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CIAO DATE: 08/06
International Affairs:
A Russian Journal
On the Cooperation with NATO in Defense Industry
V. Rubanov *
The end of the Cold War and the shrinkage of the world arms market necessitated a reform of defense-industry complexes (DIC) in the United States and Russia. Unlike the U.S. strategy of diversification and concentration of military production, coordinated and synchronized with conversion programs, Russia took the path of "shock therapy" in the defense industry sphere. This policy has some rather negative consequences for the majority of defense industry enterprises. Today, defense related enterprises are on average operated at under 22 percent capacity; the physical depreciation of fixed assets is 50 percent and of machinery and equipment, up to 70 percent while 95 percent of these have not been renovated for a decade. Furthermore, the social status of thousands of people who possess unique, and potentially dangerous, knowledge and skills, the uncontrolled spread and application of which can jeopardize the security of many countries, has declined dramatically. Now that the international community has been confronted with the threat of terrorism, this problem is acquiring global implications.
Conversion Is Difficult without Assistance from NATO Countries
The defense industry complex is perhaps the only sector that could help Russia effectively integrate into the global economy. The DIC has survived and continues to exist mainly thanks to the export of arms and military equipment. The perceived profitability of this export sector, however, is exaggerated. The profitability of the export of arms and military equipment today is contingent on the zero cost of production assets inherited from the Soviet Union; the work force trained in the Soviet era, and the stock of completed research projects awaiting application that are not included into production costs. Yet, in launching new products, DIC enterprises will have to pay for R&D projects, new equipment, and personnel training. This will sharply reduce the competitiveness and economic efficiency of the export of arms and military equipment. Hence the need for a far-reaching reform of the entire complex. The October 23, 2000 decree by the RF president, On Measures To Ensure the Concentration and Optimization of Defense Production in the Russian Federation, and the creation of a new government agency - the State Committee on State Defense Contracts, under the RF Defense Ministry, create a sound organizational framework for the reform. The creation of the Committee lays an organizational groundwork for the elaboration of a coherent military-industrial policy and centralized control of the defense industry complex.
Conversion and diversification of DIC enterprises is the only viable strategy for the economic survival and preservation of the technological capability to manufacture high-tech defense related products. With 15 percent of DIC capacity used for purely defensive (military) purposes, the use of the remaining 85 percent of capacity and preservation of the scientific and production base is only possible with the application of dual-use technology based on principles of economic expediency and competition.
Successful conversion is predicated on a harmonious blending of know-how, the capability to make an effective use of technology for civilian purposes, and the ability to develop a market for a new service. Conversion is a variety of the innovation process wherein the know-how that is intended for commercial application has a military "background." The use of rockets, subject to reduction under strategic offensive weapons treaties, on the international market of space launch services is a good case in point as well as an example of a successful application of dual-use technology.
To ensure a good economic effect, it is important for the state to decide what is to remain in the purely military sphere and what can be used in conversion programs and transferred to the business sector. High-tech civilian production capacity combined with the capability to fulfill government defense contracts enables DIC enterprises not only to preserve their economic viability with limited demand for defense related products but also to keep engineering thought toned up and learn to do good business on their own, even amid strong competition.
Nonetheless, it will be difficult to resolve conversion and diversification problems as well as many other DIC related problems without active assistance on the part of NATO member countries the relations with which in this area are far from smooth and trouble-free.
Because of financial constraints and the weakness of its defense industry enterprises and arms exporters, Russia is not in a position to implement wide-ranging programs, including the provision of services in the security sphere simultaneously with arms supplies, as is common practice with the United States. Meanwhile, due to Russia's technological backwardness and its inability to put in place a modern after-sales servicing system, the markets of the CIS countries, the former Warsaw Pact member states, and Arab countries are today being effectively taken over by Israel, France, and a number of other states.
Improving product quality is also a rather difficult task due to the declining qualifications and deteriorating skills of personnel as well as a general shortage of cadres.
The problem is made worse by the situation related to the protection of state and commercial secrets as well as intellectual property rights in Russia.
In the recent period, there have been several "spy" scandals in Russia, in the sphere of scientific and technical cooperation. Their root causes lie in the preservation of the "cult of secrecy" traditions, bureaucratic abuses, and the domination of the executive over legal institutions.
