Procurement: Russian Arms Sales Surge Ahead

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March 16, 2007: Russian arms sales continue to climb, with at least $8 billion in sales expected this year. In 2005 Russian arms exporters had already booked orders for six billion dollars worth of sales per year through 2008. In 2004, Russian arms sales were $5.6 billion, and that went to $6 billion in 2005 and $7 billion in 2006. Russian arms sales have been rising sharply (they were $4.3 billion in 2003), as the economies of their two biggest customers (India and China) grow larger. That, and the escalating price of oil (driven largely by increased demand from China and India), has sent international arms sales from $29 billion in 2003, to over $50 billion by 2006. Oil rich countries, particularly those in the Persian Gulf, as eager to buy more weapons, with which to defend their assets.

The United States and Russia are the largest exporters of weapons, together accounting for over 70 percent of world sales. Traditionally, the U.S. sold nearly three times as much as Russia, but lately that is getting closer to only twice as much. The reason is more effort by the Russians to not just sell on price, but also on service and warranties. Most of the cost of a new weapon comes during the lifetime (often a decade or more) of use. In the past, Russia had a bad reputation for support, and lost a lot of those "after-market" sales. The U.S. was much better in that respect, but much more expensive. Now the Russians not only have the price advantage (often half, or less, the cost of equivalent American weapons), but a reputation for providing good service. The Russians are also selling more high tech, and expensive, warships. For many years, warplanes comprised about two thirds of Russian sales, but now, about half the sales were for warships.

Russia is pushing leading edge naval technologies, like AIP (Air Independent Propulsion) for non-nuclear submarines. These boats can go for half a billion dollars each, if tricked out with all accessories. Russia is also providing state-of-the-art radars for fighters, and long range missiles to go with them.


 


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