Payments for Russian arms worth billions of U.S. dollars are held up in Western banks because of trade sanctions imposed by Western countries in the wake of the Ukrainian conflict. Officials of Rostec, the state-owned corporation that took over much of Russia’s military-industrial complex beginning in 2007, revealed details in its corporate report for 2014, published last month. Rostec reported export sales of nearly $15 billion last year, of which $13.2 billion was arranged through Rosboronexport, the state arms export agency. Just three countries accounted for over two-thirds of the total: India (25 percent), China and Iraq (22 percent each).
According to the report, Western banks have failed to transfer some 18 percent of payments owed to Russian defense companies for military exports last year. However, Rostec’s communication chief Vasily Brovko downplayed the sanctions problem. “Money earned will not get lost. It is only a matter of time when it is going to reach Russia,” he told a media briefing. Brovko said that alternative payment strategies had been developed, such as shifting from U.S. dollars to national currencies for receipts from the largest importers of Russian weapons, such as India and China.
Customer payments that did come through last year amounted to $11.2 billion (U.S.) compared with $12.8 billion the previous year. Deliveries were made to 59 countries worldwide. Geographically, 75 percent of the arms shipments went to Asia, 9 percent to Latin America and 7 percent to the Middle East. Brovko predicted that Russian arms exports this yearwould amount to some $13 billion, with the backlog remaining stable at $40 billion.
“Despite the sanctions regime, the corporation remains active in cooperation with foreign partners in framework of contracts signed earlier,” wrote Rostec chief for corporate law Alla Laletina in the report. “On future projects, our western colleagues await further development of the political situation, and, hence, are not so active these days with new cooperation projects,” she continued. The sanctions include a denial of access to capital markets and financial services in the West. Laletina said that in response, more funding is being raised on Russia’s own market and in China.
European Union sanctions now forbid export into Russia of products having dual civil/military use. As a result, Rostec does not have access to some new technologies, the report noted.
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