The RF Law on State Secrets is built on a list of information constituting state secrets. This list, however, does not contain specific information but defines concepts, classes, and categories under which virtually any information can be subsumed. On the practical level, however, it is not the relevant state and government officials, responsible for national security, but experts tapped on an ad hoc basis, whose activities, rights, obligations, and responsibilities are not subject to specific, formal regulations, who decide on what constitutes, or does not constitute, a state secret. This calls into question the legitimacy of classifying and deciding on the secrecy of particular information and is in conflict with the provision of the RF Constitution to the effect that particular information is classified as a state secret not on an expert basis but on the basis of federal law.
The freezing of a huge number of "sensitive" projects of DIC enterprises and their de-facto exclusion from commercial application impede international cooperation and cause great damage to the Russian economy.
Another mistake made by Russian government agencies is that over a long time they have sought to ensure the protection of intellectual property rights in the military-industrial sphere by relying on state secrecy laws. That caused an unjustified delay in adopting the Law on Commercial Secrets as well as unwarranted restrictions on the commercial use of DIC technological achievements, and lack of legal protection for declassified technologies.
The absence of liability for industrial espionage in Russia was actively taken advantage of by certain foreign companies, which caused considerable damage to DIC interests and provoked the Russian authorities into taking action based on a misapplication of the Law on State Secrets. The adoption of the Law on Commercial Secrets brings the situation into a legal field that is in sync with the legislation of NATO member countries, providing better opportunities for military-technical cooperation.
Commercial use of intellectual property assets is a key to the advancement of Russia's DIC. This requires a harmonization of the organizational and legal regulations for the generation, development, and use of valuable know-how in Russia in line with current European standards. The study and application of experience acquired by NATO countries in addressing such tasks could be beneficial for Russia.
Failure to resolve the problem of intellectual property rights also compounds Russia's relations with countries producing arms and military equipment under Russian license and selling them to third countries without permission or payment of appropriate royalties to Russia and also modernizing Russian arms and military equipment. Agreements are pending on the protection of intellectual property rights with Poland, Hungary, the Czech Republic, Romania, Bulgaria, Slovakia, and a number of other countries. Some of these agreements have been coordinated and presented to the respective governments for approval while with some countries they have already been signed.
Politicization of the International Arms Market
Russia's internal problems, however, are not the only impediment here. The situation on the world arms market is characterized by stagnation and politicization. According to the London based International Institute for Strategic Studies (ISS), its capacity has declined almost two and a half times - from $78.6 billion in 1987 to $29.17 billion in 2002. Over the past decade, the U.S. share of the shrinking arms market has grown from 25 percent to 40 percent to 43 percent while Russia's share dropped from 37 percent to 11 percent to 14 percent.
The politicization of the world arms market also manifests itself in the use of unfair competition and discriminatory, restrictive business practices. Russian DIC enterprises are oftentimes confronted with extra-economic methods designed to crowd them out of certain markets or to create artificial obstacles to their participation in tenders for the provision of military-technical services or products.
The intention by a number of Central and East European countries to modernize and upgrade the Russian made military equipment that they inherited from the Warsaw Pact era to NATO standards by its manufacturers and their European partners is coming up against strong pressure on the part of the United States. The United States uses political pressure and the relatively low costs of its military equipment, in some cases resorting to dumping practices, to squeeze Russian competition out of the Central European market.
The United States continues to exert unjustified pressure on Russia over its military- technical cooperation with Iran. The trend by European countries to award contracts for modernization of Soviet and Russian made military equipment to third countries, not surprisingly, evokes a negative reaction from the Russian side.
Another area of stiff competition between the United States and Russia in the recent period has been India, a very attractive market. The United States also poses the main challenge to the marketing and promotion of Russian combat aircraft. The development of the JSF joint strike fighter is designed not so much to arm or rearm NATO countries (although this task is also high on the agenda) as to crowd Russia and Europe out of the world's military aircraft market.
NATO is a heterogeneous organism and a complex mechanism. Within NATO there is marked disagreement between America and Europe on the most important issue - force, its effectiveness, and the morality and desirability of its use.
There is also another impediment to cooperation with NATO as a whole. Although NATO speaks out in favor of expanding military-technical cooperation with Russia, the realization of these intentions is no longer the bloc's priority. So cooperation within the Russia-NATO format is proceeding mainly on the conceptual level. On the practical level, military-technical cooperation can only be organized within the framework of bilateral agreements with individual NATO member countries.
The aforementioned circumstances provide cause for Russia's differentiated approach toward cooperation with NATO as a whole as well as with its individual member states, taking into account the prevailing situation and the coincidence or conflict of interests in the military-technical sphere.
