France and Russian Ship Deal - Russia not to Build its Own Ships

Here is the story:

Russia's new Defence Minister has made the decision that Russia will not build Mistral class helicopter-carriers, the Vedomosti newspaper reports with reference to sources in the Defence Ministry. 

According to earlier agreements, France was to build two such ships, with the costs totalling more than a billion euros, while Russia was to build two more ships at its own shipyards. 

But, according to the periodical, the concept of using Mistral class ships by the Russian Navy has turned out to be questionable, while the building and maintenance costs, too heavy. 

France is already building two helicopter-carriers for Russia, with the first one due to be commissioned in 2014, while the second one, in 2015.
Both naval ships will be based in Vladivostok.

My question on this particular case is whether or not Russia is backing out because it just doesn't have the capacity to build enough advanced ships for its own navy while maintaining its ship export commitments.

Russia and India Arms Relations Redux

Vladimir Putin spent some time in India this past week.  One of the primary deals struck between the two states during the visit, was the sale of $3 Billion worth of Russian helicopters - a tender, which was rumored to be going to the United States earlier in the month.

The Russian Ambassador to India had this to say about plans for further cooperation between the two states: (source)

...the deals that have been struck as part of the ten-year programme of military and technical cooperation between India and Russia are estimated at $30 billion. 

On Monday, during the Russian President Vladimir Putin's visit to India, several important agreements in the military area were signed in New Delhi.

The helicopter and other aircraft deal looks like this:

Under one contract, India will buy 71 Mi-17B-5 Hip helicopters worth $1.3 billion, while the other provides for the delivery of assembly kits for 42 Su-30MKI Flanker fighters, worth $1.6 billion. 

The two countries also signed a number of cooperation agreements in the defense and technology sector, notably between Russian Helicopters and Elcom Systems Pvt Ltd.

Here is the blurb from a BBC story that really highlights the personal role that Putin is playing in getting these deals signed:

In an article in India's Hindu newspaper, Mr Putin described as a "historic step" the declaration of strategic partnership between the two countries signed in 2000. 

The Russian leader also said that the military co-operation between the two nations has reached an "unprecedented level". 

Russia's currently accounts for some 70% of India's arms purchases, the BBC's Sanjoy Majumder in Delhi reports. 

But India has recently signed a number of big defence contracts with the US and other countries, including France and Israel, our correspondent says. 

Russia is concerned, he adds, that its traditional position as India's main arms supplier could be under threat.

And that's the rub.  As I have already pointed out on this blog (11/30/2012 "Are they Related?"), India is one of Russia's primary partners.  China has gained ground recently, but India is still number one or two in all years since the early 1990s - and essentially helped keep Russia afloat in the arms export world in the 1990s.  The fact that Putin is soliciting arms deals and spending his time indicates that to the Russian government (in the form of Putin), arms sales are an important aspect of foreign policy.  This is mostly likely due to the domestic implications of losing the ability to produce arms and shutting down the factories that produce Russia's most sophisticated export materials.

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.

When Cooperation, Competition, and Politics Collide

The world of international arms transfers is a complicated one. The more I study the complex interactions of states in this arena, the more complexity I see.  The US and Russia are the world's largest arms exporting states.  In most arenas they are competitors.  The reasons for this are both historical  and current.  The reasons are historical in the sense that there is path dependence in arms patterns established during the Cold War. They are current in that Russia's own domestic political weakness is a factor in its anti-US foreign policy decision-making (See Ortmann 2011).

The US has problems with Russia's arms export agency, Rosoboronexport:

Rosoboronexport was subject to US sanctions from 2006 to 2010 for allegedly providing nations including Iran and Syria with equipment that could be used to develop weapons of mass destruction. (Source)

The Pentagon, in its Afghanistan mission, has turned to Russia's export agency to provide ammunition for the Afghan forces as well as to supply the reconstituted Afghan army with helicopters.  The first batch of helicopters has been delivered and a new contract is in the works.  The US Congress (both the Senate and the House) are working on legislation to prevent US agencies to work with Rosoboronexport:

In mid-June, US Senator John Cornyn called on the Pentagon to take action against Rosoboronexport, but the Pentagon dismissed his claims, saying that dealing with Russia’s arms exporter was the "only legally available method" to supply the helicopters to Afghanistan.

In this transaction the US is essentially acting as an agent for the Afghan military, which has a preference for the Russian helicopters.  This preference is probably based more on historical considerations than current events, but it is their preference.  The Pentagon is caught in the middle.

This transaction - and others like it in Iraq - show the limits in my current research on the arms trade.  When the sale of helicopters is completed it will show that Russia sold arms to Afghanistan.  The US involvement in the transaction - including paying for the equipment with US taxpayer money is not accounted for.

While such transactions are not the norm, they do highlight weaknesses in the way we code arms transfer data and limitations in the ways we can make inferences from such data.

