Moscow Defense Brief

MiG-29 on the Market: Recent History and Outlook

Konstantin Makienko

Sales of the MiG-29 family of Russian fighter jets have been extremely volatile over the past 12 years. They completely flatlined at the turn of the century; then picked up again; then plummeted in 2007-2008, before rapidly regaining lost ground after 2009.

In the mid-1990s MiG chose a very unfortunate marketing strategy. In 1994 the company clinched a lucrative deal with Malaysia, which placed an order for 18 MiG-29 jets. That led to some unrealistic expectations on the part of MiG managers, who massively overpriced their products. As a result, only two small contracts were secured in the late 1990s. Peru bought three MiG-29SE aircraft, and Bangladesh placed an order for eight MiG-29s. By the end of the decade MiG itself ceased to exist as a single company. It split into three components: MAPO (former Aviation Plant No 30), which controlled the manufacturing assets; the ANTK Mikoyan Design Bureau; and VPK MAPO, which was in charge of administration and asset management. Each of these three components became an independent and economically autonomous entity.

But MiG then made a sharp turnaround after 1999 following the arrival of new management, led by Nikolay Nikitin, and with the government showing more interest in the company?s plight. To begin with, the separate fragments of MiG were once again consolidated under VPK MAPO; the new entity was named RSK MiG. The company?s R&D program was also revitalized; it started to make more rapid progress on the development of new MiG-29 versions ? primarily the MiG-29SMT (9-17/9-18) and the MiG-29K (9-41/9-47). RSK MiG then secured a series of new contracts which enabled it gradually to resume production and to increase R&D spending.

In 2000-2003 it signed several contracts with customers in Africa, the Middle East and Southeast Asia for a total of more than 45 MiG-29 aircraft of various modifications. It also secured orders for the new MiG-29SMT version of the fighter jet, and for upgrading previously supplied aircraft to MiG-29SMT specification. Two MiG-29 jets were delivered to Eritrea in 2001; some time later (presumably in 2005) they were upgraded to MiG-29SMT (9-18) spec. In 2003-2004 a total of 12 MiG-29s were supplied to Sudan, which paid an estimated 140m-150m dollars for them. Burma placed an order for another 12 aircraft in 2001; deliveries were made in 2001 and 2002. Finally, MiG secured a large order from Yemen, which bought a total of 20 aircraft and later had some of them upgraded to more advanced specification. In 2001 the country bought 12 MiG-29s and two MiG-29UB combat trainers for 420m dollars. In 2004 it placed another order for an additional six new MiG-29SMT (9-18) jets, and signed a contract for upgrading the previously supplied 14 aircraft to the MiG-29SMT spec.

As a result, by the mid-2000s MiG had overcome the crisis. Its corporate structure and financial situation were much improved compared to the late 1990s. It had developed a new competitive product, the MiG-29SMT, and everything seemed to be in place for the company to resume continuous mass production and development of new models.

The outlook for the exports of the MiG-29 family was especially promising in 2004-2007. In January 2004 India commissioned Russia to upgrade the Soviet Navy Admiral Gorshkov aircraft carrier, which will be renamed the Vikramaditya once it has been delivered to the Indian Navy. At the same time New Delhi placed an order, worth an estimated 750m dollars, for the development and manufacture of 16 MiG-29K/KUB (9-41/9-47) carrier-based fighters. In 2004-2005 MiG was also negotiating a large contract (for up to 50 MiG-29SMT fighters) with Venezuela; the company was very optimistic about the changes of the deal being signed. In 2006 it signed the ill-fated 1.3bn-dollar Algerian contract for 28 MiG-29SMT (9-19) jets and six MiG-29UB combat trainers. Finally, in April 2007 Syria placed an order for 12 fighters of the new MiG-29M/M2 modification and four MiG-31E heavy interceptors, worth a total of 1.5bn euros.

Had all of these deals come to successful fruition, exports of the MiG-29s might well have reached about the same level as the sales of the Su-30. But Venezuela eventually opted for the Su-30MK2 model, made by MiG?s main Russian rival Sukhoi. Algeria, for reasons which mostly had to do with a power struggle within its military-political establishment, cancelled the 2006 contract and returned the 15 aircraft it had already received from RSK MiG. The outlook for the Syrian contract is very uncertain owing to the ongoing civil war in the country. The failure of the Algerian and Syrian contracts; Venezuela?s decision to buy from Sukhoi instead of RSK MiG; and the world economic crisis which began in 2008 ? a combination of all these blows pushed RSK MiG back to the financial brink.

Fortunately, the company managed to secure new contracts, and the government quickly stepped in to provide much needed support. As a result, RSK MiG was soon well on its way to recovery. The Algerian fiasco was a blow for the company?s reputation ? but in purely financial terms the failure of that contract was actually a boon. RSK MiG retained the Algerian deposit of 250m dollars, and all 34 of the aircraft previously destined for Algeria were then bought by the Russian Air Force (which we believe paid at least 15bn-20bn roubles for them). In December 2009 Burma placed an order for 20 MiG-29B/SE/UB fighters. The contract, which is worth 410m euros, was not only important economically, but also helped to restore MiG's reputation. Then in 2010 the Indian Navy converted its option for an additional 29 MiG-29K/KUB carrier-based fighters into a firm contract worth 1.5bn dollars. Finally, in 2012 the Russian Navy placed an order for 24 MiG-29K/KUB fighters, which will be assigned to the 279th Independent Naval Fighter Air Regiment.


Outlook

There are several good reasons to be upbeat about the outlook for domestic and foreign sales of the MiG-29 family.

