Looking for New Arms Export Markets: Focus on CIS Petro-States
Russian government officials in charge of arms exports continue to make optimistic noises in public – but the situation with new export contracts is obviously deteriorating. The reasons for that are manifold. China has stopped buying new Russian ships and aviation platforms, with the exception of helicopters. There is growing competition on the Indian market. The Venezuelan market is subject to extremely worrisome political and economic risks. The Libyan market has ceased to exist for Russia, for all practical purposes. Finally, there is the disgraceful decision by Moscow to join sanctions against Iran. Demand from Algeria and Vietnam remains strong, but it is not nearly enough to compensate for the losses on other fronts. Russia is therefore faced with an urgent need to look for new regional and product niches if it is to sustain its current arms export figures.
One possible solution is to woo the CIS oil producing nations, i.e. Kazakhstan, Azerbaijan and Turkmenistan. All three have stepped up their arms procurement programs in recent years. It is well known, for example, that Azerbaijan has bought an estimated two batteries of the S-300PMU-2 SAM systems and large numbers of Russian helicopters, including transports, assault-landing models and the Mi-35M attack helicopters. But all three countries are increasingly buying from Europe and especially Israel rather than Russia. The reasons for their growing arms imports are obvious: they have accumulated large currency reserves; their GDP growth is strong (albeit volatile and dependent on oil prices); and they all face obvious military-political risks.
Of the three countries, Azerbaijan is the largest buyer of Russian weapons at the moment – but for various political reasons, it is the Kazakh market that appears the more important for Russia. These political considerations are more compelling than the purely commercial ones, which is why Moscow should adopt a very flexible approach to military and technical cooperation with Astana instead of just focusing on profits. There are several key reasons why Kazakhstan is so important:
The country is Russia’s most important and cooperative partner as far as political and economic integration in Eurasia is concerned. That integration appears to be the main project President Putin will pursue during his current term of office. Arms trade and defense industry cooperation with Kazakhstan could become a tangible manifestation of the idea of the Eurasian Union.
Unlike Azerbaijan, Kazakhstan remains part of the Russian civilizational - and especially linguistic - sphere of influence. That makes it easier to sell Russian weapons to that country.
Kazakhstan is Russia’s most militarily capable ally in the explosive Central Asian region. Military alliance between the two countries necessitates a high degree of operational compatibility of their weaponry, which is easier to achieve by arming the Kazakh forces with Russian-made hardware.
One final advantage is that the existing Kazakh infrastructure is well-adapted to operating Soviet/Russian weaponry. Experience shows that when such infrastructure is already in place, a transition to Western hardware becomes a very expensive proposition. A case in point was Poland’s decision to buy American F-16 fighters. Once the cost of running these aircraft became clear, the Polish Air Force decided to keep its existing fleet of Soviet-made MiG-29 fighters. What is more, the country operates the largest MiG-29 fleet after India among the non-CIS countries. MiG-29s also remain in service with the Slovak and Bulgarian air forces.
Despite all these considerations, in recent years Kazakhstan has been increasing arms imports from non-Russian sources. Witness, for example, the results of the KADEX-2012 exhibition held last May:
The Kazakh MoD, the Kazakhstan Engineering company, and Eurocopter signed a protocol of intention regarding a possible contract for EC-725 helicopters and for launching their assembly at the Eurocopter Kazakhstan Engineering venture;
Another protocol of intention was signed by the Kazakh Naval Command, Kazakhstan Engineering, MBDA France SAS and Spain’s Indra Sistemas S.A. According to Kazakh media sources, the protocol concerns the possible purchase of the MBDA Exocet MM40 Block 4 coastal defense anti-ship missile system to strengthen the Kazakh defenses on the Caspian coast;
Ukraine’s Ukrspetsexport arms exporter and Kazakhstan Engineering signed a contract to launch joint production of the BTR-4 APCs.
Kazakhstan Engineering alone signed 1.8bn dollars worth of long-term cooperation deals (for the period until 2020) with leading foreign defense companies.
Clearly, Russia cannot view Kazakhstan as a captive market merely because it has all the advantages listed earlier in this article. It is therefore very encouraging that the latest Russian MiG-29M2 fighter was very well received at KADEX-2012, earning praise from senior Kazakh officials, including President Nazarbayev and the air defense commander, Aleksandr Sorokin. Aircraft and air defense systems are the two key segments of the Kazakh market which the Russian arms exporters must do their utmost to defend from foreign competitors. The MiG-29M2 makes that task entirely achievable. Its main advantage is that the carrier-based version of the aircraft, the MiG-29K, is already being made in large numbers for India, which has placed an order for 45 units, and for the Russian Navy, which has bought 24. Besides, exports of the MiG-29s, including sales to the CIS petro-states, will be a lot less sensitive politically than the eventual exports of the heavy Su-30 fighters. The latter have a lot more firepower and a longer range, and will therefore cause a much more nervous reaction among the buyer’s neighbors. Between the two models, the MiG-29s are clearly the much lesser irritant.
Russia must act energetically and waste no time in its efforts to secure the Kazakh market (though the same applies to the markets of Azerbaijan and Turkmenistan). The current integrationist policies of the Kazakh government may well change if the competent and far-sighted President Nazarbayev leaves the political scene for some reason. The pro-Western trends brewing among the Kazakh political elite may spread to the Kazakh army as well. Time may well be working against Russia – which is why Russian arms exporters should not waste it.