Vladimir Kozhin: S-400 contract with Turkey signed, about to be executed

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Vladimir Kozhin: S-400 contract with Turkey signed, about to be executed

This past summer was very eventful in the military-technical sphere. First and foremost there were three major international weapons shows – Army-2017, Moscow aerospace show MAKS, and International Maritime Defense Show (IMDS-2017), where despite Western sanctions Russia signed a number of major contracts and intergovernmental agreements.

Russian presidential aide for military-technical cooperation, Vladimir Kozhin, reviewed the results of these events, the conclusion of a number of major military-technical contracts, including those with Turkey for the supply of S-400 air defense systems and also promising agreements in that sphere that may materialize by the end of 2017 in an interview granted to TASS.

- Did Army-2017, MAKS-2017 and IMDS-2017 rise to the expectations of the military-technical sphere captains and the main manufacturers?

- It is true that last summer’s schedule was very tight. We don’t have so many specialized exhibitions each year. I can tell you right away that the achieved results are rather high. All events received extensive media coverage. All those who wished were able to see our military equipment live and in action. In the wake of the exhibitions the feeling we are on the right track has grown much stronger. There were no signs of isolation in military-technical cooperation. All exhibitions gathered many foreign delegations. First and foremost, among the participants we saw the main or most promising potential buyers of weapons and military equipment. Of course, there were countries from South East Asia, Central Asia and Latin America. Quite a few meetings and negotiations were held.

Now, some facts and figures. Army-2017 attracted 114 delegations. This is not exactly what can be called isolation, right? There was a very tight business program not only from the standpoint of meetings and talks. There were sessions of three inter-governmental commissions for military-technical cooperation with Bolivia, Sudan and Kyrgyzstan. A new inter-governmental agreement on military-technical cooperation with Niger was concluded. The total value of contracts signed at the Army-2017 forum in Kubinka reached about $300 million. This list includes the supply of Sukhoi-30SM planes to Kazakhstan and of helicopters Mi-171Sh to Burkina Faso and a number of other agreements.

As for the combined effect of all three summer exhibitions, I should also mention the contracts to provide helicopters for China, several extra contracts complementing the previously concluded agreements to sell military equipment to Zambia and a number of arrangements for post-sale maintenance of our hardware, including aircraft. For instance, with Malaysia. In a word, contracts, agreements, protocols and memorandums on military-technical cooperation concluded last summer are many and their geographic scope is a reason for optimism.

Incidentally, our exhibitions were attended by some countries that in the current political situationmight stay away by all odds, because they are members of NATO. For instance, with Bulgaria an agreement was concluded on the repairs and maintenance of helicopters being used in Afghanistan.

- What can you say about the European exhibitions, for instance, Le Bourget, in the context of the continuing sanctions? Did Russian companies feel isolation?

- At such events a great deal depends on the organizers. At the latest Le Bourget show our delegation was present as a full-fledged member. It conducted negotiations with the partners it was free to choose. But there is also Britain’s Farnborough, for instance. Its organizers’ stance is different, so we preferred to refrain from participation in the latest British air show of our own accord.

- What most significant events would you single out at the three Russian shows?

- As I’ve already said, there was an important inter-governmental agreement with Niger, which paves the way for our further cooperation. It is possible conduct no end of negotiations, but as long as there is no basic document words will remain words. We signed a fundamental agreement with Niger. It is a large African country with a vast potential. Specific work on its requests is about to begin.

On the sidelines of the Army-2017 show there was a meeting of the observer council of our joint venture with India that manufactures Brahmos missiles. The venture’s future development and guidelines for the promotion of its products to the market were discussed. As for the specific contracts concluded at the summer shows, I’ve already mentioned the most important of them. Quite a few remarkable memorandums were signed with Israel and Malaysia. They precede contracts proper. But at the same time they are rather important and many of them incorporate the parties’ concrete liabilities, and not just fine intentions.

- Russia’s victory in the bidding contest to provide Ka-52K helicopters for Egypt’s Mistral amphibious assault ships made headlines last summer. What about the other equipment for the helicopter carriers? When do you expect the conclusion of contracts for helicopters and other military technologies?

- Let’s talk about helicopters first. It is true, we won the context, but that does not necessarily mean that a contract is signed instantly, although huge piles of work have been handled and everything is pretty close to the moment when the Ka-52K contract will be inked. I do hope this will happen soon. It goes without saying that without the navigation equipment and command and communication centers the helicopters may have problems with keeping in touch with the ship.Talks on this theme are in progress, but at this point I cannot yet say that there is a contract. One should take note of our advantage over competitors, bearing in mind that the helicopters are of Russian manufacture. The Mistral ships were custom-made to accommodate our helicopters. We hope that the talks will yield positive results.