Cooperation with individual NATO member countries is beginning to move from the conceptual to the practical sphere. For the first time ever Russia is going to create a new weapon system for its military (unmanned aerial vehicle) jointly with France. The developer on the French side will be Dassault, the producer of Mirage and Rafale fighters. In Russia, a team of developers will be set up, comprised of the Sukhoi, Iakovlev, and Tupolev design bureaus. France benefits from cooperation with Russia since both countries are seriously lagging in UAV technology behind the United States and Israel, which are already using unmanned aerial vehicles in combat action.
Boeing Corp. announced its intention to undertake new joint projects with Russia, the main objective being to integrate all programs related to the development of flying platforms as well as all satellite communication and information projects. In this context, systemic solutions are being developed to attract the attention of Boeing customers in the United States as well as worldwide.
There are good examples of Russian-U.S. cooperation in specific areas: Thus Russian made An-124 cargo aircraft took part in U.S. military campaigns of 2003 due to the shortage of air fleet capacity in the U.S. Air Force. The technical capability of Russian cargo aviation and the economic attractiveness of its services, however, could be nullified by Washington's politically motivated approach, which is coming through in statements and comments by some U.S. Congressmen.
Establishment and advancement of military-technical cooperation with developed Western countries, above all with the United States, is a tortuous and difficult process. Even though the Cold War is over now, its stereotypes are still alive. Thus, U.S. partners oftentimes strive to obtain individual models or prototypes of Russian military equipment in order to find effective ways to neutralize the most advanced models of Russian military hardware and equipment. Russia's proposals and initiatives concerning mutually beneficial cooperation are most of the time "politely" turned down by the United States.
Meanwhile, Russian-U.S. cooperation in a number of apparently promising areas is being scaled down. For example, the United States is pulling out of the Russian-American RAMOS (Russian-American Observation Satellite) missile defense project that was launched in 1992 as part of a joint initiative by B. Clinton and B. Yeltsin. At the initial stage of the program's implementation, in 1995-1999, both countries made some progress in the scientific and technical sphere. Later on, however, the program became hostage to the situation that prevailed following the U.S. decision to pull out of the ABM Treaty and to build a national missile defense system. When Russia objected to that decision, the Pentagon started showing concern about the security of information on the RAMOS program and the possibility of leakage of U.S. space technology that was used in the project. Those concerns affected the project's funding.
Despite the decision to close the RAMOS program, U.S. officials say that they intend to cooperate with Russia in the missile defense sphere. Nonetheless, the U.S. withdrawal from the program shows that the outlook for Russian-U.S. military technical cooperation is rather bleak.
There is yet another reason for the problems plaguing Russian-U.S. cooperation on missile defense programs. The fact is that the United States is focusing its efforts on laying an information groundwork for global control of the world. The U.S. aspiration for absolute, undivided domination in the military sphere impedes the advancement of Russian-U.S. cooperation in the defense industry.
From Igla to the S-400
The international working group R&D projects in the sphere of defense and industrial innovation (MRGV), operating within the framework of the New Defense Agenda under the auspices of the EU and NATO and with the support of the K. Adenauer Foundation, could be highly instrumental in searching for solutions in cooperation between DIC enterprises in Russia and NATO member countries.
Russian proposals put forward at MRGV sessions are well received by MRGV members. Special interest was shown for cooperation in the sphere of aviation, in particular the creation of a fifth-generation strike fighter. In light of U.S. plans to create such aircraft by 2012, European countries were confronted with a choice: either join the U.S. JSF (Joint Strike Fighter) Program, which has already been done by Great Britain and the Netherlands, or cooperate with other countries, including Russia, to develop a competitive alternative strike fighter model within the same time frame.
In this event, Russia, even amid fierce competition, has a good chance of preserving and strengthening its positions on the combat aircraft market.
As of now the Russian side has signed a number of letters of intent with the French aircraft producer Dassault and the European EADS; a joint working group was set up and a tender was announced for the creation of a specific system and components for a new fighter. The basic position is that Russian partners are to be the main suppliers of component and various systems for a fifth generation fighter.
MiG Corporation has years of practical experience under its belt in working with foreign partners within the framework of joint ventures on the operation, after sales servicing and modernization of aircraft and their equipment. A good case in point is the MAPS Russian-German joint venture. MiG Corp. has technical servicing centers in Malaysia and India. A joint administration was created with French companies on the MiG-AT program, aiming to secure 25 percent of the world market of training aircraft. Algeria, India, and Greece have already shown interest in the program. In 2001-2002, MiG Corp., in competition with major Western companies, won contracts to extend the service life and modernize the fighter fleet in Central and East Europe.
