Story ID: 346
Russia To Expand Export Sales
By: Reuben F. Johnson
Caption: Russia does not believe the U.S. has much chance of breaking into markets such as India and Pakistan that it has dominated.
Word Count: 1092
Russia’s Federal Service for Military-Technical Cooperation (FSVTS), which is responsible for managing relationships with the country’s arms export customers, is attending the Dubai Air Show this year intent on expanding export sales of the country’s defense products.

The director of the service, Dmitri Shugayev, has spoken at length this year about where Russia sees itself cementing relations with its traditional export clients, and expanding sales beyond those long-term customers. Shugayev is due to attend Dubai 2017, which is seeing one of the most high-powered Russian delegations ever to participate in this event.

FSVTS (Russian Export Centre, Stand 688) is different from Rosoboronexport (ROE), which brokers arms export sales and negotiates contracts. Instead, FSVTS manages the broader strategic goals of national defense policy as it relates to foreign buyers of Russian military hardware. The organization’s role is similar to that of France’s Direction Générale de L’armement (DGA).

Outside the UAE, Moscow has done business with two other nations in the region: Iran and Libya. However, both of these nations are subject to sanctions, which affects Russia’s export policy.
Iranian Sanctions
For years, Moscow has been maneuvering to make a multibillion-dollar sale to Iran once sanctions are lifted. Iran operates a fleet of outmoded U.S. aircraft, many of which are 40 years old or more. Speaking earlier this year, Shugayev told Russian news outlets there are no plans to violate any sanctions, but that there are services that Moscow may legally supply to Iran.

“We have scrupulously adhered to all of the international obligations in this matter that we have previously agreed to. We have all of the documents that the United Nations has adopted, and the corresponding decrees subsequently issued by our country’s leadership that apply to both Libya and Iran,” the agency director told Russia’s Kommersant business daily in August.  

“With regard to Iran, we are discussing the maintenance of previously delivered air defense systems. But we have the full right legally, from the point of view of international norms, to service this previously supplied equipment. So there are no violations in our actions in this regard,” Shugayev added.

He said that a not uncommon practice of equipment being serviced by unauthorized entities in these nations by using substandard components has been the cause of more than one tragic occurrence. Moreover, the use of these aftermarket parts that are not produced according to OEM standards—sometimes derisively referred to as “gypsy spares”—serves only to create a negative impression about the reliability of Russian-made hardware. “For us, this situation is a huge headache,” said Shugayev.  

Counterfeit products are often supplied from former Soviet republics, in many cases from Ukraine, he noted. “These suppliers will remove, improperly, an aero engine using old equipment, clean it and then sell it at half the normal price. Then, later, the helicopter that we delivered, has some faults or—even worse—an accident because of the use of these non-certified components. 

“Then immediately we hear shouts of ‘Ha, look here, another Russian helicopter crashes!’ However, once the cause is investigated it is discovered that this helicopter has long since invalidated its OEM warranty, where it was last repaired or serviced is unclear, and where the parts that were used came from no one knows.”
Old Friends, New Clients
India is a major client for Moscow’s military hardware and has purchased some advanced systems, including the Sukhoi Su-30MKI fighter. However, India is now being wooed by the U.S., which sees an increase in military cooperation as a hedge against an increasingly expansionist and belligerent China.

In a speech delivered on the same day as the opening of the 19th Communist Party Congress in September, U.S. Secretary of State Rex Tillerson laid out a strategy to use alliances to guard both “flanks” of Asia. “India, a very significant and important democracy, pins one side of that map,” said Tillerson in an address at the Center for Strategic and International Studies in Washington, “While Japan, another very important and strong democracy that we have very strong security relationships with, is pinning this side of the map.”

However, Shugayev and other Russian officials state the U.S. cannot compete with what Moscow is proposing, which includes a major role for India on the Su-57/T-50 fifth-generation fighter program.

“India is serious about developing [its defense industry], and is looking for new partners on favorable terms. For example, there is the FGFA project with them to create a fifth-generation fighter. No one will ever offer the level of cooperation that we have. The Americans would never even offer a tenth of the number of joint-development tasks that we are potentially prepared to discuss with them,” he claimed.

“At present, there is a discussion of joint development [of the Su-57] and of equality of intellectual property for both parties. Realizing this, we are optimistic about the prospects for Russian-Indian military-technical cooperation. I do not want to make predictions, but if by the end of the year the steps that we have outlined with our Indian partners within the framework of the agreements already in place, including those on helicopter issues, [are] realized, I think we will see some considerable level of cooperation following this year.”

He also pointed to where Russia is beginning to re-capture some of the business previously lost when Egypt switched to the U.S. as a supplier in the 1970s. Moscow is also looking for new business with Pakistan to compete there against systems offered to Islamabad by the PRC.

“With Egypt, everything is quite active,” he said. “We won a tender with the Ka-52K 'Katran' helicopter gunships for the helicopter assault ships in the Mistral class, meaning the Egyptians passed on the option for the French Tiger helo. This was expected, to be honest: the Ka-52K was originally designed specifically for these ships. We are now discussing technical details within the framework of contract negotiations.

“With Pakistan, we have an agreement now on military-technical cooperation: I signed it on behalf of the Russian government this year. To be specific, we will supply the Mi-35 [helicopter] and we will see how events develop further. Our relations are based on a common goal of combatting terrorism, so in the future I also do not exclude any new export sales.”