28 “Rossija postavit Indii chetyre batarei ZRPK Tunguska-M1,” ARMS-TASS, 20.12.2005. 29 Nikol’skij, A., “4 mlrd doll. za odin vizit,” Vedomosti, 26.01.2006. 30 Nikol’skij, A., Mazneva E. Korol’ MAKSa,” Vedomosti, 18.08.2005.

# 1, 2006 Moscow Defense Brief 19 Russia’s Arms Trade Cooperation with Foreign States in 2005 Arms Trade

31 “Pervaja gruppa vertoletchikov iz Venesujely zavershila obuchenie v 344-m centre boevogo primenenija v Tverskoj oblasti,” Interfaks-AVN, 16.12.2005. 32 “Indijskaja armija zakazala batareju sverhzvukovyh raket Bramos nazemnogo bazirovanija,” ARMS-TASS, 21.11.2005. 33 “Specialisty FGUP Zvezdochka provedut modernizaciju DJePL Sindukirti VMS Indii,” ITAR-TASS, 10.10.2005; Grickova, A., “Admiraltejskie verfi vstretili alzhirskuju podlodku,” Kommersant (Sankt-Peterburg) 09.12.2005. 34 Dorohov, R., “Sputnik dlja Irana,” Vedomosti, 01.02.2005. 35 Shestakov, A., “Jenergomash vzjal s soboj Polet,” Kommersant, 08.12.2005. 36 “V N’ju-Deli sostojalas’ prezentacija indijsko-rossijskogo servisnogo centra Rosoboronservis,” ITAR-TASS, 09.09.2005. 37 “V Malajzii planiruetsja otkryt’ servisnyj tehnicheskij centr po obsluzhivaniju samoletov Su-30MKM,” ITAR-TASS, 07.12.2005. 38 “Rossijskoe oruzhie v Jugo-Vostochnoj Azii,” Kommersant, 12.12.2005. 39 For more information on the current structure of the shipbuiliding industry of Russia, see the related article by Konstantin Makienko in this issue. 40 Nikol’skij, A., “4 mlrd doll. za odin vizit,” Vedomosti, 26.01.2006.

20 # 1, 2006 Moscow Defense Brief Russia’s Arms Trade Cooperation with Foreign States in 2005 Facts & Figures

Russian Defense Colleges

Name Chief Post-address Telephones / Web-site Moscow of the General Army General Prospekt Vernadskogo str., (495) 438-97-36, Staff Ivan Ivanovich Efremov 100, Moscow, 117571 438-11-75 ARMY FORCES COLLEGES Combined-Arms Academy of Army Forces Colonel General Devichego polya proezd str., (495) 246-50-84, of the Russian Federation Vladimir Ivanovich Popov 4, Moscow, 119255 246-01-44, 248-90-27 http://oavsrf.narod.ru/ High Command Military College Major General Lenina str., 158, (4162) 52-48-03, (military institute) named after Marshall of Vladimir Mihaylovich Gryzlov Blagoveshensk, 675021 52-84-65 the Soviet Union K.K. Rokossovsky Moscow High Command Military Academy Major General Golovacheva str., 1, Moscow, (495) 172-90-06 (military institute) Sergey Petrovich Epishin 109380 http://mosvoku.narod.ru/ Novosibirsk High Command Military Major General Ivanova str., 49, Novosibirsk- (3832) 39-93-32 Academy (military institute) Vladimir Petrovich Egorkin 117, 30117 http://hbbky.narod.ru/ Chelyabinsk High Command Military no information Manakova str., 1, (3512) 37-03-05, Academy (military institute) Chelyabinsk, 454030 37-09-84 Kazan High Command Military Academy Major General Orenburgsky trakt str., 6, (8432) 35-85-72, (military institute) Valery Nikolaevich Mironchenko Kazan, 420046 92-96-49, 35-85-92 MISSILE FORCES AND ARTILLERY COLLEGES Mihailovskaya Artillery Academy Lieutenant General Komsomola str., 22, (812) 248-14-85, Vladimir Aleksandrovich Konstantinov Sankt-Petersburg, 195009 248-14-05, 248-14-59 Kazan High Artillery Command Academy Major General Oktyabrsky gorodok, (8432) 76-57-46, (military institute) named after Artillery Aleksandr Ilich Borodin Kazan-25, 420025 76-71-21 Marshall M.N. Chistyakov Kolomna High Artillery Command Academy Colonel Artilleristov proezd str., 5, (49661) 6-01-33, (military institute) Nikolay Vladimirovich Uharsky (vrio.) Kolomna, 140403 5-01-90, 2-40-46 Ekaterinburg High Artillery Command Major General Sherbakova str., 145, (3432) 21-90-49, Academy (military institute) Vladimir Sergeevich Morgun Ekaterinburg, 620108 21-90-13, 21-90-50 AIR DEFENCE COLLEGES Military Academy of Air Defence Forces Major General Kotovskogo str., 2, (4812) 2-98-38, Anatoly Dmitrievich Gavrilov Smolensk, 214027 2-98-22, 2-63-33 Orenburg High Air Defence College Major General Pushkinskaya str., 63, (3532) 41-94-50, (military institute) Vladimir Vasilievich Demin Orenburg, 460010 41-94-67, 41-96-00 COLLEGES OF RADIOLOGICAL, CHEMICAL AND BIOLOGICAL DEFENCE FORCES Military Academy of Radiological, Chemical Major General Brigadirsky pereulok str., 13, (495) 265-94-30, and Biological Defence Forces named after Nikolay Ivanovich Alimov Moskva, 105005 265-92-22, 261-11-44 Marshalll of the Soviet Union S.K. Timoshenko Kostroma High Military Command- Major General Gorkogo str., 1, Kostroma, (4942) 59-97-50, Engineering Academy of Radiological, Nikolay Timofeevich Volkov 156015 59-97-70, 59-97-01 Chemical and Biological Defence (military institute) Saratov Military Insitute of Radiological, Major General 50 let Oktyabrya prospekt (8452) 17-41-49, Chemical and Biological Defence Nikolay Pavlovich Shebanov str., 5, Saratov, 410037 37-41-06

