Does Ukraine have a future in arms exports?

Sales weapons It is not only a profitable business for exporting countries. Arms-producing countries solve their tasks of strengthening their defense capabilities and, of course, have the opportunity to play their political game at the global level.

According to experts, the leader among military exporters is the United States of America. The sale of US weapons in 2010 amounted to 31,6 billion. The second place is occupied by Russia - ten billion dollars, then Germany, France, and the United Kingdom.

China is stubbornly making its way to the armaments market, which offers modified models of Soviet military equipment for sale.

The Ukrainian arms export goes the same way. After the collapse of the USSR, a lot of research institutions and industrial complexes that worked for the country's defense remained on the territory of Ukraine.

Just as the presence of a beard does not make a person a philosopher, so the transfer of rights to Ukraine to objects of the weapons complex, like the portion of the inheritance during the breakup of the Union, does not mean continuing its effective functioning. In order to maintain military-technical potential at the global level, it is necessary not only to constantly maintain and modernize the defense industry, but also to invest considerable funds in the development of scientific research, including basic sciences.

In Ukraine, there is a practice that only the defense industry is a source of profit, the army gets crumbs from the available funding, and they try not to even remember the contribution to science.

What was the reason for such a deplorable state of the defense industry in Ukraine?

At first, there is no strategic planning for the development of the industry. The development project involves the investment of sufficiently large funds in long-term projects for the creation and implementation of the latest developments in the field of weapons.

Only an insignificant part of the enterprises of the non-state sector carries out development, but only those that will bring profit in the near future. These include the improvement of some units and parts of existing military equipment and weapons created in the Soviet era.
A significant part of the industrial capacity of the former defense industry is used as a repair infrastructure for equipment released during the USSR.

The main focus on the sale of military-technical products is on Soviet equipment, which interests potential buyers. For example, models of Soviet helicopters, airplanes, and small arms are in great demand and their customers in Africa and South America.

The main buyers of Ukrainian weapons on the African continent are Sudan and the Republic of the Congo. Africans are interested in such types of weapons as tanks, armored vehicles, howitzers, mortars, artillery installations "Grad", "Gvozdika", "Acacia", rifles, Kalashnikov assault rifles, machine guns and grenade launchers.

Many former defense enterprises remained "ownerless" due to the fact that "Ukroboronprom" considers them ballast. The segment of the military complex, the space industry, was in a particularly difficult situation. There is no space technology development program in Ukraine.

Secondly, lack of sound personnel policy.

This led to a massive departure of qualified personnel from the defense industry. The biggest loss is the dismissal of most of the specialists who were engaged in the preparation and conclusion of contracts for the supply of military equipment. The contacts with buyers and intermediaries that have been developed over the years have been lost, which has led to a decline in Ukraine’s reputation as a reliable partner, information leakage, and a delay in meeting obligations under concluded contracts.

Thirdly, the lack of new developments in the field of high technologies in the manufacture of military products. Equipping the manufacturing sector of the defense complex is not invested. Of course, the highest level of weapons production in the Soviet period gave Ukraine time to take measures to modernize its military-industrial complex, since the demand for military products of the Union times for some models is quite high. For example, by equipping an armored personnel carrier with the latest defense system, means of destruction, a new engine, you can offer it to the market as a new modification of armored vehicles.

Unfortunately, Ukraine could not create an integrated military-industrial system on the basis of the existing elements.

Time to upgrade irretrievably missed. On the arms market there appeared analogues of weapons. For example, ten years ago the Kolchuga electronic intelligence station was the best product in its class, now there are three analogues of such equipment on the market. And this situation in almost all positions of weapons. Only a few enterprises were able to conclude contracts with foreign buyers: Motor Sich JSC, Aerotekhnika, and Ukrspetstekhnika Holding Company. Therefore, to talk about the possibility of Ukraine to stay on the world market of arms suppliers with confidence no one can.

Even such developments in the field of modernization of individual units and assemblies of existing equipment, such as a thermal sight, a complex of pulsed electromagnetic protection, technology of ion-plasma spraying of chromium, new ceramic panels, a laser-based range finder, will not be able to confirm Ukraine’s reputation as a weapon state.

And the fourth reason is the significant changes taking place in the armaments market: the emergence of new exporters, the change of power and priorities in countries that traditionally are buyers of weapons, the ousting of Ukraine from the African market (the main sales region) by suppliers from other countries.
To date, Ukraine’s arms business has been under contracts concluded in 2009. A new agreement is only a continuation of previous contracts.

