Russia 2010. Patr 7. Armed Forces and The Defense Industry in 2010

(the part of book "Russia 2010. Report of Transformation")

Part 7. ARMED FORCES AND THE DEFENSE INDUSTRY IN 2010 

For Russia, 2010 was a time of preservation of the former positions in the sphere of defense and defense technical policies in conditions of a general negative trend. On the one side, the total amounts of the military exports kept going up. In one year, Rosoboronexport FSUE sold arms and military equipment for the amount of USD 8.6 bln, thus having supported the average dynamics of export growth for USD 500-700 mln. per year. The total of all Russia’s defense sales amounted to USD 10 bln. Altogether, about 1.3 thousand of military contracts had been signed with foreign countries. Due to this, the portfolio of export contracts for weapons and military equipment had reached USD 48 bln. in 2010. The pool of principal customers of the Russian weapons has remained practically the same, namely, 60% were covered by India, Algeria and China. These countries compiled the major pool of principal customers of the Russian defense industry along with Vietnam, Lybia, and Myanma.

On the other hand, the technological weakness of the Russian defense industry complex became quite obvious. In 2010, the major priorities in the strategic plan had been set. In February, President Dmitry Medvedev approved the new Defense Doctrine of the country and “The Basis of the State Policy in the Field of Nuclear Containment Until 2020.” The Defense Doctrine included a number of new requirements for the defense industry complex (DIC) including the requirement to provide unification of the weapons and components in order to save funds. In March, Medvedev signed a document on the foundations of the state policy of the DIC development until 2020. According to this document, implementation of the program of the defense industry development was delegated to 1,729 enterprises.

The vertically integrated structures, such as the Untied Aircraft Corporation (UAC) and the United Shipbuilding Corporation (USC), shall play a special role. The Medvedev Administration’s course in the field of new systems acquisition could be characterized as policy of ‘point upgrading.’ New samples of military equipment did arrive to the army. However, these activities did not have a mass character. This way, a resolution on strengthening the Russian Black Sea Navy’s defense potential was adopted in 2010, but only five ships were to supplement the fleet for that purpose. These were to be frigates and diesel submarines. The AAMC Pantsir-C1 was passed into service (a development of the mid-1990s) in this period. However, in the entire year, the Russian army received only 10 complexes of the kind. Commissioning of the multi-purpose DSMs of the fourth generation of the 677 Lada project had begun at the same time. In 2010, the St. Petersburg B-585 DSM was included in the Navy. However, the entire 677 project currently has just three submarines. Production of the long-distance missiles for C-400 AAMCs had begun, but only two C-400 divisions had been equipped with it in the course of the year.

The Kremlin paid special attention in its military-technical policy in 2010 to acquisition of relatively obsolete samples of weapons and modernization of the already existing equipment. This way, the Russian Navy acquired the first batch of deck-based MiG-29Ê destroyers that were intended for deployment on the Admiral Kuznetsov aircraft-carrying heavy cruiser. A resolution on modernization of 30% of the Russian AF's long-range aircrafts was adopted. Technical modernization of Tu-95MC and Tu-160 strategic bombardment aircrafts and Tu-22MZ missile bombers had begun simultaneously. A new aiming system had been developed under the frames of the program indicated for Tu­22MZs. It was assumed that the process of long-range bombardment aircrafts upgrading would be completed by 2015. Development of new defense means for Su-25UBM and Su­25TM attack aircrafts was started. The Karelia ballistic missile submarine K-18 (RPKSN K-18) of the 667BDRM Dolphin Project and the Vice Admiral Kulakov major anti-submarine ship of the 1155 Frigate Project had returned to the RF Navy after renovations and modernization. Modernization of the T-90 main battle tank (OBT) had been completed. In the course of the year, 63 new T-90 OBTs began service at the Russian Army. A process of complex modernization started at the experimental Sarov DESM B-90 of the 20120 Project; it was passed into service in the RF Navy in August 2008. At the same time, in 2010, MOD decided to decline a whole complex of perspective weapons systems. A special loss experienced the armor and artillery industries. Design and experimental jobs (DEJs) were cancelled on the Object 195 Project (the main battle tank Ò­95), the Coalition-SV 152-mm self-propelled artillery vehicle and the universal Burlak tank turret. MOD decided against acquisition of the Bakhcha-U ACV, the Sprut-CD 125-mm self-propelled artillery vehicle, and the tank support fighting vehicle (BMPT). These systems never entered service. Later on, MOD decided to stop acquisition of the military equipment samples which, while still in service, had not exhausted their potential: these were BTR-80 armored infantry vehicles and BMP-3 infantry fighting vehicles. The major reason for such cautious approach of MOD to equipping of the Russian army with new weaponry systems is its skeptical attitude to the capabilities of the Russian DIC. Production capacities of the majority of the defense industry enterprises had not undergone any modernization since the early 1980s. Presently, they are morally and physically obsolete.