# 1, 2006 Moscow Defense Brief 21 Russian Defense Colleges WarFacts And & PeopleFigures

Name Chief Post-address Telephones / Web-site ENGINEER CORPS COLLEGES Military Engineering Academy Shevchuck Aleksandr Borisovich Pokrovsky bulvar str., 11, (495) 917-35-45, Moskva, 109028 916-82-96, 916-82-13 Tumen High Military Engineering Command Major General L.Tolstogo str., 1, (3452) 43-41-21 Academy (military institute) Mihail Aleksandrovich Loginov Tjumen, 625028 http://www.tvviku.ru/ Niznhy Novgorod High Military Engineering Major General Kstovo, Nizhegorodskaya (83145) 2-42-28 Command Academy (military institute) Nikolay Ivanovich Bondarenko oblast, 607564 Sankt-Petersburg Military Topographic Major General Pionerskaya str., 20, Sankt- (812) 235-28-07 Institute named after Army General A.I. Valentin Georg ievich Volohov Petersburg, 197042 http://www.lvvtku.ru/ Antonov AIR FORCE COLLEGES Air-Defence Academy General-Colonel Monino, Moskovskaya (495) 584-20-27 named after Y.A. Gagarin Arkady Nikolaevich Barsukov oblast, 141170 Air-Defence Engineering Academy Lieutenant General Planetnaya str., 2a, (495) 155-10-31, named after prof. N.E. Zhukovsky Anatoly Nikolaevich Maksimov Moskva, 125190 155-11-14, 155-11-13 http://www.vvia.org/ Military Academy of Aerospace Defence Lieutenant General Zhigareva str., 50, Tver-22, (48222) 33-70-01 named after Marshall the Soviet Union G.K. Oleg Rubenovich Balayan 170022 Zhukov Ejsk High Military Aviation College (military Major General Eysk-1, Krasnodarsky kray, (86132) 2-75-77 institute) named after austronaut-pilot of Evgeny Nikolaevich Kruglikov 353660 the USSR V.M. Komarov Stavropol High Military Aviation Major General Lenina str., 320, Stavropol, (8652) 32-66-33 Engineering College (military institute) Dmitry Nikolaevich Medyanoy 355003 http://svvaulsh.narod.ru/ named after Aviation Marshall V.A. Sudec Sankt-Petersburg High Military Aviation Major General L-324, Sankt-Petersburg, (812) 146-01-01, College of Radioelectronics (military Vladimir Stepanovich Trofimov 198324 146-13-60 institute) Chelyabinsk High Military Aviation College Major General Chelyabinsk-15, 454015 (3512) 22-39-16, of Navigating officers (military institute) Sergey Nikolaevich Horonko 28-71-28, 28-73-37 http://chvaish.narod.ru/ Krasnodar High Military Aviation Major General Aviagorodok, Krasnodar-5, (8612) 24-01-01 Engineering College of pilots (military Vladimir Viktorovich Degtyarev 350005 institute) named after A.K. Serov Voronezh High Military Aviation Major General Staryh Bolshevikov str., 27, (4732) 26-60-13, Engineering College (military institute) Gennady Vasilevich Zibrov Voronezh-64, 394064 22-47-52, 22-98-84 Irkutsk High Military Aviation Engineering Major General 1-ya Sovetskaya str., 176, (3952) 27-15-36, College (military institute) Igor Ivanovich Velichko Irkutsk-9, 664036 54-46-10, 27-30-83 http://ivaii.irk.ru/ http://ivaii.da.ru/ Tambov High Military Aviation Engineering Major General Komissara Moskovskogo str., (4752) 79-74-84, College of Radioelectronics (military Valery Germanovich Varchenko Tambov-6, 392006 73-74-99, 79-77-23 institute) Yaroslavl High Air-Defence College Major General Moskovsky prospekt str., 28, (4852) 30-93-28, (military institute) Vladimir Mihaylovich Martynov Yaroslavl, 150016 30-35-53 Syzran High Military Aviation College of Major General Marshala Zhukova str., 1, (8462) 7-38-10, 7-37-22 pilots (military institute) Viktor Grigorievich Ukolov Syzran-7, Samarskaya oblast, http://svvaylvi.narod.ru/ 446007

