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Russia's defense industries losing business to the Israelis

SPECIAL TO WORLD TRIBUNE.COM
Wednesday, July 2, 2003

MOSCOW Russia's leading strategic institute warns that the nation's defense exports are being endangered by competition from Israel.

The Center for Analysis of Strategies and Technologies said in a report that the pillars of Russia's defense industry stand on exports to China and India. The center said the huge Russian defense trade market in India is being jeopardized by competition from Israel.

"The problem of the Indian market is that the competition there is growing with France and Israel," Ruslan Pukhov, director of the center, said.

Russia reported record defense exports in 2002, with sales of $4.8 billion, Middle East Newsline reported. China and India were said to have comprised the lion's share of the exports. Exports for 2003 were expected to reach $4.5 billion.

But the report warned that India is moving from away Russia and seeking other suppliers. Israeli defense sales to India have been growing and are estimated at about $1 billion over the last year.

Konstantin Makiyenko, a leading Russian strategist and member of the center, said China and India could be saturated by Russian military systems by 2004. He cited the huge number of Russian aircraft, tanks, naval vessels and other systems sold to both countries over the last three years.

Last year, Israel and Russia signed a memorandum of understanding to cooperate in the upgrade of Soviet-origin systems. The MoU was demanded by Moscow as a condition for cooperation in a proposed $1 billion sale of Israel's Phalcon airborne early-warning systems to India. India wants the Phalcon to be fitted in the Russian-origin Ilyushin Il-76 cargo plane.

Marat Kenzhetayev, an analyst with the Moscow-based Center of Arms Control, said the rapid growth of Israeli defense exports is one of the most significant trends in the global market. Kenzhetayev said Israel has become a leader in platform upgrades, particularly those of Soviet-origin.

In its report, the center said Sukhoi was the leading defense exporter in 2002, followed by MiG. Exports comprised 90 percent of Sukhoi revenues while 95 percent of MiG revenues come from exports. Sukhoi has $3 billion in orders from India.

The center's report said Sukhoi exported MiG fighters to Yemen in 2002. It said Russia's KBP Tula plans to begin deliveries of Pantsir-S1 air defense systems to the United Arab Emirates.

Industry sources said the assassination of two senior executives of Russia's Almaz-Antei will affect exports in 2003. The consortium, composed of 46 companies, is the leading designer and producer of anti-aircraft systems, such as the S-300PMU.

"This killing, without a doubt, will wreak havoc on the shareholders meeting planned for late June and, ultimately, will significantly alter the formation of the holding's management structures," an industry source was quoted by the Moscow-based Interfax news agency as saying.

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