Saturday, December 22, 2012

Aggressive Tactics or Business as Usual?

RIA Novosti carried this story the other day: (link here)


MOSCOW, December 20 (RIA Novosti) - Russia’s Vnesheconombank (VEB) will provide Indonesia with a total of $399.5 million in credit to finance purchases of aircraft and related equipment from Russia’s state-run arms export company Rosoboronexport. 
credit will be provided for a seven-year term, Rosoboronexport said.
This is the second credit agreement between VEB and Indonesia’s Finance Ministry in the past two years. 
Last week VEB's deputy chief Alexander Ivanov said VEB won the Indonesian Finance Ministry’s tender to finance the purchase of six Russian-made Su-30MK2 Flanker multirole fighter aircraft.
After looking at aggregate numbers for arms sales, I am still not sure of how specific transactions go down most of the time.  Is this a fairly common practice, or is it unusual?

Here is a look at Indonesia's arms imports for the past 20 years (give or take) created using STATA and data from SIPRI:

Russia is the second largest supplier (By cost) of weapons to Indonesia in the period from 1991 to 2010.  However, the total amount of arms sales has been around $700 million dollars.  Here's a breakdown of Russia's sales (by year) over that same period:

The relationship between Russia and Singapore only began in 2001- and although it has been relatively steady, the maximum amount per year has been just over $200 million dollars.  My guess is that Indonesia is still not considered to be a reliable customer, and this financing deal is meant to try to lock Indonesia's government into longer-term deals that can bring them more fully into Moscow's arms corner.


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