22 # 1, 2006 Moscow Defense Brief Russian Defense Colleges Facts & Figures

Name Chief Post-address Telephones / Web-site NAVY FORCES COLLEGES Navy Academy named after Admiral N.G. Admiral Vasily Petrovich Eremin Ushakovskaya naberezhnaya (812) 246-2867, Kuznecov str., 17/1, Sankt-Petersburg, 431-9463 197045 Navy Corps of Peter-The-Great - Sankt- no information Leytenanta Shmidta (812) 323-94-66, Petersburg Navy Institute naberezhnaya str., 17, Sankt- 323-71-47, 213-74-37 Petersburg, 199062 http://vvmu.isot.ru/ Navy Engineering Institute Rear Admiral Kadetsky bulvar str., 1, (812) 465-29-06, Nikolay Pavlovich Martynov Pushkin-4, Sankt-Petersburg, 465-27-00 189620 Navy Institute of Radioelectronics Rear Admiral Kominterna str., 15, (812) 427-52-45, named after A.S. Popov Nikolay Grigorievich Kovalevsky Petrodvorec-4, Sankt- 420-22-23, 420-22-73 Petersburg, 1198903 http://vvmure.spb.ru/ Baltic Navy Institute Rear Admiral Sovetsky prospekt str., 82, (4012) 22-77-41, named after Admiral F.F. Ushakov Dmitry Vladimirovich Komkov Kaliningrad, 236026 22-78-66, 21-54-78 http://www.bwmi.ru/ Pacific Navy Institute Vice-Admiral Evgeny Yakovlevich Kamsky pereulok str., (4232) 46-79-18, named after S.O. Makarov Litvinenko -62, 690062 46-09-46, 46-09-50 STRATEGICAL ROCKET FORCES COLLEGES Military Academy of Strategic Rocket General-Colonel Kitaygorodsky proezd str., (495) 298-34-50, Armed Forces named after Peter-The-Great Yury Fedorovich Kirillov 9/5, Moskva, K-74, 103074 298-39-09, 298-35-68 http://arvsn.mil.ru/ Rostov Military Institute of Rocket Forces Major General Mikhaila Nagibina prospekt (8632) 32-69-57, named after Chief Artillery Marshall M.I. Sergey Petrovich Solohin str., 24/50, Rostov-na-Donu, 45-11-51, 45-34-77 Nedelin 344027 http://rau-rostov.narod.ru/ Stavropol Military Institute of Colonel Artema str., 2, Stavropol, (8652) 26-32-35, Communications of Rocket Forces Sergey Ivanovich Gorbenko 355017 26-98-45 Serpuhov Military Institute of Rocket Major General Brigadnaya str., 17, (277) 78-96-89, Forces Aleksandr Vasilievich Kot Serpuhov-2, Moskovskaya 72-19-11 oblast, 142202 SPACE FORCES COLLEGES Space Military Academy named after A.F. Lieutenant General Zhdanovskaya nab. str., 13, (812) 235-86-25, Mozhaisky Aleksandr Pavlovich Kovalev Sankt-Petersburg, 197082 235-86-72, 235-85-39 http://www.vka.spb.ru/ http://mozhayka.chat.ru/ Pushkin Military Institute of Major General Kadetsky bulvar str., 6/43, (812) 466-30-12 Radioelectronics Space Forces named after Sergey Aleksandrovich Artemiev Pushkin-9, Sankt-Petersburg, Aviation Marshall E.Y. Savitsky 189620 Moscow Military Institute of Major General -2, Moskovskaya (495) 592-24-34, Radioelectronics Space Forces Vladimir Vladimirovich Dergach oblast, 143070 592-24-13 AIRBORNE FORCES COLLEGES Ryazan High Airborne Command College Major General Kalyaeva str., 20, Rjazan, (4912) 79-06-38, (military institute) named after Army Vladimir Yakovlevich Krymsky 390031 79-06-14 General V.F. Margelov http://www.vrazvedka.ru/ rvvdku/ COLLEGES OF THE GENERAL STAFF OF RUSSIAN ARMY FORCES Krasnodar High Military College (military Major General Krasina str., 4, Krasnodar, (8612) 68-64-63, institute) named after Army General S.M. Yur y Petrovich Makarov 350035 68-35-09, http:// Shtemenko svinya200.narod.ru/

