Procurement: How Russia Profits From Syria

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April 12, 2016: Russia state controlled media is giving lots of coverage to the idea that the recent campaign in Syria was a wise business investment. That’s because most of the half billion dollars the Syrian operation has cost Russia so far has gone to keep the aircraft flying. But that is now expected to bring in over $7 billion in additional arms sales. That is the result of new Russian weapons gaining credibility because of the combat experience. This makes it easier to get export sales and always has.

Russia has, until now, not benefitted much from the sharp growth in arms exports after 2001. That led to global defense spending increasing nearly 50 percent to over $1.6 trillion. That's about 2.5 percent of global GDP. After the Cold War ended in 1991, defense spending declined for a few years to under a trillion dollars a year. But by the end of the 1990s it was on the rise again. The region with the greatest growth has been the Middle East, where spending has increased 62 percent in the last decade. The region with the lowest growth (six percent) was Western Europe. The 2008 recession led to global defense spending stalled at, or maybe even a little below, $1.4 trillion. But the spending growth has resumed now that the recession is over in many parts of the world.

In the 1990s many potential buyers backed away from Russia because throughout the Cold War Russian gear had performed poorly. More importantly with the Soviet Union gone there were no more financial incentives (free weapons, very cheap weapons and great credit terms) to buy Russian. Eventually Russian efforts to improve their own economy enabled a return to some of their Cold War sales incentives.

Thus in 2006 Russia offered a billion dollars in loans so Indonesia could purchase eight Su-30 fighters, two submarines and four Mi-26 assault helicopters. The Russians were now back with their famous low prices, immediate delivery and credit terms. That did not work as well as expected because since the 1990s China replaced Russia in many markets by offering financing and were not deterred by demands for bribes and other off-book services.

Russia needed a way to get some credibility for their more expensive systems. This was accomplished in Syria by sending new, untried but high-tech and expensive systems. These included Su-34 fighter-bombers (similar to the American F-15E) and Su-35S fighters (low budget competition for the F-35) as well as electronic warfare systems like the Tu-204 (similar to the American RC-135) and helicopter gunships. Also involved were a new generation of jammers and monitoring gear. There were also new radars, cruise missiles and all manner of other new gear that was now “combat tested.”

This potential boost in arms exports is attractive to most Russians right now. Russia is broke because of low oil prices and international sanctions. An extended presence in Syria would be unpopular back in Russia because of the cost, although the government has kept Russian casualties low. Meanwhile 3,000 or so Russian advisors and technical personnel are staying. This will continue to aid and encourage Assad forces. The Russian presence in Syria will end up costing more than half a billion dollars but not a lot more because a lot of the expensive new aircraft, which are expensive to operate, were withdrawn.

 


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