Due to this, absolutely new systems of weapons are often assessed as technologically obsolete by modern requirements. Such approach does have an element of logics. The majority of new systems declined by A. Serdyukov’s department are inferior to western analogues in their electronic ‘stuffing.’ Besides this, MOD has reasonable concerns that the equipment already put in service will have significant drawbacks. There have been precedents of the kind. In 2009, the RF Navy put in service the Nerpa multi­purpose nuclear cruise missile submarine MPLATRK Ê-152 of the 971U Shchuka-B Project (a 1980s development). However, in the course of tests carried out by the State Commission, a number of drawbacks had been revealed in the NSM (in 2008, an accident on its board resulted in deaths of 20 people). In the result of this, during the major part of 2010, additional tests had been taking place at the submarine. This was taking place despite the fact that the Nerpa MPLATRK was to be leased by the Indian Navy for a period of 10 years, which implied that it had been developed under the export requirements. The failure of the state defense order in 2010 was the most telling example of the Russian DIC’s low production level. In the second half of 2009, the Kremlin had approved the program of the next year Russian army equipping. Medvedev announced its major indexes (not classified) in his message to the Federal Council on November 12, 2009. It was expected that “more than 30 land- and sea-based ballistic missiles, 5 Iskander missile complexes, about 300 modern armor units, 30 helicopters, 28 fighting aircrafts, 3 nuclear submarines, and one battle ship of the Corvette class will be put in service in the Russian Army.” This way, the Russian leaders tried to demonstrate the Russian public and the world community that re-equipment of the army is going on, and the army does receive new samples of the military equipment. However, it came out after the year 2010 was over, that only 70% of the officially announced by the President Defense Order had been fulfilled. The army had never received the following weapons systems: the corvette of the 20380 project; three new submarines of the Borey 955 and the Yasen 885 Projects; six Yak-130 training aircrafts; 76 BMPs-3 and five space ships. Investigation on the fact of the order failure started in March 2011. In the result of the administrative sanctions, five people lost their jobs and 11 more were reprimanded. Among those dismissed were the Izhmash Director General Vladimir Grodetsky; the Electromekhanika R&D Institute Director General Arkady Khokhlovich; Deputy Director of the Russian army R&D Chief Directorate General Major Nikolay Vaganov; Head of the Department of the Air Equipment and Weapons Development Orders Colonel Igor Krylov; and the NF Deputy Commander in Chief on Weapons Vice Admiral Nikolay Borisov. This 2010 Defense Order episode showed the insufficient functional capacity of the Russian defense industry not only for the broad-scale aggressive activities at the external markets, but even in regards of relatively modest requirements of the Russian army. With the exception of the Borey 955 and Yasen 885 Projects submarines, the State Defense Order did not contain a single major weapons system. It enlisted neither air carriers, nor missile cruisers, nor guided weapons destroyers, nor strategic bombers. Even the very failure of the NSMs could hardly be attributed as a major one: it concerned only three submarines which had been under construction since the early 1990s. It turned out that the manufacturer, OAO Sevmash, was again unable to complete the obvious long-term unfinished project. The major reason for this is the clear discrepancy between the Sevmash’s manufacturing capacities and the tasks set to it by MOD. The enterprise just does not have sufficient number of specialists and the necessary equipment to timely complete all jobs of the Borey and Yasen projects. There is no surprise that the Sevmash’s Director General had already been criticized. The critique was connected with significant extensions of the period of repair works and modernization under the contract with India of the Admiral Gorshkov aircraft-carrying heavy cruiser.

