Of all economic sectors, the defense industry depends the most on the state’s foreign policy. This policy directly affects access by the military-industrial complex to foreign technologies, prospects for exports, and the extent and nature of domestic demand.
The military-industrial complex is a highly capital- and science-intensive industry which requires careful long-term planning. Compared with the first half of the 20th century, lead time from design to mass production of new types of sophisticated military equipment has increased several times over. The time span from the start of the R&D of a new type of combat aircraft till the moment the first batch of vehicles acquire initial operational capability usually takes 10 to 15 years. This is much longer than the entire life cycle of a standard fighter aircraft in the 1930s-1940s – from the preparation of the performance specification to the withdrawal from service of the last vehicle.
Changes in world politics often occur faster than military-technical programs are implemented. For example, requirements for an advanced tactical fighter for the U.S. Air Force were set back in 1981, at the height of the Cold War. They resulted in the creation of the F-22, the most outstanding U.S. combat aircraft, but its mass production was launched in 1997 and it reached its initial operational capability only in 2005, 14 years after the breakup of the Soviet Union. In 2011, the aircraft’s production was terminated in the absence of an enemy that would justify the production of such an expensive vehicle.
The international arms market is highly politicized. States seldom decide to buy a piece of equipment relying solely on its performance characteristics and price. Usually, political factors play an equally important role. The arms market is not regulated by the WTO or other trade agreements – a factor which makes permissible any form of subsidization, collusion of suppliers, links of arms sales to various other relations, etc. Decisions on arms sales by arms-exporting countries are also blended into the general foreign-policy context.
Superpowers like the United States or the Soviet Union usually link decisions to sell weapons or military equipment with an intricate set of mutual political commitments, interests of their allies, and ideological considerations. Exporters from among second-tier countries, such as China of the 1980s or today’s Russia, are much more free in their choice of partners.
WHY FOREIGN POLICY MUST MEET DEFENSE INDUSTRY INTERESTS
Before answering the question “What kind of foreign policy would best meet the interests of the defense industry?” one must understand why the foreign policy should heed the interests of Russian arms makers.
Russia has proclaimed a policy of economic modernization. Throughout the history of Russia’s industrial development, this country has moved into advanced positions only in defense production and nuclear engineering (as well as in some allied industries). Beyond these sectors, there are just a few islands of competitiveness.
At the same time, one can hardly say that, compared with the Soviet period, the competitiveness of Russian non-military industries has decreased dramatically. In 1985, machinery and equipment accounted for 13.9 percent of Soviet exports. Most of civilian machinery and equipment was exported to other socialist countries at reduced prices and often on easy credit. Capitalist markets accounted for a mere 2 percent of such exports from the Soviet Union.
Thus, Russia (and previously the Soviet Union) has had no experience of successful development of advanced high-tech industries, with very few exceptions, outside the defense industry, its derivatives (the space industry, the civil aviation industry, and a large part of the present automotive industry), and nuclear engineering. At present, the defense and nuclear industries are the main centers of innovation. This is where the main demand is created for skilled scientific and technical personnel and a high-quality education system. It is these industries that have the expertise and experience required to solve complex management problems of industrial development.
The imbalance in favor of the defense industry in the Soviet Union was probably a mistake, but now the military-industrial complex and nuclear engineering are the only islands of a modern high-tech economy in Russia. Modernization of civil economic sectors will involve the creation of entire industries from scratch, because everything created by previous generations has proven worthless or has been lost. Without reliance on the potential of the defense and nuclear industries, these tasks cannot be resolved within a reasonable time, regardless of the scale of investment, and the Russian leadership understands this perfectly well. Investments alone will not ensure quick training of skilled technical personnel, the creation of scientific schools, or accumulation of experience in implementing complex projects.
