Procurement: May 31, 2005

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The Venezuelan decision to buy 100,000 assault rifles from Russia has produced a lot of contradictory information. Even for the usually torturous military procurement process, this is unusual. Russian media initially announced that the deal for 100,000 AK-103s (a much updated version of the half century old AK-47 design) for $54 million (which appeared to be the wholesale/bulk purchase price for the AK-103), was followed by reports (the usual reliable sources) from inside Venezuela, that the actual price was $1200 each, with a third being distributed as bribes to various politicians. This made sense, as it had happened so often before, and the new revolutionary government of Venezuela has, so far, proved to be as corrupt as previous ones. 

Now the Venezuelan government announced that they are getting the AK-103s for $186.22 each. In the United States, you can buy the same rifle for $825. But it gets more interesting. As part of the deal, Russia will transfer the technology to enable the Venezuelans to build the AK-103 themselves, under license (paying the Russian patent holders royalties.) Venezuela is sending 45 people to Russia to spend eleven months mastering the manufacturing technology.) No details given on when the manufacturing plant will be ready, or how many AK-103s it will produce. 

The Russians are selling 100,00 AK-103s at a loss, and granting a license to produce them in Venezuela. What does this mean? It means that the Russians are continuing their energetic efforts to capture arms markets in Latin America. Russian weapons have a reputation, in Latin America, as being cheap, but crude. This is no longer the case. Since the end of the Cold War, Russian arms manufacturers, at least the ones that are still in business, have upgraded their manufacturing technology. While not up to Western standards yet, they are producing much better stuff than they did in the past. But they realize they have to take some drastic measures to overcome their old reputation. Its quite possible that the Venezuelan AK-103 deal went through several twists and turns before someone in Russia decided to offer a deal that could not be refused, and would serve as a way to get Latin American countries to take another look at Russian weapons.

 


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