As a whole, the year 2010 had quite acutely revealed the issue of the DIC’s production capacities. It became clear that the ‘margin of safety’ established at the majority of enterprises during the soviet period is gradually tailing off. However, there is no adequate manufacturing replacement to it so far. The Russian mechanic engineering in its current capacity is not capable to provide for quality increase of the DIC potential. Defense enterprises have to operate the old and quite obsolete equipment. Along with the high corruption level embracing the top leadership of the defense industry, this seriously weakens the industry and leads to true scandals. For example, Director General of Izhmash, Vladimir Grodetsky, who was fired in May 2011 in the course of investigation of the 2010 defense order failure, had in actual fact cancelled his responsibilities earlier, in March 2011.The major reason for the disapprobation was palpable destruction of the enterprise in the preceding period. Problems with implementation of the tasks set had been revealed in operation of the NPO Mashinostroeniya. The Head of the enterprise, Alexander Leonov, was reprimanded for footdragging of the R&D and development work. Lastly, in January 2011, President of UAC, Aleksey Fedorov, was removed. Two episodes caused it, namely, failure of the contract with Jordan on supply of the Il-76MF military transport aircrafts and technical bugs in the Tu-214PU aircraft supplied in 2010 and to be exploited by the Head of the State.

With the current tendencies preserved, the national defense industry will experience more and more difficulties with supporting the RF’s status of a leading weapons exporter. The low level of functional capacities and deterioration of the manufacturing capabilities will provoke delays and failures of the earlier contracts. DIC will prove to be unable to follow officials’ activities on formation of the military-technical course of Russia on the world arena. As a result, the Kremlin will be at risk to lose the status of a solid partner. No new contracts will be signed due to the permanent failures with the previous ones. Presently, such threat is quite palpable. For example, Jordan, a U.S. military and political ally, makes no secret of its interest in acquisition of Russian weapons. No surprise that in November 2010, Russia and the Kingdom signed an agreement of a joint enterprise establishment for production of RPG-32 Khashim light anti-tank weapons. And Amman’s interests spread far beyond RPGs only. However, the abovementioned episode with the failure of the contract on Il-76MF supply impedes their more palpable outlining. A contract for the amount of about USD 100 mln. had been signed back in 2005.

However, Russia proved to be unable to execute it. The formal reason is failure of the Tashkent Chkalov Production Association (the major manufacturer of Il-76MF aircrafts in the soviet period) joining UAC. However, as a matter of fact, this enterprise has no production capacities. It had practically collapsed in the early 2000s. This means that knowing the actual situation at the Tashkent Chkalov Production Association, the UAC management had not just signed a contract with Jordan, but did not make any efforts to provide its implementation at the account of its own production capacities. The contract had been doomed to failure or, in the very least, serious delay from its very beginning. There is no reason to expect from Amman any practical formalization of its interest in the Russian defense production in the nearest future Competition between particular companies also has a negative impact on the potential of the Russian DIC. Based on the apparatus character and connections of leadership of a particular structure with representatives of the executive bodies, it has direct impact on the manufacturing capacities of the defense industry.

While some enterprises receive preferential administrative support for the production development and supply both to the Russian army and export, others have to either reduce their manufacturing or significantly change the offered weapons samples. A dispute between OAO Kamov and OAO Moscow Mil Helicopter Plant could illustrate this kind of competition in the realities of the year 2010. The former company offered a whole pool of helicopters for the needs of the Russian army including the battle Ka-52 helicopter and the military carrier Ka-60. The major arguments of the latter player were the Mi-28 battle helicopter and the Mi-8 military carrier. OAO Kamov’s production was noticeably better than that offered by the Mil Plant. This was particularly true in regards of Ka-60, whose rival was the obsolete in all senses Mi­8 (in the form of its next modification Mi-8ATMS). Despite this fact, OAO Moscow Mil Helicopter Plant won. While in limited amounts, its machines started to enter the inventory of the Russian army in the end of 2010. This way, the Russian army received 10 Mi-8ATMS. At the same time, production of OAO Kamov is supplied to the armed forces in literally single items. E.g., in the same December 2010, the 344 Center of Battle Training and re-Training of Pilots of the Army Air Force had received only three serial Ka-52, while currently there are only 6 Ka-60 machines in exploitation (including those that are being tested by OAO Kamov). The situation of the kind is stipulated by close relations between the leadership of the Mil Plant with MOD and special structures responsible for the military­ technical policy. This allows it to lobby for its interests damaging both its immediate competitors and the potential of the helicopter industry as a whole. Office competition has significantly weakened the capacities of the Russian military aircraft industry.

