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Moscow Defense Briefsection 1 Your Professional Guide Inside Special Issue, 2019 Moscow Defense BriefSection 1 Your Professional Guide Inside Special Issue, 2019 Russian ArmouredMoscow Cars Defense Brief 1 Afghanistan Needs to be Regionally Integrated CONTENTS Special Issue, 2019 Arms Trade Russian Arms Exports in 2018 2 PUBLISHER Centre for Analysis of Defense Industries Strategies and Russian Ship-based Air Defense Missile Systems 6 Technologies Viktor Grigoryev, the Shadow Oligarch of the Russian CAST Director & Publisher Defense Sector 10 Ruslan Pukhov BRAHMOS Supersonic Cruise Missile Program Project Director Achieves Major Milestones in 2018-2019 14 Andrey Frolov Editor-in-Chief Russian Wheeled MRAP Vehicles 16 Mikhail Barabanov Russia’s Latest Amphibious Tracked Vehicles 18 Advisory Editors Konstantin Makienko Alexey Pokolyavin Book Review «Russian Nuclear Orthodoxy: Religion, Politics Researchers Timofey Borisov and Strategy» 22 Sergey Denisentsev Maxim Shepovalenko 24 Polina Temerina Our Authors Editorial Office 3 Tverskaya-Yamskaya, 24, office 5, Moscow, Russia 125047 phone: +7 499 251 9069 fax: +7 495 775 0418 http://www.mdb.cast.ru/ To subscribe, contact phone: +7 499 251 9069 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 maybe reproduced in any form or by any means, electronic, mechanical or photocopying, recording or otherwise, 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. Translated by: Ivan Khokhotva Cover photo: Russian MRAP K-53949 «Typhoon-K» Please be advised that subscription Photo by: JSC Remdizel to the electronic version of Moscow Defense Brief © Centre for Analysis of Strategies and Technologies, 2019 includes access to the entire archive of the journal Printed in Russia at www.mdb.cast.ru/archive. Moscow Defense Brief 1 Afghanistan Needs to be Regionally Integrated Arms Trade Russian Arms Exports in 2018 Andrey Frolov y mid-January 2019, senior Russian officials had Russian arms exporters’ rouble earnings grew in Bannounced some of the official arms export figures 2018, helped by the weakening rouble (whose average for 2018. In late December 2018, President Putin said that annual exchange rate fell from 58.3 to the dollar in 2017 to Russia had sold 16bn dollars’ worth of weaponry to foreign 62.92 in 2018). The rouble inflation rate was 4.3 per cent, customers that year, of which the state-owned intermediary up from 2.5 per cent the previous year. Rosoboronexport accounted for 13.4bn.1 The company had also signed 19bn dollars’ worth of new contracts by early November 2018,2 while the estimated total for the whole Another upsurge in new arms contracts and year is 20bn.3 a bulging portfolio The Russian arms contracts portfolio grew from 45bn dollars at the beginning of 2018 to 55bn at the year’s end. As already mentioned, the Russian portfolio of arms By subtracting the value of arms deliveries made over the export contracts grew sharply to a fairly comfortable 55bn year, we arrive at a rough estimate of the total value of new dollars, providing for a healthy safety cushion compared to export contracts signed in 2018: 26bn dollars. We can also the previous years’ average of 45 to 49 billion. That upsurge deduce that new contracts signed with the CSTO states, free is largely explained by the successful completion of talks on arms transfers, and contracts for the repair and maintenance several large contracts with India. Without that contract, of previously delivered hardware were worth about 5bn the Russian portfolio would probably have remained flat. dollars. It’s worth mentioning that these figures almost A few details were released during 2018 about the match the record highs set in 2015 (see Figure 1). structure of that portfolio. As of late August, North Africa Officials have also released a few details about the and Asia Pacific (including India and China) accounted for number of new contracts signed and the schedule of 60 per cent of all outstanding contracts; the Middle East deliveries under those contracts. For example, we now and the Arabian Peninsula for approximately 20 per cent; know that Rosoboronexport had made 7bn dollars’ worth sub-Saharan Africa 10 per cent; and the CIS 5 per cent.5 of deliveries and signed 600 new contracts worth a total of The portfolio itself stood at 45bn dollars at the time, so, in 9bn dollars by August 2018.4 By November, the number of absolute figures, these percentages translate into 27bn, 9bn, new contracts had reached 1,100, and their combined value 4.5bn, and 2.25bn dollars, respectively. Interestingly, in late 19bn dollars. September, the portfolio of contracts