Russia pragmatic on arms but is trade healthy?

Moscow, June 19: Missiles to Syria and Iran, warplanes to Venezuela and Myanmar, helicopters to Sudan -- Russia goes its own way when it comes to selling arms, seemingly immune to ethical debates that affect the industry elsewhere.

While European Union members argue over whether to lift a weapons ban against China, almost half of Russia's 6 billion dollars arms sales last year went to Beijing.

As the White House struggles to persuade Congress to approve a US-India nuclear deal that some lawmakers fear could spark an arms race, Moscow is completing two atomic plants for New Delhi.

Russia's arms industry is one of the few national manufacturers that can compete with Western firms on equal terms, and it is a both a source of prestige and key to Moscow's drive to gain new markets for its exports.

''Let's have no illusions: if we stop sending arms to export, then someone else will do it,'' Sergei Chemezov, head of state arms export monopoly Rosoboronexport, said in a rare interview with Itogi business magazine last year.

''The trade in weapons is too profitable for the world to refrain from it. Happily, Russia has understood this. The period of democratic romanticism has changed into a period of business pragmatism,'' said Chemezov, a close friend of President Vladimir Putin since they served together in the KGB.

But this pragmatism has drawn international criticism, and some experts say the apparent health of Russia's arms exports actually conceals an industry in decline, still making money from the leftovers of the Soviet military past.

Big Money?

Russia earns around 5 billion dollars a year from the weapons trade -- a figure dwarfed by its exports of energy, metals and timber.

Its main clients are India and China, but it has also received orders from Iran, Syria, Venezuela and the Palestinians -- buyers some Western countries shy from dealing with.

Russia says it abides strictly by international embargoes, and does not engage in trade with banned regimes. But rights groups criticise it for not unilaterally limiting itself.

The International Action Network on Small Arms (IANSA) says Russia has sold weapons to states whose forces have committed abuses.

''In Russia's export control system, there is virtually no reference to controlling arms exports for reasons connected with respect for international human rights and humanitarian law,'' the network of agencies said in a June briefing paper.

Rosoboronexport officials declined requests for an interview for this story, but customs figures show Russia's arms exports -- of which it controls 90 per cent -- have grown by almost 70 percent since Putin established the agency in 2000. The Kremlin hopes the increasingly aggressive consolidation of the industry at home will make the export trade a cornerstone of its system of state capitalism, before the post-Soviet decline that has plagued production becomes irreversible.

Some experts say that point has already been reached.

''The industry is in deep, terrible crisis. I believe it is beyond recovery because no components are produced. They use old components. The industry has disintegrated, and they have sold the equipment,'' said Pavel Felgenhauer, an independent analyst who closely follows the Russian arms trade.

Very few new weapons were being designed and -- more importantly -- component factories had closed for a lack of new orders and their skilled workers had dispersed, he said.

''This is not an industry, it is a trade. There is no growth in this industry.'' Felgenhauer said the Soviet stockpiles were large enough to keep selling for years and years to come, but the trade was not creating employment or any long-term growth.

''A SELL-OFF'' ''This is a sell-off. These are good weapons for Sri Lanka, say, or Africa. They are easy to use for badly trained personnel,'' he said.

''As for the future: it depends where war will happen.'' General Yuri Baluyevsky, head of Russia's General Staff, said last year he feared the domestic weapons industry might not be large enough to supply the armed forces by 2011.

That, experts say, has led the Kremlin to forge a state arms champion out of Rosoboronexport, originally an export agency.

It has taken control of Russia's top carmaker AvtoVaz, has been eyeing truckmaker Kamaz and is in talks to buy into VSMPO-Avisma, the world's top titanium maker -- reportedly to get hold of Russian firms with easy access to a metal that is key to the aerospace industry.

''It is a kind of state capitalism. Rosoboronexport controls all military exports and we compete well in this sphere, but we need to keep working at it,'' said Gennady Raikov, a member of parliament who worked for decades in rocket design and aviation.

He said the new consolidated system -- reinforced in March when Defence Minister Sergei Ivanov was put in charge of the whole industry -- was a return to the Soviet system of having a single overseer of the military-industrial complex.

''To perfect our technology, we need to pull together,'' said Raikov, who said Russian scientists could create systems as good as Western powers but that investment was needed.

Reuters