Putin’s Arms Bazaar Is in a Serious Sales Slump
(Bloomberg – bloomberg.com – Tobin Harshaw – April 25, 2017)
Tobin Harshaw writes editorials on national security, education and food for Bloomberg View. He was an editor with the op-ed page of the New York Times and the paper’s letters editor.
Russian President Vladimir #Putin is mighty proud of his #military’s performance in #Syria. And, as I have written, it’s become a central part of a sales pitch: “You can’t miss this opportunity to strengthen our position in the global arms market,” he told a meeting of Russian defense companies this week. He added that there was unprecedented desire for buying Russian munitions “thanks to the effective use of our weapons in real combat conditions including in anti-terrorist operations in Syria.”
But while Putin talks a proud game, it’s hard not hear a tinge of desperation here. That’s because, after years of phenomenal growth, the exports of Russian-made arms have stagnated. And it couldn’t have come at a worse time, with oil prices devastating the economy in the midst of a massive military buildup dependent in large part on those foreign sales.
Arms exports are a tricky thing to measure. According to one of the leading experts on the subject, Sergey Denisentsev, after nearly tripling global sales from 2005 to 2013, Russia has seen them drop or hold steady each year since. At a recent forum at the Center for Strategic and International Studies in Washington, Denisentsev gave some reasons for the Kremlin’s struggles.
At the top of the list are changes in military procurement in China and India, which traditionally counted for about half of Russia’s exports. But there was a downside to those sales: The Chinese in particular are masters at appropriating the expertise of others, and have now adapted Russian technology to domestically built planes and ships. “In some ways the student has already surpassed the teacher,” said Denisentsev.
India, the world’s top buyer, is also building more of its own equipment. Its first aircraft carrier, the Vikramaditya, was built in the 1980s by the Soviet Union and purchased in 2004 off the Russian junk heap. But its second, the Vikrant, is the first in a planned class of carriers to be built domestically. A deal between the countries to jointly build a fifth-generation fighter jet have been delayed for seven years over Indian unhappiness with various Russian proposals. Meanwhile, the country increasingly finds itself in the U.S. orbit, and this month reached a deal for $2 billion in various arms with Israel.
Vietnam, another major market, has been opened to U.S. competition since last year, when President Barack Obama lifted the ban on sales there.
Meanwhile, low oil prices have hurt Russia indirectly as well as directly. Its big customers like Algeria and Nigeria have signed contracts for a handful of planes, but are hardly on a spending spree because their own oil revenue has dried up. Azerbaijan, a top customer, cut arms imports by 36 percent. Iran, even freed of many Western sanctions after an international deal for nuclear monitoring, has a shambles of an economy. And Syria, of course, has turned from a customer to a charity case — or at best, a proving ground.
The state-controlled Russian press claims there is interest in fighter sales from several South American countries, but there’s no proof this is anything more than propaganda. Spending in that region has fallen to its lowest level since 2007. It’s hard to believe Venezuela, where citizens go months without basics such as milk and eggs, is about to splurge on a bunch of $37 million Su-30 fighters.
A final problem, as pointed out by Marcus Weisgerber at Defense One, is that Russia is struggling to churn out desirable products in an age of high-tech weaponry. Traditionally, Moscow has left the top end of the market to the U.S. and other Western producers, while focusing on what Denisentsev called “cheap and deadly” weapons within the price range of buyers in the developing world.
But as former clients like China and India get wealthier, Russia is being forced to go upscale. And in developing next-generation jets and missile-defense systems, Moscow is losing its competitive advantage. Given American companies’ superior reputations and track records, it makes less and less sense for aspiring powers to buy Russian.
The real-world effect is clear: After a decade-long military expansion intended to solidify its rank as a global superpower, Russia is slashing its defense budget by as much as 25 percent this year. (Other estimates put the figure below 10 percent, but either way, it is a sea change.) Putin has reason to crow about his military’s performance so far in Syria, but it’s not going to do much for his bottom line.
©2017 Bloomberg L.P. All Rights Reserved. Article also appeared at bloomberg.com/view/articles/2017-04-25/putin-s-arms-bazaar-is-in-a-serious-sales-slump
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