# 1, 2006 Moscow Defense Brief 23 Russian Defense Colleges WarFacts And & PeopleFigures

Name Chief Post-address Telephones / Web-site COLLEGES OF THE GENERAL STAFF OF RUSSIAN ARMY FORCES Cherepovec Military Engineering Institute Major General Sovetsky prospekt str., 126, (8202) 67-31-01, of Radioelectronics Anatoly Grigorievich Predius Cherepovec, 162608 50-18-03 Moscow Military Conservatory (military no information Polikarpova str., 21, Moskva, (495) 946-02-65, institute) A-284, 125284 945-25-05, 293-81-80, 293-67-15, 946-08-79 COLLEGES NOT INCLUDED IN ANY MILITARY BRANCH Military Academy of Communications Lieutenant General Tihorecky prospekt str., 3, (812) 556-95-65, named after S.M. Budenny Aleksandr Lazarevich Kremenchucky Sankt-Petersburg, 194064 556-98-35 Kemerovo High Military Command College Major General Kosmicheskaya str., 2, (3842) 28-82-09, (military institute) of Communications Vladimir Oskarovich Dubs Kemerovo, 650020 28-90-84, 28-88-01 named after General I.T. Peresipkin Ryazan High Military Command College of Major General Kashirina str., 1, Rjazan, (4912) 79-78-71, Communications (military institute) named Konstantin Vladimirovich Stojan 390032 79-78-60, 77-54-20 after Marshall of the Soviet Union M.V. http://www.rvvkus.ru/ Zakharov Ulyanovsk High Military Engineering Major General Tuhachevskogo str., 19, (8422) 34-91-87, College of Communications (military Vyacheslav Mihaylovich Verhoglyad Ulyanovsk, 432013 35-30-25, 44-31-09 institute) named after G.K. Ordgonikidze Novocherkassk High Military Command Major General Atamanskaya str., 36, (86352) 2-09-31, College of Communications (military Evgeny Nikolaevich Lihosherstov Novocherkassk, 346418 2-99-31 institute) named after Soviet Union Marshall V.D. Sokolovsky Military College of Physical Culture Major General Bolshoy Sampsonievsky (812) 248-31-04, Aleksandr Vladimirovich Levshin prospekt str., 63, Sankt- 248-31-50, 248-31-00 Petersburg, 194353 COLLEGES OF THE HEADQUARTERS OF MOTORIZED FORCES Omsk Tank Engineering College named after Colonel 14-y voenny gorodok, Omsk- (3812) 44-97-70, Soviet Union Marshall P.K. Koshevoy Aleksandr Grigorievich Jakovenko 98, 644098 44-25-87 http://www.ovtiu.ru/ Ryazan Military Automobile College named Colonel Rjazan-14, 390014 (4912) 72-96-79, after Army General V.P. Dubynin Aleksandr Nikolaevich Gerasimov 72-01-05, 72-96-29 The Far East High Military Automobile Colonel Leningradskaya str., (4234) 34-16-15, Command Engineering College (military Anatoly Ivanovich Varakuta Ussurysk-12, Primorsky kray, 33-41-15 http:// institute) 692512 uvvaku.yccyp.ru/ Cheljabinsk High Military Automobile Major General Sverdlovsky prospekt str., (3512) 35-25-03 Command Engineering College (military Aleksandr Afanasievich Naprimerov 28a, Chelyabinsk-29, 454029 http://www.urc.ac.ru/ institute) named after Chief Marshall of Universities/CHMAES/ Autoarmed Forces P.A. Rotmistrov COLLEGES OF THE HEADQUARTERS OF ROCKET ARTILLERY FORCES Penza Artillery Engineering Institute named Major General Penza-5, 440005 (8412) 63-92-87, after Artillery Chief Marshall N.N. Voronov Aleksandr Andreevich Pljushh 63-93-02, 63-92-07 Tula Artillery Engineering Institute Colonel Aleksey Mihaylovich Alferov Prospekt Lenina str., 99, Tula, (4872) 35-38-04, 300029 35-36-85, 35-38-72 http://www.taii.ru/ COLLEGES OF ARMY LOGISTICS Military Academy of Logistics and Lieutenant General Naberezhnaya Makarova str., (812) 328-88-73, Transport named after Army General A.V. Valery Mihaylovich Moskovchenko 8, Sankt-Petersburg, 199034 328-75-80, 328-54-91 Khrulev

