Procurement: Russians Master Spares

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December 4, 2005: Russia has been forced to improve the quality of spare parts it makes for the military equipment it has delivered over the last few decades. Spares for this stuff is big business, worth billions of dollars. The Russians have a hard time getting a handle on the exact size of this market, because so many spare parts and upgrades are now being manufactured by non-Russian companies. This movement gathered steam after the Soviet Union collapsed. As a result of that, many Russian weapons manufacturers went out of business. Their biggest source of orders was the Soviet Union, which dissolved partly because its communist economic system didn't work. The Soviet Union was broke when it fell apart, and orders for military equipment largely disappeared for nearly a decade. But there were still thousands of Soviet built armored vehicles, warplanes, radars, missiles and warships in use by foreign customers. These users needed spare parts, but now many of the Russian factories that produced the stuff were shut down. Foreign manufacturers gradually stepped up to supply the needed parts.

Some Russian defense plants stayed in business by supplying the export market, and these firms eventually got into the spare parts business. By 2003, Russian companies supplied $20 million worth of spares to the Russian armed forces. At this point, the Russian military procurement market began to grow, as Russia used a flood of revenue (caused by sharply rising oil prices) to increase the military procurement budget. But Russian defense firms see a huge market for spares. While the Russian military is buying some new equipment, they are refurbishing much more older stuff. This is partly driven by increased training, meaning that equipment that had hardly been used for years, is suddenly out a lot more for training. That sort of thing requires lots of spare parts, including new engines (especially for aircraft). By 2005, the Russian military way buying $300 million worth of spares. That number is expected to increase, and Russia may be able to regain some of the export market. That's because, in the last decade, Russian industry has adopted many Western practices, which has increased the quality of their output. This was partly driven by the need to please the two biggest export customers for Russian weapons; India and China. India, in particular, has threatened to buy more weapons from non-Russian firms. The Russian companies responded to the challenge, improving quality, as well as service.

 


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