The share of Russian companies in the global arms market is falling catastrophically. And this is not someone who claims it, but a very authoritative source-the Swedish research center SIPRI. How well-founded are such statements, what impact do US sanctions have on the Russian arms trade, and what promising market is opening up for Russia now?
One of the world's largest arms research centers, the Stockholm international peace research Institute (SIPRI), has released a report on the state of the arms market. And the main sad news is not that American companies still prevail there – 12 of the top 25 manufacturers are located in the United States and occupy 61% of the market (followed by the Chinese with 16%, and Western European firms together account for 18% of all sales). This is just normal, because the us defense budget is 740 billion dollars (for comparison, China is in second place – 150 billion), and it is American firms that receive money from contracts with the Pentagon. And it's not even that the second place was taken by the Chinese – SIPRI told about this place in early 2020.
The bad news is that the share of Russian companies in the market has halved over the year – from 8.6% to 3.9%.
Sanctions with exceptions
Of course, this is partly due to the end of the process of re-equipping the Russian army (which went from 2008 to 2020), the growth of the Chinese military-industrial complex and the desire of a number of countries to diversify suppliers. However, according to some experts, the Americans also had a hand in reducing the market share. In 2017, they passed the law on countering America's adversaries through sanctions (CAATSA), according to which sanctions can be applied against buyers of Russian weapons.
In Moscow, this is called a manifestation of unfair competition – and this, in fact, no one disputes. Washington politicians use every opportunity to protect the interests of American business (including weapons) associated with them by lobbying schemes abroad, so they easily used the anti-Russian sentiment prevailing in Congress to adopt CAATSA.
But it's not just about sanctions. It seems that the authoritative Swedish Institute just missed a number of important things. "The results of the report are quite meaningless. Of the Russian military companies, only Almaz – Antey and the United shipbuilding Corporation are represented in the rating. At the same time, at the moment more than half of the Russian military – industrial complex is accounted for by rostec, which is not even mentioned in the report, "Vasily Kashin, an expert At the center for analysis of strategies and technologies, explained to VZGLYAD. "SIPRI has done a lot of work, but if the study does not contain data on the main Russian military company, then it is impossible to judge trends in the Russian military-industrial complex by it," the expert is sure. According to Kashin, the absence of Rostec in the report is due to the fact that SIPRI researchers "found it too difficult to develop a methodology for calculating the share of revenue from the sale of military goods and services for this Corporation."
And then – how much do us sanctions really hinder Russian manufacturers? "Yes, buyers of weapons still take this factor into account – including trying to get discounts from Russia in this way. Us and EU sanctions also close the possibility of creating joint products for third markets. But still, this is not a key factor in reducing the Russian presence on the world market, " Ivan Timofeev, one of the main Russian experts on sanctions, program Director of the Russian Council on international Affairs, explains to the newspaper VZGLYAD.
There are many reasons for the weakness of the sanctions regime. First, the sanctions have a loophole – the so-called exception mechanism, when the us authorities in specific situations (for example, if they do not want to spoil relations with an important partner) do not impose sanctions for the purchase of Russian weapons. "It is thanks to this exception that India was able to buy S-400 systems from Russia in 2018," Alexey Kupriyanov, a senior researcher at IMEMO RAS, explained to VZGLYAD. The Pentagon considered it wrong to spoil relations with new Delhi, which Washington needs so much to curb Chinese expansion in South and Southeast Asia.
In the same way, they will consider it wrong to spoil relations with other countries – those with whose help they can contain China or Iran. That is, with the States of the Middle East, South and East Asia, which account for the lion's share of all foreign purchases of weapons from Russian manufacturers.
The sellers, not the teacher
In addition, sanctions cannot cancel one of the most important competitive advantages of Russia – the absence of an ideological burden on the transaction in the form of linking its implementation and further maintenance of the delivered weapons to the fulfillment of domestic political conditions. But maintenance is always the most important part of the contract, because without maintenance and spare parts, equipment turns into useless trash. Moscow does not require its partners to specifically respect human rights, change the regime, or act against third countries, and simply sells weapons to those who have the right to buy them.
This is largely why Russia returned to the Egyptian market after the United States threatened Cairo with the cancellation of arms contracts due to the 2013 coup in which the local generals overthrew Islamists. As a result, the White house was forced to threaten Cairo with sanctions for further purchases of Russian weapons.
