Russia and China rethink arms deals
By David Lague

Sunday, March 2, 2008
BEIJING: For almost two decades, it was close to the perfect match of buyer and seller.

Denied weapons and defense technology from the West, China was almost totally reliant on Russia for the hardware it needed to jump-start an ambitious military buildup. And while the Russian economy teetered in the aftermath of the Soviet Union’s collapse, huge orders from China helped keep a once-mighty defense industry afloat.

But powerful new forces, including a fear in Moscow of renewed rivalry with its neighbor and a desire in Beijing to become more self-reliant, have led both sides to re-evaluate this trade.

After orders peaked at more than $2 billion a year early in this decade, Chinese arms deals with Russia shrank to almost nothing in 2006, and no major new contracts are in the pipeline, according to Russian, Chinese and U.S. defense experts.

"We are in a strategic pause," said Ruslan Pukhov, an expert on the Russian military and director of the Center for the Analysis of Strategies and Technologies, a Moscow-based research institute specializing in the arms trade. "The Chinese and Russians are like long-term lovers who are thinking, ’Shall we continue to share this bed?’ "

A halt or slowdown in Russian arms deliveries could hamper the Chinese drive to modernize its military. It would also increase pressure on the Chinese arms industry to innovate. Some Western and Russian military experts say they believe that despite decades of intensive effort, Chinese arms makers are still struggling to master the advanced engineering skills needed to build important hardware.

In China, there is confidence that these problems will be solved. "The Russians can maintain their lead for a certain period, but eventually we will catch up," said Shen Dingli, an international affairs analyst at Fudan University in Shanghai. "China will be a formidable technological competitor to anybody."

In the meantime, Russia - which, with its economy booming, is no longer dependent on arms sales to China - is concentrating on managing a complex relationship with its increasingly powerful neighbor, analysts say.

Longstanding Chinese claims on territory in the Russian Far East, competition for energy and water resources and illegal migration from China underscore the potential for tension between the two countries. And while they continue to enjoy warm ties, some Russians point to the Chinese-Soviet split that culminated with border clashes in 1969 as a reminder that friction could return.

"Russians feel genuinely concerned, in the medium to longer term, that Russian and Chinese interests may collide again," said Alexey Muraviev, a strategic affairs analyst at Curtin University of Technology in Perth, Australia. "There is this debate about whether we should arm the Chinese when they may eventually use them against us."

Some Chinese analysts suggest that Russia, the world’s second-ranked arms supplier behind the United States, is also concerned about the threat of competition from the Chinese defense industry.

"We want to buy better-quality weapons, but they refuse," Shen said. "If I was Russian, I would do the same thing. We are a country that is very capable of using their technology to build our own versions and competing with them."

Neither country publishes comprehensive figures on weapons shipments. But drawing on some announced deals, press reports and private monitoring of arms transfers, Russian analysts estimate that arms deliveries to China from 1992 to 2006 were valued at $26 billion.

Total Russian arms exports over that period were estimated at more than $58 billion.

With a Western embargo on arms sales to China having been in place since the Tiananmen killings in 1989, it was these weapons from Russia that allowed the People’s Liberation Army to reduce a yawning gap in technology and firepower with other regional powers, including Taiwan, South Korea and Japan. With sustained, double-digit annual increases in defense spending, China is increasingly seen as a potential rival to the United States, the dominant military power in East Asia.

But Beijing has become increasingly reluctant to rely so heavily on imported weapons, experts say.

From the outset of its dealings with Russian military factories in the early 1990s, China has insisted on technology transfer as part of its long-term plan to modernize its domestic arms industry.

Moscow has certainly complied with some of those demands. It has allowed the licensed assembly of fighter aircraft and other weapons in China. Experts say there is also evidence of considerable, ongoing Russian technology transfer in the design of indigenously built Chinese military aircraft, space launch vehicles, submarines, surface warships and other hardware. Mostly, however, China has taken delivery of complete weapons or assembly kits.