THE DEFENSE INDUSTRY AND INTERNATIONAL COOPERATION
Currently, the Russian defense industry is undergoing a change of the development paradigm. During the larger part of the country’s post-Soviet period of development, the Russian Armed Forces did not purchase conventional weapons, relying on what was left of Soviet arsenals. Russian defense industry plants that survived the 1990s and the first half of the 2000s should thank mainly the Chinese and Indian armies for that, not the Russian Armed Forces.
The situation changed dramatically in 2007-2008, when Russia sharply increased spending on the state defense order, and the new defense minister, Anatoly Serdyukov, started a large-scale reform of the Armed Forces. Russia’s defense exports reached U.S. $12 billion in 2011, including $10.7 billion exported by Rosoboronexport ($8.7 billion in 2010). In the same year, the state defense order amounted to 581.5 billion rubles ($18.07 billion).
Although Russian arms exports keep growing, domestic arms purchases are growing even faster: Soviet military equipment made in the 1980s-early 1990s needs immediate replacement. The government’s large-scale 20-trillion-ruble armament program, adopted for the period until 2020, has been criticized by many reputable experts, for example, ex-finance minister Alexei Kudrin. But even he does not deny the need to increase spending on rearmament and questions only the rate of this increase.
At the same time, flaws and weaknesses inherited by the Russian defense industry from the Soviet Union were aggravated by a long period of underfunding in the 1990s-early 2000s. Exports are still very important for the defense industry’s development, but their significance is decreasing. Instead, the defense industry has a growing demand for advanced foreign technologies and equipment and, ultimately, for large-scale integration into international projects. It is already developing cooperation with Italy in the creation of light armored vehicles, and with France in the production of thermal imagers.
So, the Russian government must, on the one hand, firmly uphold Russia’s right to supply weapons to its traditional markets in developing countries and, on the other, build military confidence and develop cooperation with the United States, EU countries, Israel, South Korea and Japan. Implementing this strategy will require complex maneuvering, and actions will be largely situational. For the West, integration of the Russian defense industry into international projects would be a far more effective way to reduce Moscow’s interest in arms supplies to anti-Western regimes than direct pressure on it.
THE DEFENSE INDUSTRY AND FOREIGN POLICY: THE EXAMPLE OF CHINA
When China faced a sharp reduction of the domestic defense order in the 1980s, it increased its presence in global arms markets, regardless of political constraints. While building up cooperation with traditional partners, such as Pakistan and North Korea, the Chinese entered new markets, including countries that had been unfriendly to Beijing just a while before. For example, it sold J-7 fighter aircraft (clones of the Soviet MiG-21) to the U.S., where they posed as Soviet aircraft at military exercises.
In another instance, China sold 50 Dongfeng-3 intermediate-range ballistic missiles to Saudi Arabia in 1987. The move sparked a very negative response in the world and dealt a blow to China’s reputation. The strategic missile system that Beijing sold to the Arabs could reach Israel and even parts of Europe. However, due to its low accuracy, the missile had no value without a nuclear or chemical warhead, which the Saudis, fortunately, did not have. At the same very time, the deal did not prevent China from launching fruitful military-technical cooperation with Israel, which until 2002 was an important source of military technologies for Beijing.
The Iran-Iraq War came as a real salvation for the Chinese defense industry. Beijing sold weapons to both sides. For example, Iran in the 1980s bought from China 720 Type 59 main battle tanks, 520 Type 59-I 130-mm cannons, about 200 J-6 and J-7 fighter aircraft of different versions, and about 300 Type 86 infantry fighting vehicles. Supplies to Iraq included about 1,300 Type 59 and Type 69 main battle tanks, 650 tracked armored personnel carriers (Types 63 and 85), 720 130-mm cannons, a large number of anti-ship missiles, and even H-6D anti-ship missile carriers which were rare even in China’s People’s Liberation Army. Sales of small arms and ammunition to both warring parties are beyond calculation. Chinese weapons were consumable materials in that war; they were in service with the rank and file, whereas elite units were supplied more modern Soviet and Western arms.