signed with unspecified “African states” was said to be worth 3bn dollars; the source Figure 1. Russian arms export portfolio and new contracts provided no further details.6 in 2013-2018 56 55 China accounted for 15 per cent of the export contracts 50 portfolio (6.75bn dollars) and 12 per cent of all Russian arms 49 48 7 45 deliveries made in 2018 (1.92bn). In fact, the Chinese share of the portfolio has risen sharply from 5 per cent in 2013 to 14-15 per cent in recent years.8 Outstanding contracts with Vietnam are worth 1bn dollars (2.2 per cent of the 45bn- 26,0 dollar total).9 20,0 Some interesting details were released about the state 17,0 15,9 14,0 of Russian-led defense infrastructure projects in third 9,5 countries in recent years. Rosoboronexport was said to have completed 11 large projects across all the major types of armed services in foreign countries over the period from 2013 2014 2015 2016 2017 2018 2001 to 2018. Another 20 infrastructure projects were under Total portfolio at year-end, bn dollars way in more than 10 countries in 2018.10 Contracts signed during the year, bn dollars It was also reported that over the past five years, the Source: CAST value of joint R&D programs with foreign partners (focusing 2 Special Issue, 2019 asd Russian Arms Exports in 2018 Arms Trade on arms upgrades and the development of new weaponry) customers, including such a major global power as India. It was up 35 per cent.11 But the largest such program, the was reported in June that Indian payments under most of the joint effort with India to develop the FGFA fifth-generation arms contracts with Russia suddenly ground to a halt in April fighter, is now effectively frozen.12 2018 over the CAATSA sanctions against Rosoboronexport, whose foreign trading partners now risk so-called secondary Figure 2. Russian arms exports in 2013-2018: total and sanctions for doing any business with it.15 The proposed those channeled via Rosoboronexport solutions Russia began to explore included new payment 15,70 16,00 15,00 15,00 15,00 15,00 options, such as clearing accounts and currencies other 13,20 13,00 13,00 13,00 13,00 13,40 than the US dollar in order to shield Indian banks from the CAATSA threat.16 In an indirect admission that the US sanctions have a real bite, there have been several statements to the effect that Russia intends to begin using the rouble and its foreign defense customers’ own national currencies – such as the Indian rupee, the Chinese yuan, and the UAE dirham – for future contracts. In fact, the dollar has already been replaced 2013 2014 2015 2016 2017 2018 as the settlement currency by one of the national currencies 17 Total, bn dollars for some of the existing contracts. Total Rosoboronexport, bn dollars In addition to financial risks, there have also been difficulties with logistics. For example, the Russian RO/RO Source: CAST ship Ural sailing under a Turkish flag was arrested with a cargo of weapons on a flimsy pretext in Tunisia in February, and released only two months later in April. We believe Key developments and highlights of 2018 that problems like these have forced Russia increasingly to rely on its military transport planes and Emergencies The main development of 2018 was the impact of US Ministry aircraft for defense hardware deliveries to foreign sanctions under the CAATSA bill on Russian arms exports. customers. Also, in June 2018, the government issued a US sources estimate the Russian arms exporters’ losses as a resolution authorizing foreign shipping companies to result of those sanctions at 3bn dollars, mainly in the form handle shipments of Russian weapons destined for foreign of contracts from which the potential buyer has walked away customers in the event of Russia’s own companies being – but Moscow has denied this.13 unable to do so. It remains unclear though whether and Regardless of the actual figure, there is no denying that how those foreign shipping companies can evade the US the sanctions have caused some real problems. We are aware sanctions. of at least one contract affected by CAATSA. Indonesia was Another part of the Russian strategy to minimize the willing to buy 11 Su-35 fighters from Russia, but the contract risks posed by sanctions is to further reduce the transparency depended on credit financing by a commercial bank. That of its arms exports. Statements by the traditional Russian bank, however, did not want to risk the consequences arms export newsmakers have become few and far between, should the US government interpret the loan as the bank’s and information from Russian sources has become scarce.
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