In collaboration with the German firm STN-Atlas, MiG Corp. created a new flight simulator that is planned to be used as a platform for MiG-29 pilot training centers in Central and East European countries. Such centers can also appear in other parts of the world where MiG aircraft were supplied in the past. MiG Corp. is developing cooperation with the EADS aerospace concern and the Rolls-Royce German division on the outfitting, marketing and certification of the Tu-334 aircraft to European airworthiness standards.
Russia's return to the European aviation market, from which the United States and its influential NATO allies tried to crowd Russian fighters, have become a logical, landmark development. The perseverance displayed by MiG Corp. in the struggle for the Austrian market created conditions wherein Hungary, Bulgaria, and Slovakia also opted for Russian MiG aircraft despite strong counteraction by competitors.
A viable strategy for the preservation and development of Russia's military aircraft building industry is to take technology in the West and money in the East and combine the two in implementing an open international program.
In the rocket and space sphere, NPO Energomash cooperates with Lockheed Martin on Proton rockets and the installation of Russian made engines on U.S. rockets. RD-180 engines are made in Khimki, outside Moscow, combustion chambers are supplied from Samara while special grades of steel come from Chelyabinsk.
Boeing gives high priority to partnership with Russia in the civilian, non-military use of space sphere. The United States and Russia have the needed engineering and technological capability to advance their cooperation. One practical result of this cooperation has been the creation of an international space station and implementation of the Sea Launch program. Boeing knows very well how to work with Russian partners, showing readiness for joint development of a unified, integrated missile defense system, contingent on the political decision by the U.S. and Russian leadership.
The main potential for cooperation, however, exists in the sphere of non-military uses of space, where there are not very many lucrative, money-making projects.
In the missile defense sphere, Russia is the only country in the world producing the whole line of air defense systems - from the super-short range (the Igla complex) to the super-long range (the S-400). All Russian air defense systems are superior to their foreign counterparts in both technical specifications and price parameters. Even the U.S. most advanced system, the PAC-3, is inferior to the current S-300 modifications. The S-400 system, which is now being tested, will without a doubt have technical specifications superior to those of the modernized version of the PAC-3. Western experts believe that the S-400 will be effective for 20 years to 50 years.
Today, the United States gives high priority to defense against tactical missiles, creating a new THAAD (Theater High-Altitude Air Defense (THAAD) system, ensuring the operation of the so-called first-level national missile defense system. No one is prepared to say that the S-400 will be able to compete with the THAAD. Said projects can be seen as a subject of cooperation with NATO countries concerned.
At the end of the latest stage of a strategic command and staff exercise in Plesetsk, President Vladimir Putin announced that Russia would soon have the most advanced strategic missiles flying at hypersonic speeds with capability to change their flight paths by altitude and course, and effectively engage strategic targets in the intercontinental depth.
U.S. experts see Russia's achievements as an asymmetric response to America's anti-missile challenge and as potential capability to overcome the missile defense system that is being created in the United States. There are no effective counterparts to this system abroad, which makes consultations on the entire range of problems involved in the development and deployment of missile defense systems a viable option.
There are good prospects for Russia-NATO cooperation in armor protection. The Kolomna machine building design bureau created the Arena system that is now at the testing stage. This system can effectively protect a tank against strikes with guided and unguided rockets launched from all types of infantry weapons. The Arena detects and destroys any targets flying toward a tank.
The survivability of a tank equipped with this system doubles while its price increases by a mere 20 percent. This technology helps not only to increase sales of Russian armor but also to use it in other forms of military technical cooperation.
Battleships are yet another type of new military systems that can be seen as a viable area of military technical cooperation. The U.S. based consulting company AMI estimates the world market of battleship building at $236 billion for the next 15 years. Russia possesses cutting edge destroyer, corvette, and nuclear powered submarine production technologies. Today, however, prospects for Russia's cooperation with NATO member countries in this sphere are rather unclear.
Russia has technology to produce anti-ship missiles of unsurpassed operational effectiveness, above all Moskit missiles. More than 30 inventions and scientific discoveries were used in developing this missile. With some modification the Moskit can be used as an air to surface missile to arm fifth generation fighters. It is not, however, technological competitiveness but political and economic considerations that will apparently be playing a key role in decision-making on cooperation in this sphere.