- There has been much talk about the provision of project 11356 frigates for India. When will Russia and India come close to concluding this contract? What power plants will be installed on the frigates to be built at an Indian shipyard? The Russian Navy’s Deputy Commander for Armaments, Viktor Bursuk, said that a second troika of these frigates would be built at the Yantar shipyard for the Black Sea Fleet, although the original intention was to sell two of the three to India. Will you please explain how will it all look like in the end?

- As far as these frigates and their delivery are concerned, we hope that all final contracts will be signed by the end of this year. Under the terms of the contract we are to build the frigates. India is to purchase the power plants on its own. We know that the power plants will be Ukrainian, but that’s the customer’s realm of responsibility. India confirms that it is moving in this direction. We will honor our obligation regardless of the circumstances. I would prefer to say nothing about the state defense order or comment on what Defense Ministry officials say. These two themes are in no way related with each other.

- You said that Indonesia, the Philippines and Thailand would like to purchase Russia’s project 636 submarines Varshavyanka. At what stage is the negotiating process at the moment? And when will it be possible to say specific contracts may be concluded?

- It is true that the Philippines, Indonesia and Thailand have taken interest in these submarines. Their technical parameters and the price-quality ratio as they are, these submarines are among those most in demand in the world. Negotiations with all three countries are underway, but it is too early to say that a contract with any of them may be signed tomorrow. It should be remembered that a submarine is much more complex than a battle tank. Building it is a time and effort-consuming process. Also, the customer is to have a special infrastructure where ships of that class are based. The process is not a fast one, but the talks proceed. There is hope that in the future we will forge specific agreements.

- Although our submarines are one of the best, the share of naval technologies in the overall contract portfolio is not as great as we would like it to be. What’s the outlook for promoting our naval technologies to new countries and regions? What might help build up its share in the overall export?

- For now naval technologies come second after aircraft, ground systems and air defense weapons. This concerns the annual amounts and the effective contracts. I believe that this trend will be changing because the prospects of marketing these armaments are very good. Practically any littoral country needs its own effective naval force. Some countries’ existing fleets require upgrading. Without a naval force it is impossible to protect the maritime border well enough or fight against piracy and poaching. Many countries have realized that protecting their offshore areas is entirely their own business. Naturally, there is great interest in naval technologies around the world and it will keep growing. We are holding many talks with various countries. There are such traditional partners as India and China, and also Indonesia, Thailand, the Philippines, some African countries and so on and so forth. Some would like to have our equipment right away, but there are problems with resources. Various payment schemes are being discussed. We are considering and analyzing them. Currently we have the full range of naval technologies on offer: submarines, frigates, patrol ships, speed boats and mine sweepers. There are all reasons to expect that that share of naval technologies in our export structure will be growing. According to our estimates, in 2017-2025 Russia’s export of naval hardware may be up to $40 billion.

- Next, to aircraft. You’ve said that a contract with Kazakhstan has been concluded for Sukhoi-30SM jets. Earlier, Kazakhstan declared the purchase of twelve such planes. How will it all work?

- It is true that this framework contract was signed at the international military-technical forum Army-2017. It will be implemented within the framework of the 2013 treaty on military-technical cooperation between Russia and Kazakhstan, which envisages direct interaction between the Irkut Corporation and Kazakhstan’s government-run enterprise Kazspetsexport. Under the terms of the contact it will be implemented step by step starting from the moment of its first delivery.

- A few words about another major aviation contract then. Rosoboronexport has already said that MiG-29 planes have begun to be delivered to Egypt. Photo news sections on some Egyptian websites confirm this. Official information on that score is scarce, though. When will this contact be implemented?

- Quite right. The contract has been signed. Some fighters have been delivered to Egypt already. About fifty planes will be provided over a period of several years. Everything will depend on the manufacturers’ capabilities. I am certain that we will cope with our contractual obligations on time.

- There have been conflicting reports about the contract with Indonesia for Sukhoi-35 jets. Wouldn’t you explain where these talks are at the moment? When can one expect the contract to be signed and how many planes would that country like to have?

- Our partners there wish to have a dozen planes. The situation looks like this. Indonesia has adopted a new law on the purchases of military products. It says that there must be a large offset component. India is pushing ahead with the Make in India program. Indonesia is proceeding in the same direction.

In fact, this project is a pilot one for the Indonesians and for us, too, from the legal point of view. We are well aware that the contract is now in the active development phase. We’ve made more than half of the way, but the contract has not been signed yet.

