{"id":54657,"date":"2019-07-22T09:42:07","date_gmt":"2019-07-22T09:42:07","guid":{"rendered":"https:\/\/staging.sightlinemg.com\/defensenews\/uncategorized\/2019\/07\/22\/influence-or-profit-russias-defense-industry-is-at-a-crossroads\/"},"modified":"2026-08-08T00:04:31","modified_gmt":"2026-08-08T00:04:31","slug":"influence-or-profit-russias-defense-industry-is-at-a-crossroads","status":"publish","type":"post","link":"https:\/\/staging.sightlinemg.com\/defensenews\/top-100\/2019\/07\/22\/influence-or-profit-russias-defense-industry-is-at-a-crossroads\/","title":{"rendered":"Influence or profit? Russia\u2019s defense industry is at a crossroads"},"content":{"rendered":"\n

MOSCOW \u2014 Russia has long been one of the world\u2019s largest arms dealers, reporting about $15 billion in sales annually. It is an important business for Moscow, especially in times of economic strain on its defense budget. Foreign sales help keep the industrial base healthy and working, and Russian hardware is renowned for being comparable to Western wares at lower prices.<\/p>\n\n\n\n

It also helps that Russia is willing to sell to just about anyone.<\/p>\n\n\n\n

But global arms sales have always had a political element, and Russia is no different. Many of Moscow\u2019s friends and allies are more cash-strapped than the clients typically enjoyed by Western defense firms. And if a regime is close enough to the Kremlin, Russian state banks and corporations will often provide loans to finance large purchases of Russian hardware.<\/p>\n\n\n\n

Click here to see the Top 100 global defense companies.<\/b><\/a><\/p>\n\n\n\n

\u201cOften, loans are provided for politically driven arms contracts,\u201d said Robert Lee, a former fellow at the Russian think tank Centre for Analysis of Strategies and Technologies, who is currently studying for his doctorate in war studies at Kings College London.<\/p>\n\n\n\n

\u201cRussia generally won\u2019t make a profit off of these contracts, but they do provide work for Russian defense companies by supporting employment, keeping production lines running and lowering costs for domestic procurements,\u201d he added.<\/p>\n\n\n\n

The practice of issuing loans to coax sales from less prosperous customers has become increasingly common over the past decade as sales slumped and Russia\u2019s political ambitions on the world stage began to broaden. President Vladimir Putin endorsed the practice during an April 2013 meeting on the arms export industry.<\/p>\n\n\n\n

\u201cSome countries are simply short of money at the moment and find it more expedient to prolong the service life of the arms and equipment they already have,\u201d Putin said. \u201cTimely loans made on market terms will help to promote our goods and create markets for subsequent maintenance of goods and for later sales of additional equipment and spare parts.\u201d<\/p>\n\n\n\n

There are many examples of this in practice, though they tend to be on a small scale. Last year, Moscow approved a $200 million loan to Armenia for anti-aircraft and radar systems. Bangladesh in 2013 was given an $800 million loan for training jets. Cuba, too, was issued a $50 million loan. The financial risk to Russia, if these customers default, is low.<\/p>\n\n\n\n

Not only are the majority of these loan arrangements minor, but they often exclude high-end Russian weaponry and are targeted at members of the Collective Security Treaty Organization, a loosely bound post-Soviet security bloc. They help keep post-Soviet states locked into Russian military equipment \u2014 and, by extension, Russia\u2019s sphere of influence.<\/p>\n\n\n\n

However, these customers represent a very small slice of Russia\u2019s export business. Economic considerations trump all others when it comes to Moscow\u2019s largest customers: India and China. Russia knows both can and will pay in cash.<\/p>\n\n\n\n

But when the conditions and politics are right, Moscow will offer a loan to states ready to spend; look no further than Turkey<\/a>.<\/p>\n\n\n\n

In December 2017, Rostec CEO Sergey Chemezov said that 55 percent of Turkey\u2019s $2.5 billion purchase of four Russian S-400 air defense systems was financed by a Russian loan. The deal was a major political coup for Moscow, sparking tensions between Turkey and its NATO allies, who eschew the use of Russian equipment.<\/p>\n\n\n\t