Prime Minister Dmitry Medvedev, center, tours the 2013 Nizhny Tagil display of military equipment (Russia Arms Expo - RAE). Right: Uralvagonzavod general director Oleg Siyenko.Ria Novosti/Dmitry Astakhov
“Sanctions have had no significant negative impact on the Russian defence industry,” said Sergei Goreslavsky, Deputy General Director of Rosoboronexport. “Our military equipment enjoys strong demand on the international market, the order books remain filled several years in advance,” he said. According to the organization, international partners have raised the number of requests to lease and rent Russian military products during this period.
“Sanctions have added new adrenaline in the daily work of Rosoboronexport. We are now discussing with our customers non-traditional forms of settlements, improving the system of payments and transportation,” Goreslavsky said.” Since last year, we are promoting a comprehensive security system programme, which includes a variety of elements – from the small air-defence to special firearms. To various companies, we are offering opportunities for scientific and technical cooperation,” said Goreslavsky.
Difficulties in import substitution
The Russian economy’s dependence on imports is high, but not fatal. The process of import substitution is gaining momentum. During the first half of 2015, as many as 57 Ukrainian-made components, out of 102, or 55 per cent, have been replaced by Russian ones. Successful examples of import substitution include development of the strategic nuclear forces programme, which no longer requires Ukrainian manufacturers. The intercontinental ballistic missile (ICBM) ‘Sarmat’, which will enter into service in 2016 will replace the Russian-Ukrainian ‘Satan’ missile. The ‘Sarmat’comprises only domestically manufactured components. The Klimov Plant in Saint Petersburg has begun production of aircraft engines. Preparations are on to begin production of domestic gas turbine units for ships made by NPO Saturn OJSC in Rybinsk.
The main problem with import substitution are significant backlogs in components for the mechanical engineering sector, shortage of qualified personnel, and the absence of “long” and “cheap” money.
Reverse side of cooperation
Western sanctions have also opened up new possibilities of cooperation; mainly cooperation with BRICS countries and South-East Asia. However, despite obvious advantages of cooperation with friendly countries, cooperation cannot be a permanent panacea to the current situation. “Cooperation with a series of countries in Southeast Asia, where we are increasingly playing the role of donor, of course, carries a certain risk, due to the not always ‘reverent’ attitude towards our intellectual property,” Vladimir Gutenev, first deputy chairman of the Industrial Committee of the Russian State Duma, told reporters.
Another problem is balancing of interests. The global arms market, where Russia occupies second place out of five major exporters, is likely to soon see emergence of new producers. Countries with which Russia is cooperating, but which are themselves trying to make a mark in the military technologies market, and may become Russia’s competitors, such as China, South Africa, Brazil, and Korea.
Search for a balance
Given this situation, the Russian defence industry needs to achieve a reasonable balance between import substitution and cooperation, say defence analysts.
One of the promising directions in development of the Russian defence industry sector, according to Gutenev, is possible adoption of a Russian law on private military companies.
“It is not a soldier with a gun, who has to protect the foreign economic interests of our companies, but the possibility of making operative deliveries of sophisticated technology to other countries, primarily electronic warfare equipment, as well as air defence systems with trained personnel, which could instantly take up their combat duty positions. I believe that development of this direction will greatly expand the spectrum of political opportunities for Russia,” said Gutenev.
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