24 # 1, 2006 Moscow Defense Brief Russian Defense Colleges Facts & Figures

Name Chief Post-address Telephones / Web-site COLLEGES OF ARMY LOGISTICS Volsk High Military College of Logistics Major General Maksima Gorkogo str., 1, (84593) 2-91-51 Mihail Mihaylovich Gorbunov Volsk, 412680, Saratovskaya oblast Ulyanovsk High Military Technical College Major General K.Marksa str., 39a, (8422) 34-94-90, Aleksandr Valentinovich Morohov Ulyanovsk, 432050 32-64-43, 31-48-87

COLLEGES OF THE BUREAU OF MEDICINE AND SURGERY Military Medical Academy named after S.M. Lieutenant General Lebedeva str., 6, Sankt- (812) 248-32-66, Kirov Boris Vsevolodovich Gajdar Petersburg, 194044 542-21-39 http://vmeda.spb.ru/, http:// military-medic.narod.ru/ Samara Military Medical Institute Major General of Medical Service Pionerskaja str., 22, Samara, (8462) 33-03-69 Sergey Fedorovich Usik 443099 Saratov Military Medical Institute Major General Ilinskaja ploshhad str., 17, (8452) 25-09-01, Vladimir Anatolievich Reshetnikov Saratov, 410017 25-36-14, 25-18-34 Tomsk Military Medical Institute Major General Prospekt Kirova str., 49, (3822) 55-54-86, Oleg Alekseevich Zhatkin Tomsk, 634050 55-54-35, 55-53-32 VETERINARY SANITARY SERVICE COLLEGES Military Veterinary Institute Colonel Chugunnye vorota str., 5, (495) 377-93-43, Ivan Stepanovich Kolesnichenko korp.1, Moskva, Zh-472, 377-93-92, 372-49-90, 109472 377-73-35 COLLEGES OF ARMY FINANCIAL HEADQUARTERS Military Financial University General-Colonel Prospekt Mira str., 126, (495) 215-4456, Vasily Vasilievich Vorobiev Moskva, 129164 283-02-89 Yaroslavl Military Financial College named Major General Bolshaya Oktyabrskaya str., (4852) 30-38-91, after Army General A.V. Khrulev Sergey Aleksandrovich Derepko 67, Yaroslavl, 150038 30-46-26, 30-75-82 COLLEGES OF THE DIRECTOR OF CONSTRUCTION AND QUARTERING Military Technical Engineering University Lieutenant General Zaharevskaya str., 22, (812) 278-82-02, Pavel Alekseevich Zaychenko Sankt-Petersburg, 191123 279-33-41, 275-61-87 http://vitu-spb.narod.ru/ Tolyatti Military Technical Institute Major General Voroshilova str., 2a, (8482) 32-55-66, Mihail Petrovich Mihaylin Tolyatti-25, Samarskaya 32-78-87 oblast, 445025 MILITARY INSTITUTE DEPENDANT TO THE DIRECTOR OF THE MAIN PERSONNEL ADMINISTRATION - DEPUTY SECRETARY OF THE MINISTER OF DEFENCE OF THE RUSSIAN FEDERATION Military Institute General-Colonel Bolshaya Sadovaya str., 14, (495) 299-08-16, Valery Ivanovich Marchenkov Moskva, 123001 362-41-55 http://www.vumo.ru/ RAILROAD TROOPS COLLEGES Military Transport University of Railroad Lieutenant General Naberezhnaya r. Moyki str., (812) 311-80-67, Troops Sergey Nikolaevich Soloviev 96, Sankt-Petersburg, 190000 311-80-78, 311-81-95,168-50-84