Official figures for Chinese arms exports in the 1980s have never been published. Estimates (very approximate) provided by the Stockholm International Peace Research Institute (SIPRI) show that these exports peaked in 1987 and 1988, when China exported armaments worth U.S. $3.2 billion and $2.2 billion, respectively (in 1990 prices). These figures have never since been exceeded: to achieve the 1987 level, exports in 2010 should have reached U.S. $5.27 billion, adjusted for inflation, but, according to most estimates, they stood at about half that figure.
Notwithstanding politics and ideology, arms exports went hand in hand with a policy of increasing imports of defense technologies from the U.S. and Europe. The 1980s saw the beginning of a new stage in the development of the Chinese helicopter industry with the aid of France. In addition, France and Italy helped China launch the production of new short-range air defense systems, some of which went into series production already after the military-technical cooperation was officially terminated in 1989. France also helped China with the production of WZ551 armored personnel carriers, comparable to France’s VAB, wheeled APCs in service with the French Army.
So, although the Chinese defense industry was in technical stagnation in the 1980s, when all its products had grown obsolete, it was the time of its greatest commercial success. China’s example shows graphically how much the arms market depends on external political factors. China, which is a large and politically independent second-tier power, like today’s Russia, has ensured its interests in arms exports and, on the other hand, has attracted foreign technologies.
FOREIGN POLICY MEETING DEFENSE INDUSTRY INTERESTS
The interests of the military-industrial complex in foreign policy presuppose meeting a set of conflicting requirements. Arms makers need a balance between domestic demand and exports which, at the same time, must be combined with involvement in international cooperation. The industry needs a possibility to buy foreign equipment, components and technologies and to broadly engage foreign specialists. The defense industry cannot develop successfully in isolation, relying only on its own industrial and technological potential; there has been no example of that in any major country of the world.
The duration and capital-intensity of defense programs means that the stability of demand, both external and domestic, has a top priority. The state needs long-term foreign-policy planning and the ability to forecast threats to national security, which in turn will help it avoid unexpected twists in the defense policy, changes in priorities, renouncements of long-term arms programs, etc.
It is also important that the state pursue an independent foreign policy and ensure its national security, relying mostly on its own resources and avoiding close military-political alliances. In this way it will guarantee steady and long-term demand for domestically produced armaments. From the perspective of the Russian defense industry (export growth, on the one hand, and growing opportunities for international cooperation, on the other), it would be best for Moscow to pursue an independent and multi-vector foreign policy, as free of ideology as possible.
A confrontation with some country or a group of countries would close their markets for the military-industrial complex and reduce opportunities for interaction. For example, anti-Western rhetoric may put at risk cooperation with EU countries and Israel, which is important for the Russian defense industry, as well as cooperation with the United States in space exploration and the civil aviation industry.
Joining a military-political alliance with a foreign country would also result in a loss of markets. A classic example is Israel which had to end its large-scale and highly advantageous cooperation with China under strong pressure from Washington in 2002-2003 and to cancel a major contract, at considerable loss to itself, for the Phalcon Airborne Warning and Control Radar System and the Harpy unmanned aerial vehicle. U.S. pressure was also behind the continuation of an EU embargo on arms supplies to China, which is detrimental to European industries. Attempts by some countries, for example, France and Italy, to lift the embargo have yielded no results yet.
Russia’s joining military-political alliances would pose obvious risks for the defense industry. For example, while maintaining close and friendly relations with Beijing, Moscow is actively involved in modernizing the armed forces of India and Vietnam, which border China and which are alarmed at the growth of its might. If the allied relations with China were formalized, Russia would be faced with a choice it does not want to make. If Russia establishes a close partnership with the United States, now unlikely but possible in the future, Washington will most likely demand that Moscow limit its cooperation with China, which also may involve serious political and economic costs for Russia.