New Prospects
Contemporary militaries give high priority to modern coordination, command and control systems. NATO's integrated coordination system is based on the creation of a consolidated digital global data transfer network comprising end users in various parts of the world and ensuring an interlocking and synchronization of communication systems on the operation and tactical command and control level. The Russian military leadership also sees a clear-cut need to put in place an inter-branch, multipurpose military command and control system, as envisioned under the concept for the development of the RF Armed Forces command and control system for the period until 2016. It is to be based on maximum unification and interoperability of software and technical facilities.
Putting in place an integrated telecommunications platform for the information structure of the RF Armed Forces and the creation of a unified information space for command and control and support of effective information technology of command and control of troops and weapons require an active tapping of Russia's nationwide communication infrastructure assets. Close interconnection between civilian and military information communication resources gives cause to talk about a broad context of Russia's cooperation with NATO member countries in this sphere, given the U.S. and European leadership in the information technology sphere.
Cooperation in this area can also advance along the lines of achieving interoperability of Russian military command and control systems with NATO standards with a view to ensuring Russia's participation in peacekeeping operations of the North Atlantic alliance.
The role of the information space in modern military systems changes considerably. It is information that integrates missiles, tanks, and battleships into whole military systems. So information and its application technology are becoming an increasingly important military asset. Thus the "invention formula" for the fifth generation aircraft is predicated on the functionality of onboard systems and the transfer of combat systems command and control processes into virtual space.
The limitation of Russian-European cooperation to traditional military technology (aviation, missile building, and so on) impedes a full tapping of information technology potential. Russia has good potential in the sphere of information-communication technology in the form of a large number of highly qualified mathematicians and computer programmers who are virtually unemployed or not effectively employed on the Russian market. This causes a brain drain and an ineffectual use of intellectual resources.
In the recent period, Russia has been tapping into the international experience of offshore programming and building up a corresponding capability. Specialized companies have emerged on the Russian market - SiBit, LUXOFT, Novosoft, ACTIS, ARGUSSOFT, and a number of other companies adapted to the world information communication technology market. Experts believe that Russia has especially good positions in cryptography; image recognition and processing; development of programming languages and systems and software for communication systems; and bio-information science, hydrodynamics, and physical sciences which help develop programs and software for the dissemination of information technology in research projects, including for military applications.
A good case in point is the Russian-U.S. program Nuclear Cities Initiative, implemented by the U.S. Department of Energy jointly with the RF Ministry of Atomic Energy to facilitate the non-military use of defense technologies and create permanent jobs in civilian sectors for scientists and engineers working in the defense, including nuclear power, industry. The Russian companies LUXOFT and Novosoft working within the framework of this program provide professional retraining courses for computer specialists at the Russian scientific center Kurchatovskii Institut. Groups of nuclear scientists are being trained to adapt their knowledge and skills to commercial software development projects. Today LUXOFT operations have moved beyond the bounds of the project with the company emerging as Russia's major center for offshore programming on contracts with leading companies in NATO member countries, including Boeing.
Russia's information security technology potential, comparable with the U.S. potential, deserves special attention as a possible area of cooperation between Russian and NATO defense industry enterprises.
Russia has recently made a breakthrough in the export of special weapon systems. Silent pistols, automatic rifles and sniper rifles as well as the Gyurza pistols and submachine-guns, which are unmatched in penetration and effective range characteristics, were adopted for service in special task forces back in the early 1980s. They remain out of reach for leading Western companies in their specifications and technical solutions. Russian enterprises have made some impressive achievements in creating covert surveillance, information gathering, and point and area technical protection systems. Russia's DIC has created a broad arsenal of special devices that are used for law enforcement and civil defense purposes.
Russia's principal competitors on this market are French, British, German, and Italian companies. Nonetheless, the Russian trademark today manages to make tangible breaches in their positions, securing a firm foothold in the Middle and Near East. Rosoboroneksport is the only company offering not simply a specific line of products but also readiness to ensure the entire cycle of deploying special task forces, from supply of weapons and equipment to rendering assistance in creating close circuit systems and personnel training. Russia's DIC enterprises have competitive solutions in the sphere of special purpose equipment and are ready to carry out R&D projects under contracts from foreign partners.
On the whole, there is good reason to say that for all the difficulties and development problems Russia's defense industry complex has proven its worth and viability, preserving and realizing its high potential on the world arms market. The only question is the extent to which NATO member countries may be interested in Russian development projects and provide Russian companies opportunities for equal and fair competition on their markets.
Endnotes
Note *: Vladimir Rubanov, Vice President, League for Assistance to Defense Enterprises, Acting State Councilor of the Russian Federation, 1st Class. Back