Monday, October 11, 2010

India jets order boosts ailing Russian defence industry

MOSCOW: Russia's ailing defence industry has received one of its biggest boosts in years with a huge fighter jet deal with India, but much of the sector remains stuck in a Soviet-era time warp, analysts said.

India announced Wednesday it planned to buy up to 300 fifth-generation stealth fighters that would be jointly developed with Russia in a deal that may be worth up to USD 30 billion (22 billion euros).

Last year's record arms sales helped mask systemic troubles in Russia's defence industry that have pushed even the Russian military to seek hardware abroad in its drive to overhaul outdated weaponry.

"Russia needs the Indian money like it needs air to accelerate the production of fighter jets for its own military," said Ruslan Pukhov, head of Moscow-based Centre for Analysis of Strategies and Technologies ( CAST).

"It's not only good but revolutionary news." The deal is the biggest ever for India -- one of Russia's top three arms buyers -- and crowned two years of growing defence bookings for Russia that will ensure a steady revenue in the coming years.

But Russia has struggled to innovate technologies to meet the needs of modern warfare and is relying excessively on a few high-performing refurbished Soviet-era models, which form the bulk of its arms sales.

President Dmitry Medvedev lashed out at the "poor" state of the industry last month, as the defence ministry announced it was tripling its procurements budget over the next decade, bucking global trends.

Defence Minister Anatoly Serdyukov stressed Russia would not hesitate to spend the allotted 19 trillion rubles (USD 613 billion) on imported arms where Russian makes "did not meet the required standards."

"Our producers want to issue outdated models, but we don't want to buy them," Serdyukov told the weekly Russian Newsweek.

The world's second-largest arms supplier has been in talks with France to buy its Mistral-class warships in what would be its first ever purchase of hardware from a NATO member.

The planned procurements are part of a massive military reform that gained speed after Russia's 2008 war with Georgia showed the need to drop its Cold War-style structure to ready for modern-day, irregular warfare.

"Overall the situation in the defence industry is very negative and not consistent: It needs to be diversified," military expert Konstantin Makienko said.

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