The year 2010 was marked by significant strengthening of OAO Sukhoy Company. Not only had it reinforced its connections with the state structures, but also broadened the corridor of its ability in the sphere of exporting policies and R&D. In particular, the Sukhoy Company is the principal operator of the development project on creation of a multi-purpose destroyer of the fifth generation known as PAK FA. A series of its first tests took place in 2010. PAK FA shall replace the Su-27 and MiG-29 destroyers which currently are in the inventory of the Russian army. This means that in case the PAK FA is commissioned in the inventory (will be identified as Su in accordance with the general classification), the RSK MiG OAO will practically lose its status of the military production provider for the Russian army. In 2010, the MiG Company had not started a single major development project. The latest sample of military equipment presented by MiG is the MiG-35 multi-purpose light destroyer. However, it hardly could be considered a principally new system. MiG-35 had been designed in the 1990s on the basis of MiG-29. A similar situation is having place at OAO Yakovlev OKB, which belongs to OAO NPK Irkut Corporation. The Company’s latest major development was a multi-purpose aircraft of vertical takeoff and landing (SVVP) Yak-141, cancelled due to financial obstacles in 1992. The only competitive sample of military equipment produced by the company is the training/battle aircraft Yak-130. In 2010, its flight tests targeted at enhancement of its weapons capacities had taken place. In its turn, the Russian army had received only 9 machines of the kind. Altogether, the Russian army had ordered 62 Yak-130 aircrafts. It comes that due to political capacities of its leaders, the Sukhoy Company de-facto became the dominating force in the sphere of the military aircraft industry. However, it would have been incorrect to overestimate weaknesses of the Russian DIC. In 2010, its potential proved to be sufficient to extend if not attacking but sufficiently stable military-technical course in the world arena. The best results RF had shown in its military dialogue with Vietnam. Hanoi’s specific interest in acquisition of the Russian weapons and readiness to pay for it stipulated the fact that the Socialist Republic is one of the five leading importers of weapons from Russia. According to forecasts, Vietnam will turn into the second major buyer of the Russian military equipment after India in the nearest future.

