Russia Consolidates Leading Arms-Export Firms

Russian President Vladimir Putin issued a decree November 4 merging Russia's two largest state-owned arms exporters into a single new company called Rosoboronexport. Putin ordered the merger to stop the two leading exporters, Rosvooruzheniye and Promexport, from competing against one another and, in effect, driving down the cost of Russian weaponry, an important source of hard currency for Moscow. The new company, which will handle an estimated 90 percent of all Russian arms exports, will report to the Ministry of Defense as opposed to the Ministry of Industry, Science and Technology, which previously oversaw Russian arms exports.

Putin's decree marked the reversal of an August 1997 effort by then-Russian President Boris Yeltsin to increase Russian arms exports in the post-Cold War market by breaking up Rosvooruzheniye's state-granted monopoly of the Russian arms trade through the creation of two additional entities, Promexport and Russian Technologies. Yeltsin assigned each entity separate responsibilities, hoping to streamline the Russian arms export process, but the boundaries between the entities blurred, leading to unexpected competition.

Andrei Belyaninov, a deputy director of Promexport, was appointed head of Rosoboronexport, while deputy positions at the new company were reportedly offered to the directors of Rosvooruzheniye and Promexport, which merged with Russian Technologies earlier this year.

Since the end of the Cold War, Moscow has sought to increase its share of the arms market after experiencing a dramatic decline in new weapons deals. Russian arms deliveries fell to a few billion dollars per year over the past decade after exceeding $20 billion per year during the mid- and late- 1980s. Though the Congressional Research Service reported in August that Russian arms agreements rose from $2.5 billion in 1998 to $4.8 billion in 1999, new deals have often fallen short of Russian industry forecasts. In a November 13 statement, the Kremlin reassured current clients that all existing contracts would be fulfilled and that talks underway would not be slowed by Putin's decree.