The current Russian policy generally meets the interests of the national defense industry. Russia does not enter into alliances; it is prepared to sell armaments to all countries where they can be supplied in accordance with the law; and it firmly resists pressure when its military-technical cooperation with some countries causes resentment among other states.
ARMS EXPORTS AND ROGUE STATES
In exporting arms to countries that are in international isolation, Russia does not adhere to some abstract anti-Western principles. In each case, it weighs possible pros and cons. Formerly, Russia on several occasions went back on contracts it had already concluded with some states, such as Syria and Iran (for example, on the contract for the sale of the S-300 missile system). In 1995, it signed the Gore-Chernomyrdin memorandum, which allowed Russia to proceed with already-contracted arms sales to Iran in return for a cessation of all transfers by the end of 1999. Cancellations of contracts for political reasons, for example, under the influence of America and Israel, took place later, as well. All those accords were inked in secret. Moscow used the disclosure of sensitive information relating to the U.S.-Russian understanding on Iran during the 2000 presidential election campaign in the United States as a formal justification for the resumption of its military-technical cooperation with Tehran.
Attempts to exert direct and public pressure on Moscow to make it stop arms supplies fail, as a rule. Russia’s behavior during the current crisis over Syria only confirms this. U.S. statements about the use of Russian-made weapons in repressions against the Syrian opposition, which drew a strong response from the international media, seem to have only strengthened the Kremlin’s determination to proceed with all previously concluded contracts.
At the same time, while continuing to supply the Syrians with previously contracted weapons for a “big war” (air defense missile systems, anti-ship missiles, and combat training aircraft), Russia does not offer Damascus weapons or equipment adapted for use in counterinsurgency operations, such as Tigr armored vehicles, special-purpose and sniper weapons, protective equipment for special forces and the police, special-purpose vehicles, etc. In any case, there has been no information about such supplies. According to some sources, Russia has even stopped selling small arms to Syria, and this was a political decision of Moscow.
To sum up, Russia is ready to take into account possible negative effects of its military-technical cooperation with foreign countries and may enter into secret deals, but it will always react highly negatively to direct pressure. This policy is entirely in the interests of the Russian defense industry and Russia as a state.
PLANNING AND COORDINATION
However, Russia’s strategy in foreign policy and national security lacks long-term planning, which results in frequent revisions of conceptual principles and rearmament programs. Russia’s relations with Washington have gone through several cycles of ups and downs since the beginning of the 21st century, which has had effects on its military-technical cooperation with third countries. President Dmitry Medvedev’s decision to leave Libyan leader Muammar Gaddafi to his own devices and not to interfere with NATO’s military operation cost the Russian defense industry about U.S. $4 billion in lost profits.
Strategic planning for the Russian Armed Forces for many years was done in line with inertial Soviet principles, and later it felt the impact of radical reforms in the Russian army. Judging by some statements, Moscow proceeds from the thesis that the military-political situation in the world will become increasingly deteriorated and destabilized, but, as far as one can see, it does not have a systemic picture of future threats. The Russian leadership is aware of this problem and has plans to establish an agency for long-term national security planning in 2012 (the move was proposed by the deputy prime minister in charge of defense, Dmitry Rogozin, and included in Executive Order 603, signed by Vladimir Putin on May 7, 2012).
Problems faced by Russia’s foreign policy at the tactical level are more serious. Arms exports, especially to developing countries, are often done under complex agreements which also include contracts in civil trade and economic cooperation, mutual political concessions in the international arena, cancellation of old debts, and other aspects of interaction. Achieving results often requires prompt coordination of interests of different departments and state-owned companies and an ability for Russia to control the implementation of decisions made by all the parties to the transaction. But these things do not always work. In addition, there is the major problem of cumbersome procedures for inter-agency coordination, which take a long time and delay the consideration of applications from foreign buyers for months. At the same time, one must be aware that these difficulties stem from inherent problems of the Russian state machinery, namely the weak personnel base, poor bureaucratic interaction, and low efficiency of officials.