Rosoboroneksport: Arms Sales and the Structure of Russian Defense Industry

Authored by Dr. Sherifa D. Zuhur.

January 2007

108 Pages

Brief Synopsis

Although Russian observers believe that Washington imposed sanctions in Russian arms sellers and producers because of these firms’ arms sales to Venezuela. Sales to such dangerous states oblige us to analyze the Russian defense export program and the structure of its defense industry. Until now, that industry would have collapsed without arms sales. Arms sales thus have become the main source of its reveneue until the present and will play a key role in Russia’s ongoing attempt to regenerate its armed forces while winning friends and influence abroad.

Summary

This monograph focuses on the relationships between the state and Russia’s defense industrial sector, particularly Rosoboroneksport (ROE), the main state agency for arms sales. ROE is more than a seller of weapons; rather, it has become an industrial behemoth that is monopolizing whole sectors of this industry on behalf of the state. Its activities reflect the fundamental nature of the Russian state’s relationship to the economy, which increasingly is regressing to tsarist or even Soviet models in some respects. In this respect, defense, like energy, is a vital sector of the Russian economy that the state intends to control directly. And the Putin regime has implemented a conscious strategy of increasing state control over more and more branches of industry beyond those two sectors.

The parallels between these two sectors and the leadership’s views of them strikingly reflect this regression to patrimonial forms of management and ownership. Yet, it remains unclear whether or not the moves towards greater state control can really bring the defense industry out of the prolonged crisis it has endured. Because the Union of Soviet Socialist Republics (USSR) was in effect a military-industrial complex writ large with a militarized economy, since 1991 this sector consistently has failed to deliver to Russia’s forces the needed weapons and technologies. That failure is the root cause of the attempts by the state to take over that sector and use ROE as a major actor in the process. Arms sales also are a major, if not the major, source of funding for all research and development (R&D) and procurement.

Yet, even as arms sales revenue grows and ROE takes over more and more of the defense sector on behalf of the state, it is by no means clear that such procedures can either restore the defense industrial sector’s capability or that Russia’s arms can continue to be competitive with those of foreign rivals. Nor is it certain that arms sales revenues can keep growing, for it appears that those sales may soon reach a plateau as India opens up its weapons market to Russia’s competitors, and China’s technological capability improves. At the same time, ROE is a key player in a foreign and defense policy that is increasingly anti- American and anti-capitalist, or anti-liberal. ROE and the progress of the defense sector as a whole, therefore, are key indicators of the continuing trajectory of both Russian domestic and foreign policies, including defense policy.

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