# 1, 2006 Moscow Defense Brief 25 Russian Defense Colleges Facts & Figures

Major Identified Contracts for Delivery of Russian Arms Signed in 2005

Customer Name Amount Delivery period Price ($ mln) Contractors Notes Asia China IL-76 / 78 transport 34 / 4 2006-2011 1200* Ilyushin Aviation Complex, Aircraft will be fitted with / tanker aircraft Tashkent Aviation Plant D-30KP-2 turbofan engines. The named after Tchkalov, NPO price of motor unit (240 engines) Saturn is $300 mln. AL-31F aircraft 150 2006-? 550* MMPP Salut turbofan engine AL-31FN aircraft 100 2005-2006 350* MMPP Salut turbofan engine RD-93 aircraft 100 2006-? 267 Chernyshev MMP, Engines are intended for Chinese turbofan engine Plant aircraft FC-1. Spare parts for - 2005-2007 100 MMPP Salut AL-31 aircraft turbofan engines Spares for Kilo-class - n/a 1 Admiralteyskie Verfi submarines (project shipyard 877EKM and 636) India AL-55i aircraft 180 n/a 250 NPO Saturn, Ufa MPO The price includes development turbofan engine and organization of licensed production. Engines will be installed on Indian HJT-36 and HJT-39 advanced jet-trainers. MLRS Smerch 36 2006-2007 500 Motovilihinskie Zavodi Tunguska-M1 SP 24 (4 batteries) 2006-? 400 Almaz-Antey air-defense air-defense system concern BrahMos land-based 1 battery n/a 135* NPO Mashinostroyenia The price is calculated based on anti-ship missiles Russian share in joint venture system BrahMos Aerospace - 49,5%. Full price - $275 mln. Mid-life repair and 1 2007 80* Zvezdochka machine- Name of submarine – Sindhukirti. modernization of building plant Mid-life repair and modernization Kilo-class will be carried out on Hindustan submarine (project shipyard. The contract also implies 877EKM) enlargement of repair base of the Indian shipyard. May be a part of a larger contract. Spares for Kilo-class - n/a 1 Admiralteyskie Verfi submarines (project shipyard 877EKM and 636) Middle East Algeria Mid-life repair and 22007 n/aAdmiralteyskie Verfi The first submarine will take repair modernization of shipyard and modernization on Algeria’s Kilo-class shipyards. submarine (project 877EKM)

26 # 1, 2006 Moscow Defense Brief Major Identified Contracts for Delivery of Russian Arms Signed in 2005 Facts & Figures

Customer Name Amount Delivery period Price ($ mln) Contractors Notes Middle East Morocco Tunguska-M1 SP 6 (1 battery) 2006-? 100 Almaz-Antey air-defense air-defense system concern Iran Tor-M1 SAM system 29 2006 780* Almaz-Antey air-defense concern Iraq Mi -17 helicopters 10 2005 65 Kazan helicopter plant, The contract is carried out with Ulan-Ude aviation plant mediation of Polish company Bumar. Jordan IL-76MF transport 2 n/a 100 Ilyushin Aviation Complex, Aircraft will be probably supplied aircraft Tashkent Aviation Plant on account of Russian debt. named after Tchkalov Europe Spain Anti-MANPADS -n/a 25 Russian Federal Nuclear self-protection Center VNIIEF system for use on passenger aircrafts Africa Sudan Mi -17 helicopters More than 15 2005-2006 75* Kazan helicopter plant Helicopters are supplied in civil modification. Eritrea Kornet-E antitank 80 n/a 32* Tula KBP guided missile system Latin America Mexico Maintenance of - n/a n/a n/a The contract is signed during Mi-17 helicopters opening of Rosoboronexport’s service center in Mexico. Peru Repair of Mi-17 13 n/a 13 n/a helicopters Venezuela Mi-17B-5 / Mi-35 / 6 / 3 / 1 2005-2006 120 Kazan helicopter plant, Venezuela is planning to purchase Mi-26T2 helicopters Rostvertol 33 helicopters: 20 Mi-17, 10 Mi-35 and 3 Mi-26T2. Full price - $400 mln. Mi-35M attack 5 2006 81 Rostvertol helicopters AK-103 rifles 100 000 2005-2006 54 Izhmash concern Probable licensed production of machine guns will be organized in Venezuela as well. North America USA Development of n/an/a 50NPO Energomash, Polyot Engines will be installed on Atlas V RD-181 space Corp. rockets. propulsion engines