While a whole batch of contracts with Hanoi had been signed in 2008-2009, the year 2010 was also marked with a number of status agreements. In February, Moscow and Hanoi signed a contract for supplying 12 Su-30ÌÊ2 destroyers and aviation equipment to Vietnam. The total cost of the contract amounted to USD 1 bln. In March 2010, the RF MOD declared its willingness to help the Vietnam Navy to establish a submarine deployment base. In the end of 2010, the second Gepard 3.9 escort ship was commissioned in the inventory of Vietnam; the first ship was supplied to the Navy of the Socialist Republic in December 2009. The Kremlin’s positions remained quite strong in Northern Africa. The major contractors of Russia here were Algeria and Libya. Algeria had been trying to buy equipment of quite broad scale. In March 2010, a contract for supplying Su-30MKI destroyers was signed. Under the frames of the contract, the Republic will receive 16 aircrafts. The cost of the contract amounted to nearly USD 1 bln. An agreement for supply of 38 AAMC Pantsir-C1 anti-aircraft missile complexes for more than USD 500 mln. was reached with Algeria. The dialogue with Libya had been developing on the same big scale but was coming to some practical outcomes only after lengthy negotiations. In January 2010, a contract for weapons supply for the total of Euro 1.3 bln. was signed with the Jamahiriya. The contract assumed sales of battle and training aircrafts (Su-35, Su-30ÌÊ2, Yak-130), modernization of tanks (Ò-72), and completion of construction the Kalashnikov submachineguns production plant. In 2010, some punctual breakthroughs had been achieved in markets that were principally new for Russia. For the first time in many years, Moscow has returned as a weapons supplier to Africa to the South from Sahara. In March, Russia and Uganda had signed a contract for six Su-30MK2 destroyers supply to this African country. The sum of the transaction amounted to USD 200 mln. Argentina became a new customer of the Russian defense industry’s production. In April, information about a contract between Rosoboronexport and the Argentinean MOD for supply of Mi-171Å helicopters appeared. The sum of the transaction amounted to Euro 20 mln. Besides this, Rosoboronexport offered Buenos-Aires to purchase the air defense complexes and other military equipment. Strengthening of the military-technical connections with other Latin American countries continued, including those which had never before revealed their interest in the Russian/Soviet weapons. In July 2010, a contract on supply of eight helicopters, i.e., two Mi­35 and six Mi-171Sh carriers was signed with Peru. The sum of the transaction amounted to USD 107.6 mln. Negotiations between RF and Uruguay had begun on the supply of the Tiger armored cars. Moscow started to provide Brazil with Mi-35Ì carrying/battle helicopters (the Mi-24Ì export option) by the contract of 2008. In addition, Brasilia was offered the anti-aircraft missile complexes along with participation in the PAK FA development. Afghanistan became a ‘new old’ partner of Russia in the field of military-technical cooperation (MTC). In 2010, Kabul sent a request for weapons supply to Moscow. In 2011, a resolution on this matter was adopted after RF and NATO had agreed on the supply of 24 Mi-17 helicopters to Afghanistan. A special direction of MTC in 2010 was ‘credit cooperation.’ The Kremlin had come to major defense industry’s production sales agreements with a number of countries. However, implementation of such contracts had been carried out at the account of providing Russia’s loans to the contractors. This way, RF stimulated its activity at the world weapons market. It became known in February that Russia will provide Sri-Lanka with a loan for USD 300 mln. to buy Russian weapons and double-purpose production. In April, Moscow stated its intentions to allow credit in the amount of USD 100 mln. to Bolivia. It shall be used to purchase Mi-17Â-5 carrier helicopters. At the same time, Venezuela’s intention to order Russian military production at the cost exceeding USD 5 bln. was announced. This sum is including a USD 2.2 bln. loan provided to Venezuela by RF in September 2009. Russia’s substantial actions at the weapons market are justified by the fact that for many countries products offered by Russia are, but, at minimum, modern if not super new. They are capable to support their national security and significantly increase their military potential. This explains the current Russia-Vietnam or Russia-Venezuela military-technical cooperation. This means that even with the weapons systems, most of which are modernized versions of the 1970s-1980s developments (e.g., Su-30, Su-35), Moscow is still quite competitive. Russian offers are good for a number of countries in Asia and Latin America also by the cost/quality ratio. They are technologically better than similar Chinese samples, while noticeably cheaper than the weapons systems offered by the U.S., UK, and France. This means that to a big extent the Russian weapons export in 2010 was of remainder character. It was mainly based on the manufacturing base of the 1980-1990s and targeted at the states willing to upgrade their armed force to the fourth generation level. Such approach could be of interest only for states with seriously obsolete weapons and no national DIC. No surprise that China was not listed among the leading military-technical contractors of Russia in 2010. Beijing has already purchased from Moscow all samples of military equipment it had been interested in, while systems it could be interested in still were at the stage of either development or testing, or had just begun to be supplied to the Russian army. In particular, we are speaking about ZRS S-400, ZRS S-500, air-engines of the AL-41F1 type (exploited in Su-35) and Il-476 military carrying aircrafts. Moscow proved to be unable to sell Beijing any of the indicated production types. A similar situation is taking place in the relations between Russia and its other leading military-technical partner, India. The level of New Delhi’s interest in the Russian weapons is reducing both due to the lack of new weapons samples and drawbacks of the post-sales maintenance. In the result of this, the number of bilateral contracts in 2010 was small. Among those we could mention the additional agreement on modernization of the air-capable Admiral Gorshkov cruiser (named Vikramaditya in the Indian Navy) for the amount of USD 2.35 bln, and a contract for 29 MiG-29Ê deck destroyers (the sum of the contract is USD 1.5. bln.). In the rest, Moscow limited itself with executing the earlier signed contracts. In May, the Sukhoy Company started implementation of the first stage of the Super 30 project on modernization of 40 Su-30MKI destroyers. Since 2015, the project will be carried out by the Indian Hindustan Aeronautics Company independently. In June, the dwarfs of the Jantar ship building Plan commissioned the Tarkash (Quiver) Frigate built for the Indian Navy. Lastly, in September, India had received the first of the 80 ordered Mi-17Â-5 helicopters. The contract for supplying New Delhi with battle/carrying helicopters was signed in December 2008. A principally new trend in 2010 was emergence of Russia’s competitors for the sales markets among the leading consumers of its weapons. First of all, this is PRC. The People’s Republic of China established serial production of Russian weapons at the account of their secret replicating and started to position it as its own original production. Taking into account that the two countries have practically the same pool of military/political partners, the two players started their fight for the right to export their own weapons systems.