Procurement: Russia Hits the Jackpot in North Africa

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March 13, 2006: Russia has executed one of the largest arms deals ever, when it obtained orders worth $7.5 billion from Algeria. In doing this, Russia had several advantages. The biggest one was $4.75 billion worth of weapons, bought from the Soviet Union, during the Cold War, that Algeria has not yet paid for. Although Russia inherited many debts like this, after the Soviet Union disintegrated in 1991, it has not been successful in collecting on many of them. Many of the Soviet Union's arms customers believed they would not have to pay for all the stuff they got, or at least not pay in full. The debt is still there, it is valid, and Russia could always pursue the matter in the courts. But here Russia has found another use for this debt, by using it as a sweetener to snag new orders. To close the deal for $7.5 billion, Russia forgave the old $4.75 billion debt. The new deal is for better quality weapons, and Russia expects to be paid. The old Soviet era sales had a larger diplomatic component. Sort of a bribe, to buy some loyalty from a country. The new deal is all about firepower, and includes 76 jet aircraft, eight S-300 anti-aircraft missile systems and 40 T-90 tanks. This is all a big boost for the Russian weapons industries, which are just now climbing back from the decade of decline they suffered after the Soviet Union disappeared.

 


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