All identified contracts – $ 5491,5 mln.

*- CAST estimates. Source: Russian press

# 1, 2006 Moscow Defense Brief 27 Major Identified Contracts for Delivery of Russian Arms Signed in 2005 Facts & Figures

Major Identified Transfers of Russian Arms Signed in 2005

Year of Period of Transferred in 2005 Transferred Customer Name Amount contract delivery $ mln copies at all, copies Contractors Notes Asia China AL-31FN aircraft 100 2005 2005-2006 75 25 25 MMPP Salut The price of contract - turbofan engine $300 mln. Sovremennyi-class 2 2002 2005-2006 700 1 1 Severnaja Verf The price of contract - destroyer shipyard $1,4 bln. (project 956EM) Kilo-class 8 2002 2004-2006 1500 6 7 Admiraltejskie Verfi The price of contract - submarines shipyard, Sevmash $2 bln. (project 636) production association, Krasnoye Sormovo shipyard India Su-30MKI kits 140 2000 2004-2012 125* 5 8 Irkut Corp. The price of agreement - $3,5 bln. Licensed production. Upgrade of IL-38 5 2001 2005-2007 40 1 1 Ilyushin Co., The price of contract - maritime patrol Leninets Co. $205 mln. aircrafts into IL- 38SD standard Mid-life repair and 1 n/a 2005 80 1 fulfilled Zvezdochka Name of submarine - modernization of machine-building Sindugosh. Kilo-class submarine plant (project 877EKM) Republic Air-cushion landing 3 2002 2005-2007 33 1 1 Khabarovsk The price of contract - of Korea craft Murena-class shipyard $100 mln. (project 12061E) Vietnam Ka-32T/S 10 2002 2005 50 10 fulfilled Kamov Co., The price of contract - helicopters Kumertau Aviation $250 mln. Plant S-300PMU1 SAM 2 bat- 2003 2005 250 2 fulfilled Almaz-Antey air- systems talions battalions defense concern Mi-171 helicopters 4 n/a 2005 16 4 fulfilled Ulan-Ude Aviation Plant Middle East Iraq Mi-17 helicopters 10 2005 2005 65 10 fulfilled Kazan Helicopter The contract is carried Plant, Ulan-Ude out with mediation of Aviation Plant Polish company Bumar. Ye m e n Upgrade of 14 2003 2004-2005 120* 12 fulfilled RSK MiG, Fazotron- MiG-29B/UB NIIR Corp. fighters into MiG- 29SMT standard MiG-29SMT fighters 6 2003 2005 120* 6 fulfilled RSK MiG, Fazotron- NIIR Corp.

28 # 1, 2006 Moscow Defense Brief Major Identified Transfers of Russian Arms Signed in 2005 Facts & Figures

Year of Period of Transferred in 2005 Transferred Customer Name Amount contract delivery $ mln copies at all, copies Contractors Notes Europe Czech Mi-171Sh / Mi-35 16 / 2004 2005-2006 150* 16 / 7 0Ulan-Ude aviation The price of contract - Republic helicopters 10 plant, Rostvertol $185 mln (on account of Russian debt).

Africa Sudan BTR-80 APC 30n/a n/a n/a n/a n/a Arzamas machine- building plant Latin America Venezuela Mi-17B-5 / Mi-35 / 6 / 3 / 1 2005 2005-2006 15* 3 / 0 / 0 0 Kazan helicopter The price of contract - Mi-26T2 helicopters plant, Rostvertol $120 mln. AK-103 rifles 100 000 2005 2005-2006 15* 50 000 50 000 Izhmash concern The price of contract - $54 mln. Probable licensed production of machine guns will be organized in Venezuela as well.