References

Ortmann, Stefanie. 2011. “The Russian Network State as a Great Power.” In Russia as a Network State: What Works in Russia When State Institutions Do Not?, eds. Vadim Kononenko and Arkady Moshes. Palgrave Macmillan, p. 139–163.

Are they related?

In today's mystery music show we examine two news items from the Russian press and ask the question: are they related?

The first is a stringent denial that Russia has lost a bid to supply India (its second largest customer for arms after China)* heavy helicopters:

MOSCOW, November 28 (RIA Novosti) – Russia’s state arms exporter Rosoboronexport denied on Wednesday media reports that it had lost tenders on the delivery of heavy-lift helicopters and aerial tankers to the Indian air force. 

“Rosoboronexport denies media speculation about Russia’s loss in both tenders as these reports are false,” the company said in a statement. (Link to full article)

The second is a story related to the ongoing corruption scandal in the Russian military.

MOSCOW, November 28 (RIA Novosti) – Companies controlled by the Russian Defense Ministry embezzled more than a combined 10 billion rubles ($257 million) this year, investigators said on Wednesday. 

The alleged sum included 6.7 billion rubles ($215 million) suspected to have been stolen via a corruption scheme that cost Defense Minister Anatoly Serdyukov his job earlier this month, Investigative Committee spokesman Alexander Sorochkin said. The sum in the high-profile case was previously reported to be 3 billion rubles. (Link to full article)

Russia's intertwined military industrial complex may be eating itself.  If the corruption within the system increases to a point where Russia cannot competitively sell its arms to longtime partners, the entire house of cards could come crashing down.

Verdict: Possibly related.


* Here is a fun graph I made to show this relationship:

Corruption investigations in the MoD - Filed under: Speculation

This is just a kind of tidbit - a nugget of joy - along with some wild speculation.  For what it's worth.

There has been a story developing about corruption among Russia's Defense Ministry's property department.  That has led to what appears to be a full investigation with documents and other items being seized today in Moscow.

From the article in RIA:

Oboronservis was set up in 2008 and carries out repair and services for Defense Ministry properties as well as repair and maintenance of military equipment and provision of services to military garrison towns. 

A law enforcement source told RIA Novosti that no detentions are planned in the near future as part of the ongoing investigation. 

Defense Minister Anatoly Serdyukov was informed of the investigation and arrived at one of the locations being searched, law enforcement sources said on Thursday morning. 

Russian President Vladimir Putin’s spokesman Dmitry Peskov said Putin met with Serdyukov and instructed him to ensure interaction with investigators on the Oboroneservis case. 

Presidential administration head Sergei Ivanov said it will be up to the court to rule who is guilty. 

“Only the court may determine whether a person is guilty or not. All the rest is vibrating air and propaganda,” Ivanov told journalists.

More details about the latest seizure and ongoing investigation can be found here.

Speculations

Now for the wild speculation.  It does not seem that any large and visible investigation such as this one is every done without the knowledge/approval of the Kremlin.  This investigation, and its timing, may indicate the model of having civilians as a part of the ministry of defense, and part of the defense and security structures within Russia, is under attack.  Many in the military have been unhappy with the civilian head of the Defense Ministry.  A good bio can be found at Wikipedia.

This may be more "Clan" maneuvering among Russia's elites, especially given the fact that Ivanov's held the position of Defense Minister prior to moving over to be head of the the Presidential administration in 2007.  If Kremlin watching is back in vogue, this makes for compelling television.

Why arms control is hard...

This item has been sitting in my reader for a few days.  This statement, made by Vladimir Putin, touches on so many aspects of international relations that I didn't quite know what direction I wanted to take in examining it.  First, the statement:

"Only sanctions imposed by the UN Security Council can serve as a basis for restricting weapons supplies to any particular country. In all other cases, nobody can use any pretext to dictate to Russia or any other country on how they should trade and with whom."

I would like to address two interesting points from the standpoint of my own research on arms transfer that this statement evinces.

1. Arms control is inherently difficult to begin if the two states that have the largest stake in the arms transfer game have an effective veto on limitations of their right to sell weapons.  This is a highly rational position for Russia to take if it sees arms sales as a vital part of its economic, military, or foreign policy portfolio. The built-in veto of the security council turns this international organization into a forum for state to state diplomacy rather than international action in the case of arms transfers.  What I mean by this is that in the case of the US and Russia having disputes over arms transfers to Syria, for example, the veto on the security council by each state means that either state can effectively get what they want in the absence of all but the most spirited international consensus.  
2. The second point is that Putin seems to put arms sales in the same category as other trade.  Nobody can dictate how they trade and with whom.  This is a very interesting sentiment for a state which recently was accepted into the WTO to have.  

The question about arms transfers being a different type of trade is one that I'll leave to another time.  However, Russia continues to hold firm to its position of autonomy in foreign policy.  Its leaders are unwilling to allow the state to be constrained by other states (i.e. the United States) or even by the international community more broadly.