COMMENT: Russia makes breakthrough in Gulf weapons market

By bne IntelliNews November 26, 2007

Ariel Cohen in Washington -

After the groundbreaking visit by the Russian President Vladimir Putin to Saudi Arabia and other Middle East states earlier this year, Russian weapons exporter Rosoboronexport has announced a historic first: Russia will sell Saudi Arabia helicopters and related services worth $2.2bn.

Sources in Moscow have confirmed that Putin spoke to King Abdullah of Saudi Arabia about Russian arms sales to the kingdom during his visit. The Russian president has made challenging the US and European manufacturers in their traditional markets a key priority for his administration.

According to the Stockholm International Peace Research Institute, Russia is currently the second-largest arms exporter in the world after the US. It exported $6.6bn worth of arms in 2006 compared with $7.8bn by the US.

The package for the Saudi Kingdom will include Mi-35 attack helicopters (Nato designation HIND-E manufactured by the famed Rosvertol from the southern city of Rostov), and transport choppers Mi-17 and Mi-8.

Experts say that the quality of Russian helicopters has improved, while Rosoboronexport offers better service and training packages than in the past. Russia beat Sikorski and the French manufacturers, who tried in vain to sell the Saudis their more expensive Eurocopter. Russia is also expecting the Saudis to make a decision on a $1bn package that includes T-90 tanks and armoured personnel carriers. However, Moscow isn't selling the Saudi its crown jewels. The best Russian attack helicopter, Mi-28, nicknamed Nochnoy Okhotnik (The Night Hunter), is currently going exclusively to the Russian air force and has not been offered to Gulf customers yet.

New clients, new friends

These arms deals demonstrate that Russia is challenging the US for leadership in such exports. Furthermore, it indicates that Moscow is not backing off from expanding into new markets that have traditionally belonged to the Americans, the British and the French. Recently, Moscow sold submarines and other hardware to Indonesia. "Arms sales create allies," says a Moscow security expert who requested anonymity.

China is also increasing its exports to the Middle East as its dependence on oil supplies from the region grow. Saudi Arabia is looking to diversify its security providers, to include the resurgent Russia and fast-growing China. But neither Moscow nor Beijing are capable of offering the Gulf states, obsessed with the Iran's regional ascendancy, what the US can: a comprehensive security blanket, including troop deployment in the area, naval presence and, at the end of the day, a nuclear deterrent.

Still, Washington is unhappy about the Russian arms sales encroachment. In November, the House of Representatives introduced a bill sanctioning Russia, ostensibly for selling arms to Iran, Syria, and Venezuela. The sanctions are focusing on a $700m contract to supply to Teheran 29 units of TOR-M-1, a short range anti-aircraft missile system, which would protect the Iranian nuclear infrastructure. They also mention supply of the Strelets ("shooter") to Syria. Strelets is an integrated missile and cannon system, which also includes radars and computers.

Venezuela, another US nemesis, is buying from Russia 50 military helicopters, 24 modern Sukhoi-30 MK2 fighter jets, 100,000 Kalashnikov rifles and factories to produce Kalashnikovs, and shoulder-launched missiles, the famed RPGs. The Venezuelan soon-to-be dictator Hugo Chavez believes that his Bolivarian revolution has to be protected from "Yankee imperialism," - a tune straight from the songbook of from his Cuban teacher Fidel Castro.

The destabilizing Russian arms sales come at the same time as the US is selling billions of dollars' worth of military hardware to Saudi Arabia, other Gulf states and Israel. As such, Russia is rejecting US criticism. "Any attempts to dictate the restrictions based on one-sided and politicized views cannot and will not be taken into consideration... Russia has always observed, observes and will observe all international obligations in the defence field," says Putin.

Russian and Western experts interviewed in Moscow and Washington claim that selling weapons to volatile areas, often to both sides in a conflict, is a time-honoured Russian practice. For example, in 1981-1988, the USSR has sold arms to its protégé Saddam Hussein, and to Khomeini's Iran.

While selling nuclear reactors and expertise, aerospace and military technology, and weapons to Iran, Russia wants to cash in on insecurity in Saudi Arabia and elsewhere in the Gulf by providing multi-million-dollar weapons contracts.

The Moscow of today is obsessed with being on a par with Washington. Some Russian analysts have now even pulled the Leninist thesis about the "terminal crisis of capitalism" out of mothballs. They believe, together with Chavez and Iran's Ahmadinejad, that the fall of the dollar conclusively proves the US' doom, forgetting both the size of GDP and military power that Washington commands.

Above all, the pragmatic and opportunistic Russians see a chance to make a buck on arms sales in a region currently flush with cash - and bedeviled by insecurity. And if Washington is fuming about it, so much the better.

Ariel Cohen, Ph.D., is Senior Research Fellow at the Heritage Foundation. He visited Moscow this month.

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