Story ID: 544_Rosoboronexport.doc
Russian Defense Sales Get Top-Level Endorsement
By: Vladimir Karnozov
Caption: Russian President Vladimir Putin is urging the defense industry to boost exports with more creative sources of financing.
Word Count: 488
Rosoboronexport, Russia’s defense export agency, continues to benefit from backing by President Vladimir Putin. Speaking at a late April meeting of the Commission for Military Technical Cooperation with Foreign Countries, Putin claimed that Russia is second only to the U.S. in terms of volume of military shipments, with a 27-percent market share.

“Last year [2013], the export of Russian wares and services relating to the military technical cooperation rose by 3 percent, and exceeded $15.7 billion,” reported Putin. Rosoboronexport (Chalet A2) and its partner companies take part in some two dozen international trade shows in pursuit of export opportunity. Beyond the Commonwealth of Independent States, sales success has also come from India, Venezuela, Algeria, China, Indonesia and Vietnam. Latin America is also now viewed as a key growth market for Russian technology.

To further promote Russian products worldwide, Putin has urged Rosoboronexport to assist Russian defense firms in providing more modern and flexible financial instruments to support military sales. He also is encouraging the industry to improve the performance of its after-sales support, as well as forge more international joint ventures and alliances.

Putin also called for the Russian industry to boost its share of the growing world market for air defense systems. More than 70 countries operate Russian-made air defense systems and the country claims to be responsible for one-third of all shipments of such systems.

“By technical and combat parameters, reliability and ease of operation, the S-300, S-400 and Pantsyr-S1 [air defense systems] are definite market leaders,” Putin claimed. He called on the Russian industry to boost its capabilities in the area of air-launched weapons.

Dialing for Rubles

Rosoboronexport is responsible for some 80 percent of Russian defense exports, working with more than 700 military equipment enterprises and selling products to 70 countries. According to director general Anatoly Isaikin, last year his organization set another record, by delivering weapons worth $13.2 billion. This figure increased four-fold between 2001 and 2013, and at the end of last year the combined backlog stood at $38 billion.

Rosoboronexport is increasing the availability of export-credit funding, especially for Asian and African states. Government-to-government deals involving loans will continue to be used, but Isaikin believes commercial credits are more flexible and easier to arrange, since the largest Russian financial institutions, such as Savings Bank, VEB and VTB, “trust us more today then they used to.” For example, Angola bought 18 Su-30K ex-Indian air force fighters in a deal made possible through a commercial credit line opened by Russian banks.

Barter deals continue to be attractive, when a foreign customer takes Russian weaponry in return for rights to explore oil fields or other natural resources of the client nation. In many cases, natural resources are in high demand, because they can readily be converted into cash. Rosoboronexport and a group of Russian investors are close to clinching several barter deals along these lines.