All identified transfers - $ 3422,3 mln. Official data - $ 6126 mln.

*- CAST estimates. Source: Russian press

# 1, 2006 Moscow Defense Brief 29 Major Identified Transfers of Russian Arms Signed in 2005 Facts & Figures

Dynamics of Russian State

Mikhail A. Lukin (Kommersant) special for Moscow Defense Brief

Foreign data

US Department of State US Arms Control and Disarmament Agency Independent Analytical Agencies

CDI and Center for Arms Control & Non- estimates of 1996, in estimates of 1998, in SIPRI Proliferation, in IISS, in current Year in current prices ($ mln) current prices ($ mln) current prices ($ mln) ($ mln of 2003) current prices ($ mln) prices ($ mln) 1992 64 000 159 200 71 300 27 159 1993 55 900 125 000 62 400 23 958 1994 55 200 93 000 61 700 23 172 1995 37 700 76 000 40 900 14 700 1996 34 700 37 700 13 300 1997 39 300 41 700 14 300 64 000 1998 28 400 10 300 55 000 1999 35 000 12 300 56 000 2000 14 200 60 000 2001 15 700 65 000 44 813 2002 16 900 50 800 48 040 2003 18 500 65 200 2004 19 400 61 900 2005 2006

The lowest level is marked by bold black colour, the highest - by blue colour

30 # 1, 2006 Moscow Defense Brief Dynamics of Russian State Defense Procurement Facts & Figures

Defense Procurement

Russian data

Planned military expenses Real military expenses

Planned expenses Real expenses for national defense Share in planned for national Share in real Year in state budget ($ mln) state budget expenses defense ($ mln) state budget expenses 1992 2 517 21.56% 1993 3 328 16.64% 1994 18 085 20.89% 1995 10 656 19.56% 1996 15 368 18.4% 1997 18 028 19.69% 13 772 19.47% 1998 8 352 16.35% 5 792 14.58% 1999 3 801 16.29% 4 711 17.47% 2000 5 007 16.47% 6 816 18.81% 2001 7 357 17.99% 8 489 18.74% 2002 9 061 14.59% 9 444 14.42% 2003 11 233 14.69% 11 278 14.67% 2004 14 282 15.47% 14 944 15.74% 2005 18 801 17.43% 20 726 16.34% 2006 23 660 15.6%

The lowest level is marked by bold black colour, the highest - by blue colour The ammounts are calculated based on average annual rate of exchange

# 1, 2006 Moscow Defense Brief 31 Dynamics of Russian State Defense Procurement Our Authors

Mikhail S. Barabanov. Graduated from the Moscow State University of Culture. Currently employed by the Moscow city government. Independent expert on naval history and armaments.

Mikhail A. Lukin. In 1992 graduated from the journalism department of the Moscow State University. Since 1990 worked as an editor of Postfactum press agency. In 1993 became a staff member of the “XX century and the world” think-tank, and in 1994-1997 worked as head of the information section in the “National News Service”. From 1997 was an executive in the operational news group, deputy director of the information center of the “Kommersant” Publishing House. Since January 2003 – director of the information center of the “Kommersant” Publishing House.

Konstantin V. Makienko. Graduated from the Oriental Department at the Moscow State Institute for International Relations in 1995 and the French-Russian Masters’ School of Political Science and International Relations in 1996. Head of a project on conventional armaments at the Center for Policy Studies in Russia (PIR-Center), 1996-1997. Since September 1997, Deputy Director of CAST. Author of numerous articles on Russia’s military-technical cooperation with other countries.

Ivan A. Safranchuk. Ph. D. Political Sciences. Graduated from the Moscow State Institute for International Relations. From 1997-2001 was a researcher at PIR-Center and director of a project on nuclear arms control. Since July 2001, Head of the Moscow Office of the Center for Defense Information. Author of a number of scientific articles and reports on nuclear policy, nuclear disarmament, nonproliferation of WMD and Russian foreign policy.

Dmitry V. Vasiliev. In 2004 graduated from the State University – Higher School of Economics with a Master’s Degree in Strategic Management. From 2003 to mid 2004 worked as an analyst at Absolut Bank in the Department of Risk Evaluation. Currently working since July 2004 as a researcher at CAST.

32 # 1, 2006 Moscow Defense Brief