  • Compared to advanced heavy fighters, these jets are relatively simple and cheap to maintain.

  • Politically, exports of medium fighters are not very sensitive because they have a limited operational range and payload capability compared to heavy fighters (i.e. those with a take-off weight of over 30 tonnes)

  • There is a large fleet of older versions of the MiG-29 operated by 28 countries, which already have the necessary ground infrastructure and trained personnel. Some of these countries are potential buyers of more advanced MiG-29 versions.

  • The MiG-29K carrier-based version of the fighter has no competition in its niche on the world market. Currently this is the only horizontal take-off fighter that can be deployed on aircraft carriers without a catapult.

  • Russia still retains some leverage which enables it to restrict Chinese exports of the FC-1/JH-17 and J/F-10 fighters, which compete in the same technological, financial and political market niche as the MiG-29.

There are several potential buyers of the MiG-29s at the moment.

India. RSK MiG has failed to win the Indian Air Force?s MMRCA contract; the Indians have opted for France?s Dassault Rafale. Nevertheless, the MiG-29 still has a fighting chance on the Indian market. There is little doubt that the ongoing dispute between the Indian buyer and Dassault Aviation about the price and the transfer of technology will eventually be resolved. But the negotiations will take time. Besides, based on the experience of other large international programs in India, the roll-out of production under license at India?s state-owned HAL facilities will probably be very slow. In the interim, the Indian Air Force will have to buy fighter jets from elsewhere in order to maintain the size of its fleet. Naturally, it would make sense for it to buy only the models that it already operates. The Dassault Mirage 2000 has already been discontinued, which leaves the Indians with only two options: the Su-30MKI and the MiG-29. This is why there is a distinct possibility of a new Indian contract for 20-24 MiG-29UPG (9-20) newly-built fighters. Furthermore, as India presses ahead with its program to build indigenous aircraft carriers, it will need to buy more of the MiG-29K/KUB carrier-based fighters in addition to the 45 that it has already ordered (some of them have already been delivered). Another contract for 20-24 of these jets is therefore a realistic possibility.

CIS. In recent years there has been a pick-up in demand for weaponry from the oil-producing CIS countries, i.e. Azerbaijan, Kazakhstan and, to a lesser extent, Turkmenistan. All three are potential buyers of the MiG-29M/M2 fighters. Kazakhstan has actually demonstrated an express interest in that model. Besides, Russia has good political and economic leverage to secure contracts from Kazakhstan as well as the other two countries.

?Anti-Western? and ?blockade? markets. The two most lucrative markets in this category, Syria and Iran, are now off limits for obvious political reasons. All arms deliveries to Syria have been suspended pending the resolution of the ongoing civil war. Thanks to the short-sighted foreign policy of President Ahmadinejad, Iran is facing UN Security Council sanctions and a weapons embargo. But the political situation is very fluid. Regardless of the outcome of the civil war, Syria will need to refresh its decrepit Air Force fleet ? and the batch of 12 MiG-29M/M2 fighters for which the country placed an order in 2007 is not nearly big enough for such a refresh. It is not unreasonable to expect that at the very least Damascus will convert the existing option for an additional 24 aircraft into a firm contract. The situation over Iran can also change if, for example, relations between Russia and Qatar continue to deteriorate. A natural Russian response to the aggressive policies of the (Gulf) monarchies could and should include closer military-and-technical cooperation with Iran. Another potential buyer in this market niche is Zimbabwe. At the moment the country doesn?t have the hard cash to pay for Russian fighter jets, and Russian suppliers may face stiff competition for Zimbabwean contracts from the Chinese. But Zimbabwe is very rich in mineral resources, so it should be possible to find some flexible way of financing the deal. As for Chinese competition, Moscow can see it off because Chinese production of fighters in this class remains dependent on imports of Russian engines.

The traditional markets. The MiG-29 would be a natural choice for the relatively poor Latin American, African and Asian countries which already operate the previous generations of the fighter. These include Peru, Cuba, Sudan, Bangladesh and Burma. The Malaysian Air Force has officially announced plans to hold a tender for 18 new multirole fighters ? but the most cost-effective solution would be to upgrade the 16 MiG-29N fighters it already operates to the MiG-29UPG spec, or to swap the old fighters for the new MiG-29M/M2 model under a trade-in scheme. Finally, Russia is discussing the possibility of supplying 12 MiG-29M/M2 jets to Serbia; one of the financing options on the table is a Russian loan.

?Black Swans?. The arms market is extremely unpredictable; it is strongly influenced by political developments and, in some cases, corruption-driven decisions which often come out of nowhere. That leaves a lot of room for deals that currently seem inconceivable. Examples of such deals include the Ugandan contract for Su-30MK2 fighters, or the signing in August 2012 of a series of large Iraqi contracts for Russian air defense systems and attack helicopters. As recently as early 2012 experts believed that any large Iraqi contracts for Russian weaponry were almost completely out of the question. Meanwhile, it has been reported that representatives of the government in Baghdad have expressed interest in MiG fighters as well, so, impossible as it may seem today, an Iraqi contract for MiG-29s should not be completely ruled out. The same considerations apply to Libya, where the Tripoli faction of the new regime, as well as some other players, may try to restore military-and-technical cooperation with Russia. A contract for MiG-29s can come out of the blue from any country that can afford to spend 0.5bn-1bn dollars over 3-5 years on upgrading its Air Force fleet. There are 40-50 countries in the world that fit that description, from Argentina in Latin America to Nigeria or Equatorial Guinea in Africa and Sri Lanka in Asia.

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