Russia has preserved its place in the global ranking of largest arms exporters despite a unfavorable geopolitical environment. Yet there are still unresolved challenges.

Despite the current successes, the Russian defense industry can expect difficult times ahead, according experts. Photo: RIA Novosti

Russia has always been a significant player in the international arms market, the natural result of the Cold War ideological confrontation between the United States and the Soviet Union.

One would be forgiven for thinking that Russia’s economic recession, coupled with the impact of Western sanctions (including some directed against the defense sector), would have seriously undermined Russia’s position as an arms exporter. But that is not the case - at least for the time being. Evidence is provided not only by domestic figures, but also by the results of studies by influential international think tanks that specialize in arms-related matters.

The billion-dollar question

According to U.S. company IHS, which carries out an annual monitoring of the international arms market, Russia is second only to the United States in terms of weapons exports. Russian exports in 2014 (more recent data do not exist, since arms market statistics always take 6-12 months to appear) amounted to $10 billion, up 9 percent compared to 2013, the report reads.

The country’s top arms dealer, Rosoboronexport, affirmed Russia’s solid second place showing. The company’s data indicate that, in the past year, Russia sold $13.2 billion worth of armaments. What’s more, there is no reason to suppose that this year will see Russia reduce these volumes and slip down the ranking.

In any event, Rosoboronexport CEO Anatoly Isaikin recently stated that, "[Our] portfolio of orders is very good, constantly hovering around the $39-39.5 billion mark.”

Neither is there a shortage of buyers of Russian-made weapons. IHS notes that the largest customers are China ($2.3 billion), India ($1.7 billion), Venezuela and Vietnam ($1 billion each).

Union of Russian Armorers executive director and Center for Analysis of Strategies and Technologies head Ruslan Pukhov slightly revises the list. He asserts that Russia’s main customers in the past few years have been India, Algeria, Vietnam, Venezuela, Iraq and China.

Market watchers note the sudden appearance of Iraq as a major buyer (last year the country was Russia’s second biggest customer after India). And demand from Africa, previously a bit player in the market, is clearly on the rise. Countries such as Uganda, Cameroon and Angola are now buying Russian arms worth hundreds of millions of dollars.

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Experts believe that Iran is set to become another boon to Russian arms dealers. There is, of course, still a UN Security Council embargo on arms supplies to the country. The supply of Russian anti-aircraft missile systems unaffected by the UN embargo is still being discussed. A contract could soon be signed. The lifting of sanctions against Tehran is expected to open the way not only to Iranian oil, but also to a resumption of military cooperation with Moscow.

Challenges ahead for Russian arms exporters

Another influential international analytical center, the Stockholm International Peace Research Institute (SIPRI), published a report on the state of the global arms trade. According to the study, the top two arms exporters, the United States and Russia, between them account for more than half of all global supplies (58 percent) in the past five years.

First place belongs to the United States. In 2010-2014 Washington controlled 31 percent of the global arms trade. Russia, according to SIPRI, was a close second. Over the same five-year period Moscow’s share was 27 percent, while growth in exports of general types of weaponry stood at 37 percent.

Russia supplied weapons to 56 countries, in which regard 60 percent of exports went to three countries (India, China and Algeria) and two-thirds of all shipments made their way to Asia and Oceania.

However, despite the success of Russian arms suppliers, there is no cause for euphoria. After all, at the start of the new millennium (from 2001 to 2005) Russia was in fact the world’s number one arms exporter with a 31 percent market share, ahead of the United States at 30 percent. Today U.S. supplies to the world market are worth more than $20 billion. Russia has fallen behind.

Moreover, the once healthy growth in Russian arms exports has leveled off. According to experts, that is not surprising. Russian export contracts have been hit hard by the severing of ties with Ukraine. In addition, foreign buyers are now wary of weapons stamped “Made in Russia” for fear of violating sanctions.

This means that Russia faces not only economic, but also technological restraints. U.S. and EU know-how once filled gaps in expertise, but sanctions will keep that door firmly shut for a long time to come.

Sanctions, the West’s refusal to supply dual-use technology to Russia and the breakdown in relations with Ukraine have caused serious damage to the Russian defense industry, in particular exports,” said Alexei Arbatov, director of the Center for International Security at the Moscow-based Institute of World Economy and International Relations. “The effects will not be immediate, but bringing military import substitution on-stream will take time and considerable resources, during which period our global competitors will not sit twiddling their thumbs.”

Despite the current successes, the Russian defense industry can expect difficult times ahead, concludes the expert.

Future prospects for Russian arms exports

What are the prospects for exports of Russian arms? Ruslan Pukhov believes that Russia’s second place in the global ranking will come under threat. Experts predict that, in the coming years, France, for one, will strengthen its position. After a ten-year hiatus, Paris has returned to the combat aircraft market, having sold Rafale fighter jets to Egypt and Qatar this year.

South Korea, a relative newcomer to the market, is also ramping up sales. So too is Israel, and Turkey is also looking very ambitious. Thus, selling weapons is becoming increasingly difficult. The old stock phrase about growing competition is relevant in this case.

As for Russian arms exports, Pukhov believes that, though nominally growing, the effects of dollar inflation, which have been particularly marked in the last few years due to the Fed’s quantitative easing program, mean that in reality they are going nowhere fast.

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“It’s perfectly normal. No arms exporter, with the possible exception of Israel, enjoyed such long and consistent growth as Russia, effectively since 1999. All other sellers saw very strong supply fluctuations. The slowdown in Russian exports is linked to rising competition in our core ‘anchor’ market, India. Moreover, somewhere around the middle of the 2000s China sharply reduced procurements, having decided that its own defense industry was capable of meeting most of its military requirements,” explained the source.

Military lawyer and arms market expert Konstantin Trapaidze, for his part, considers second place in the global arms market to be a great success for Russia.

“Despite the complex geopolitical situation in which Russia finds itself, arms exports have stood firm. And that is in spite of the fact that enterprises in Ukraine occupied a fairly large niche in the components structure. Given the circumstances, bilateral cooperation is in question, so Russian companies have had to bring own production facilities urgently up to speed. In many areas that has been possible, which has stabilized the situation and kept sales on an even keel,” said the expert.