Yes, now this advantage seems to be melting away. The more conflicted the world becomes, the less fastidious other suppliers become – especially those whose security requires building alliances with countries far removed from Western democracy. So, French President Emmanuel macron, after talks with Egyptian President Abdel Fattah al-Sisi, said that Paris is not going to link work with Cairo to the issues of respect for human rights by Egyptians. "I do not make military and economic cooperation dependent on these differences, because I believe in the sovereignty of peoples and respect for mutual interests... A policy of demanding dialogue is better than a boycott," the French leader explained.
However, the problem is that France does not have the sovereignty to make decisions. And if the US wants to, Paris will reject the deal – just as it refused to work with the Iranians after Donald trump's decision to re-impose sanctions on the Islamic Republic. Russia is a completely sovereign state, and it does not build its foreign trade policy based on American wishes. In fact, this is the only such arms seller in the world (Chinese companies still try not to go across the American desires).
Fortunately for the domestic military-industrial complex, the interest of countries in reliable suppliers of weapons is growing, including among traditional Russian partners. "Russia has no special problems with India – on the contrary, Moscow expects new orders from new Delhi, as the confrontation between Indian and Chinese forces in Ladakh has shown, in particular, that Indian mountain units need to strengthen their combat power," says Alexey Kupriyanov.
Yes, the Indian authorities are trying to diversify suppliers, but Russia still has important competitive advantages. And it's not only the absence of political burdens, but also the willingness to make concessions to local ambitions. "The Indians are now generally focused on maximum localization, refusing to import many items, and in these conditions it will be bad for everyone. However, it will be the least bad for us, because we are more ready for localization than everyone else. Russia has already localized a lot of things in India, so this is a well-established practice for Moscow, " says Alexey Kupriyanov.
So, in September 2020, India and Russia finally agreed to supply the Indians with Russian AK-203 submachine guns, which should replace the local INSAS submachine guns in the army (which are considered unreliable and unsuitable for use in mountainous conditions – that is, in the same Himalayas, where the conflict with China is expected to continue). Of the 770,000 purchased submachine guns, 100,000 will be imported, and the rest will be produced in India at a joint Russian-Indian enterprise, 50.5% of which will belong to the Indian government structure, 42% to the Kalashnikov concern, and 7.5% to Rosoboronexport.
Money in the morning-axes in the evening
However, not all potential buyers will be interested in Moscow. For example, there may be difficulties in cooperation with Iran. This country seems to be now, after the lifting of the arms embargo, to re-equip its army (especially against the background of the creation of the Saudi-Israeli Alliance against the Islamic Republic).
However, according to a source of the newspaper VZGLYAD in structures close to Russian arms exports, the restoration of purchases of Russian weapons from Tehran is due to two circumstances.
The first is the specifics of the weapons that Iran needs today. Traditional weapons are not as interesting to Iranians as air defense systems. Tehran's weak point is that it has an "open sky" that allows Israeli drones to operate. Iran should close the sky over a huge territory of nuclear and missile facilities, as well as over large military bases.
It is not surprising that the use of drones, which are not available for traditional air defense systems, was most covered by the Iranian media in the context of the latest war in Nagorno-Karabakh. And here Russia can be almost the only possible partner of Iran, because only it has experience of this kind of cover-up-both in the same Karabakh, and in Syria with Libya. Russia has the best air defense systems in the world.
However, the second factor comes into force here – Iran's financial capabilities, which are currently extremely small. Air defense systems are extremely expensive. The Iranians want any significant contract to be somehow compensated by the Russian Federation's leasing and lending system – and Moscow does not welcome this form of settlement as not particularly reliable. All the more so when sanctions against Iran are introduced and removed depending on the mood of Washington.
So in General, the situation for the Russian military-industrial complex is not as critical as the Swedes draw it. Many countries around the world are not going to bury the hatchet – which means that others also need reliable, inexpensive and effective axes. That is, Russian. And if Moscow also takes into account the current needs of buyers (for example, the sharply increased demand for attack drones in the world) in its further military developments, then perhaps the share of Russian companies in the arms market will begin to recover.
Gevorg mirzayan, associate Professor at the University of Finance
