Tag Archives: arms race

Co-Dependent Enemies: US Sanctions and the Russian Titanium

Ttitanium tube containing the Russian flag, in the Arctic seabed 2007

The United States imposed sanctions on Russia’s state arms export agency and four defense industry enterprises for alleged violations of international arms control regimes restricting export of nuclear and missile technologies to Iran, North Korea and Syria on Wednesday.

A notice posted on the U.S. government’s Federal Register on the State Department’s behalf on September 2, 2015 said the move was a response to violations of the Iran, North Korea and Syrian Nonproliferation Act (INKSNA).  The act prohibits the transfer of goods, services and technologies restricted under international arms control agreements such as the Missile Technology Control Regime to Iran, North Korea and Syria.

A spokesman from the U.S. Embassy in Moscow, Will Stevens, told The Moscow Times that the Russian entities sanctioned under the act were among 23 foreign entities — including firms and entities based in China, Turkey and the United Arab Emirates — found to be engaging in violations of arms export conventions.

Russian arms export agency Rosoboronexport said it was unable to comment on the issue at this time.  The Russian defense industry firms that were involved in the alleged INKSNA violations were fighter jet manufacturer MiG, the high-precision weapons maker Instrument Design Bureau (KBP) Tula, NPO Mashinostroyenia — a rocket and missile design bureau in Reutov, outside Moscow — and Katod in Novosibirsk, which makes night-vision optics, among other things. The sanctions prevent any U.S. companies or government agencies from doing business with the sanctioned Russian arms entities.

The U.S. did not specify which arms deals in particular triggered the latest sanctions actions imposed on Russia’s defense industry…

Vadim Kozyulin of the Moscow-based PIR Center think tank argued that the imposition of sanctions under the Iran, North Korea and Syria Non-Proliferation Act was politically motivated …Kozyulin speculated that the arms transfers in question are deliveries to Syrian President Bashar Assad’s embattled regime, or the expected future delivery of advanced S-300 air defense systems to Iran — which, he pointed out, is not prohibited by any United Nations resolutions governing arms sales to Iran…

Russia’s largest arms export partners are nations such as China, India and Algeria…“This is not the first time that the U.S. has imposed sanctions on Russian defense companies,” Kozyulin noted. “I used to compile a list of such cases and I guess that you can count about 40 to 50 times when Russian companies were sanctioned by the U.S. since 1998.”…

However, Yury Barmin, an independent Russian expert on the global arms trade, said that “some Russian companies may import spare parts from the U.S. and the latest sanctions may force them to revise their procurement strategies and delay some outstanding orders.”…
Russians responded to the timing of the U.S. decision to place sanctions on 23 global entities for alleged INKSNA violations by accusing Washington of pursuing and protecting its own interests in the global arms market. Barmin argued that Wednesday’s sanctions were only implemented after the completion of a Pentagon contract with Rosoboronexport to deliver 30 Russian-built Mi-17 helicopters to the Afghan military in the wake of NATO’s withdrawal.“Now that this deal has been concluded the U.S. deemed it possible to impose sanctions,” he said.

The CEO of Russian defense firm Katod, which was producing night-vision goggles for sale on the U.S. market, told  that his company was sanctioned because the U.S. feared Russian competition in this segment of the arms market….

Barmin too pointed to the lack of contact with U.S. financial institutions and argued that existing measures will have little impact, “unless Rosoboronexport [is] prevented from performing banking transactions globally, which would imply cutting Russia off from SWIFT altogether.”

If the tit-for-tat game of sanctions with Russia continues, and the U.S. manages to cause significant damage to the Russian defense industry, Kozyulin pointed out that Russia holds certain trump cards that it could use to fight back at the U.S. defense industry.  “For example, Russian titanium,” which is used for Boeing aircraft, “and engines for space rockets might be prohibited for export to the U.S.”

Excerpts from Matthew Bodner, U.S. Sanctions Russian Arms Export Agency for Non-Proliferation Violation, Moscow Times, Sept. 2, 2015

The Arms Race: Who Lacks an Indigenous Defense Industry

XM1203 Non-Line-of-Sight Cannon (NLOS-C) prototype in 2009. image from wikipedia

Even though Colombia, Kuwait, Malaysia, Morocco and Singapore have very different perspectives and agendas, they are all expected to sharply increase their defence spending over the next 10 years. Due to the arms race and an increasing threat perception, the effects of the 2008 financial slowdown on defence spending in these transitioning markets are gradually reducing.

“Unlike leading transitioning economies like India, South Korea, Turkey, the United Arab Emirates and Brazil, the five countries selected for this study are still attempting to develop an industrial base …,” said Frost & Sullivan Aerospace & Defence Industry AnalystAlix Leboulanger. “Upon a closer look at these countries’ dynamics, it is found that their political intent is stronger than their financial and infrastructure capabilities.”  Several factors are dampening indigenisation plans. The increasingly competitive marketplace has left little room for emerging local players unless they can distinguish themselves appropriately – for instance, with price in Colombia and technology in Singapore. Moreover, weak market prospects beyond local demand, along with the absence of small- and medium-sized enterprises, have restricted partnership opportunities and transfer-of-technology ventures with foreign companies.

Investing in high-end foreign technology is perceived as the way forward to fulfil three objectives: achieving modernisation programmes, consolidating the domestic industrial base, and providing employment to locals,” explained Leboulanger. “This will require efficient and easily-applicable regulations to create an attractive and stable environment for foreign investments and industrial partnerships. The lack of skilled personnel and infrastructure, also need to be addressed.”… Financial constraints mean that governments will try to reduce armed forces and invest in combat-proven platforms, surplus material and second-hand equipment…

“As a matter of fact Colombia, Kuwait, Malaysia, Morocco and Singapore are expected to spend 21 percent of their total budget, circa 9.77 billion USD per year, on new equipment.”

Combat Readiness Plans Win Over Defence Indigenisation Targets in Select Markets, Finds Frost & Sullivan, PR Newswire, July 22, 2015