Arms trade monitors including the Stockholm International Peace Research Institute have tracked what amounts to a huge transfer of military capability to China since 1992.

The biggest ticket items over that period have been four Sovremenny-class destroyers armed with supersonic anti-ship missiles, 12 Kilo-class submarines and about 285 advanced fighters and strike jets from the Sukhoi family of aircraft, according to Russian arms trade monitors and the Stockholm institute.

Some experts suggest deals have tapered off because these and other shipments saturated the market. "In 2006 there were no especially large Chinese arms agreements with Russia, possibly because the Chinese military is focused on absorbing and integrating previous arms purchases from Russia into its force structure," a U.S. Congressional Research Service security analyst, Richard Grimmett, wrote in a report late last year.

Even so, experts agree that China wants a different relationship.

"The principle challenge for Russia is that China no longer wants to buy completed weapons and platforms," Muraviev said.

Experts say recent negotiations on big contracts to supply advanced fighters have effectively stalled, with Beijing insisting that Russian makers grant licenses that would allow production of sophisticated aircraft in China. And the Chinese Army is less interested in the superseded or under-gunned Soviet-era hardware that has accounted for the bulk of imports. "They were happy with this in the 1990s, but now they are starting to demand more technology transfers," Pukhov said.

Chinese experts say the army wants access to the most advanced Russian weaponry, including strategic bombers, tanks, attack helicopters and manufacturing technology for high-performance aircraft engines.

In a sign of tension in the military relationship, China last year suspended or deferred some big-ticket deals in a dispute over costs, including orders for 34 IL-78 transport aircraft and 4 IL-78 airborne tankers worth a combined $1.05 billion, according to analysts and reports in the Russian military press.

Regular, high-level negotiations between the two governments on arms sales have also been put on hold, analysts say.

In the meantime, some defense experts say the domestic Chinese arms industry has made strides towards self-reliance. "While China still imports a host of systems from Russia and other partners to fill critical gaps in the short term, Chinese defense manufacturers increasingly are becoming able to develop indigenous systems with new capabilities," the U.S.-China Economic and Security Review Commission said in a November report to the U.S. Congress.

A decade ago, as military spending shriveled, a slump in orders from China would have been disastrous for Russian arms makers. That is no longer the case, with the Russian economy growing at 8.1 per cent on the back of rising energy and commodity exports, according to official economic statistics.

With Moscow running a budget surplus, there are orders in the pipeline to supply the Russian military with hardware that until recently could only be sold abroad. And overall arms exports remain buoyant, particularly to India, a long-term client that Moscow views with far less suspicion than China.

Russia has also signed lucrative arms deals with new customers including Algeria and Venezuela in recent years.

Sergei Chemzov, a senior government official responsible for arms sales, said Russia exported weapons worth $7 billion in 2007, and this was expected to increase to $7.5 billion in 2008, the state-run RIA Novosti news agency reported in December.

To add to Beijing’s frustration, some of the Russian transfers to India include weapons and technology that Moscow refuses to supply to China. Moscow and New Delhi agreed to begin the joint development of a new, so-called fifth-generation fighter, the Russian government announced in October.

This aircraft would be a potential rival in performance to the U.S. F-22 Raptor, defense analysts say.

India also agreed last year to buy another 40 Su-30MKI fighters from Russia for $1.5 billion in addition to an earlier order for 140 of these aircraft. Some military experts say this versatile, twin-engined jet is probably the best fighter and strike aircraft in the world. But Russia has not offered it to China. And Moscow is offering to sell India its latest fighter, the MiG-35.

In nuclear submarine technology, Russia has also been more generous with India than with China, naval experts say.

Still, with the Western arms embargo on China still in place, most analysts expect that Moscow and Beijing will eventually negotiate compromises that clear the way for future contracts.

"Russia still provides what the U.S. and the EU will not supply," said Muraviev