Procurement: September 12, 2003


It's crunch time for Russian defense industries, as they are running out of cheap stuff to sell. Literally bankrupted by Cold War defense spending (and an arms race the Russians themselves started in the 1960s), the government has bought very little since the Soviet Union collapsed in 1991. But the Soviet Union, and it's defense industries, maintained enormous stocks of weapons, spare parts, and ammunition. Instead of producing any new stuff, stockpiles were used, or sold to foreign customers. What money was available went into developing new and improved weapons. This proved to be a wise decision, for Russia no longer had other communist nations as regular customers. They now need state of the art weapons to offer. While selling cheap worked up to a point, in the long run, Russian weapons had to be competitive. 

The Cold War stockpiles have been exhausted, item by item, over the past few years, and it's only going to get worse. Russia has developed a large export market, but 80 percent of this stuff goes to two countries; India and China. Both of these nations would rather build their own stuff, and are increasingly more interested in buying technology than manufactured goods. Even so, 70 percent of Russian arms sales are to foreigners (compared to about 15 percent for American arms producers.) The Russian government is aware of this situation, and that is one reason why defense spending on new weapons and equipment is dramatically increasing. It's supposed to be $3 billion for the next year, with increases in every year after that. The Russian armed forces need the help, as they are still using 1970s and 80s military technology. If they delay upgrading their equipment, they will see their military power tumble into the basement. 


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