The critical situation with arms supplies and the clear success of Ukraine in concluding contracts for the supply of 121 armored personnel carrier and 49 tanks "Oplot" to Thailand will not correct the critical situation. By the way, the Ukrainian tank bypassed the South Korean and Russian models at the tender. In this great merit of the team that previously signed contracts for the supply of 96 armored personnel carriers of the same version.

A successful deal also includes the sale of 200 units of an outdated model of tanks to Ethiopia.

The failure to conclude agreements with Iraq is connected with the small experience of the new team of specialists in the preparation and conclusion of agreements. Negotiators did not take into account the political, economic and social situation in this country, were not thoroughly familiar with the market situation, and were not trained to work with intermediaries.

The failure to sign contracts for the supply of Brazilian Ukrainian tanks occurred solely because of the departmental confusion in the structures of the Ukrainian defense-export complex: after signing a cooperation agreement with the Ministry of Industrial Policy, Ukrspetsexport employee demanded that the Brazilian side begin negotiations again. This led to the cancellation of all agreements on the supply of equipment and was one of the reasons for the resignation of the Minister of Defense of Brazil.

It was not possible to conclude a deal with India for the supply of aircraft weapons, although the Indians, having an urgent need for this type of equipment, agreed with the increased price of equipment. The reason is that the Arkhat Joint-Stock Company, which produces missiles, could not work out the supply scheme.

It was not possible to sell the two complexes for conducting radar reconnaissance (the manufacturer of GAHK “Topaz”) due to the fact that the employees authorized to conclude an agreement do not know how to conduct successful negotiations.

Ukrainian suppliers are not keeping up with the schedule of fulfillment of obligations under contracts concluded with China for the modernization of the An-32 and Zubr aircraft.

And although, according to politicians, Ukraine annually increases the volume of arms sales, this is a rather crafty statement. The purchasing power of the American currency is declining, and this fact means that there really is no reason for optimism regarding the success in the arms trade.

Of course, the state-owned export company Ukrspetsexport will take all measures to step up efforts to conclude new contracts, especially as Ukraine’s reputation in this market segment is quite high. It is also hoped that over time, the staff of this organization will gain experience in negotiating. However, the lack of development of the military-industrial and scientific complex will lead to the final ousting of Ukraine from the arms market.

According to Ukrainian sources, the country sold 2010 billion in armaments in 1, and, according to the international rating agency SIPRI, Ukraine’s exports amounted to 201 million. Such a difference in estimating the size of sales is associated with different methods of calculation. Stockholm rating agency SIPRI when calculating uses the value of similar types of weapons. Also, for convenience of calculation, military products are divided into five categories, and the calculation takes into account only the cost of delivery for completed contracts. These conditions significantly increase the calculation error. It should also be noted that the SIPRI report does not include data on the export by Ukraine of small arms and component parts and assemblies, which is a fairly large volume of the arms market.

The negative rating assigned to Ukraine by the agency, of course, adversely affects the image of the Ukrainian arms exporter. There is information that the state corporation Ukrspetsexport began to demand a review of the agreements already reached, which caused a decline in the confidence of potential buyers to the Ukrainian partner in the arms business.

The present time is characterized by the fact that the main countries-importers of weapons have chosen not to buy new models of weapons, but to modernize existing weapons. Only very rich countries or countries that receive income from the sale of resources can afford to purchase new designs. Therefore, having a well-developed repair base, Ukraine successfully implements contacts on the implementation of work related to the improvement of existing military equipment of countries importing weapons.

Export control analysts have determined that the United States and European countries are buying a small amount of Ukrainian heavy weapons. For example, the USA bought only one tank, developed in 1985, with Dynamic Protection "Contact", a rocket armament controlled by a laser beam. The tank is used to destroy enemy helicopters. The United States of America also acquired four Grad installations.

Ukraine got large stocks of small arms produced during the Soviet era: rifles, carbines, revolvers and pistols. The United States and Germany are the main buyers of this type of weapon.

Small batches of weapons acquired by the countries of Europe and the Southeast allow us to study the characteristics of the weapons that the armies of these countries can meet in combat conditions. For example, Italy bought 14 air-to-air missiles from Ukraine, which are in service with the Libyan Air Force.

If Ukraine does not start implementing investment projects in the development of new types of weapons, it will finally lose the status of the country of arms exporter.

It should be noted that the production of weapons is not only an integral part of the economic independence of the country, but also an important factor in its policy.
Valery Boval
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