Different payment options are being discussed at the moment. They have offered to pay for part of the contract with return suppliers. This procedure is always rather complicated, but I believe that we will agree with that to a certain extent. They have formulated their proposals. We have them and are studying them. I do hope that the contract will be inked before the year is out.

- Of all items on the agenda of Russia’s military-technical cooperation with other countries the S-400 contact with Turkey drew the greatest attention, didn’t it? Opinions differ. Even high-ranking officials make conflicting statements. But nobody has said for certain if there is a contract or there is none. Couldn’t you please explain what the main problem is and what stage are the talks at now? Have an agreement been achieved and a contract concluded?

- The contract has been signed and it is about to be executed. As you may know, S-400 is one of the most complicated systems consisting of a large set of technical components, so there are quite a few nuances. I can merely guarantee that all of the decisions made under this contract strictly agree with our strategic interests. In that connection we find quite natural the reaction of some western countries that have been trying to put pressure on Turkey.

Incidentally, I would like to point to one significant circumstance: there is a waiting list of likely buyers eager to have this system.

- Who is there in this queue of potential buyers?

- Southeast Asian and Middle Eastern countries and some CSTO member-states. There are many applications. A number of countries have taken specific interest in that system. But one should remember that it is a very expensive item of military hardware and far from everybody can afford it. The current contracts for these systems keep the manufacturers fully busy.

- Lately, remote-controlled systems have been mentioned ever more often. What is the share of drones in Russia’s export and will it be growing?

- Yes, we do have plans for building up their share. More than 50 applications are being worked on at the moment. I cannot say that we are one of the industry’s leaders, though. The United States and Israel are ahead, but Russia will certainly catch up. The Americans are developing not just reconnaissance systems meant for situation monitoring, but also attack systems on the basis of drones. We are carrying this kind of work, too, and already make a variety of unmanned systems. Also, we are holding talks with Israel over the possibility of some joint projects. In the overall amount drones account for no more than 2%-3%, but the share will grow considerably when a large variety of newly-designed products are about to begin to be batch-produced.

- Now, let’s move on to the next point – equipment for the ground forces. First of all I would like to ask about the contract for selling 64 T-90S/SK tanks to Vietnam? How is the work on it proceeding?

- The contract for providing T-90S tanks to Vietnam was signed last March and it is being implemented. The dates will depend mostly on the manufacturers.

- Will a contract for selling the T-90MS/MSK tanks to Kuwait be signed this year?

- The contract has not been signed yet, but I reckon it will materialize by the end of this year, bearing in mind the partners’ great interest and the active negotiating process.

- Are there any plans for more major events this year, something participants in military-technical cooperation and all those who keep an eye on this sphere may be looking forward to? Exhibitions, inter-government commissions, or major visits?

- As far as exhibition activity is concerned, the Dubai air show will be the largest event in the remaining months of this year. Russia has always taken an active part in the show, because the United Arab Emirates is our partner. Some major contracts with the UAE are being drafted and fundamental talks are underway with Saudi Arabia. By tradition we present the whole range of weapons at this exhibition.

Bahrain this autumn will host a new regional exhibition and conference on security BIDEC (Bahrain International Defense Exhibition and Conference). Russia’s international show Interpolitex will be the last one on the list of 2017 exhibition activities.

As far as other significant events in the military-technical sphere are concerned, by the end of year there are to be meetings of inter-governmental commissions, committees and working groups with Armenia, Jordan, the United Arab Emirates, Iraq, Cuba, Cyprus, Serbia and a number of African countries –as a matter of fact we have some events every month.

- What contracts with the United Arab Emirates are due?

- The media have already mentioned some projects for cooperation in the sphere of armored vehicles, air defense and aviation. As soon as there are agreements, we will announce them.

- In what way has the operation in Syria influenced the export of Russian weapons?

- Those well familiar with our hardware have been able to see its merits once again. Possibly, the demonstration of our weapons’ effectiveness in real combat conditions was thestarting point in making some fundamental decisions, including those in favor of purchases.

True, real war is not an occasion to show off. We’d prefer to see no wars ever happen. But since they do occur from time to time and put to test modern military technologies of domestic manufacture, we cannot but be glad about the excellent results demonstrated by Russian weaponry and the confirmed high technical and combat parameters.

Air, ground and naval systems were tested in the Syrian conflict. Their ratings are very high, so foreign customers have displayed growing interest. As far as naval technologies are concerned, all specialists keep a close eye on the Kalibr cruise missiles. I would not like to make any comparisons, but the customers see well enough who launches want and what hits the targets best. We have observed a noticeable growth in requests for Kalibr missiles.

- Have the Western sanctions influenced Russia’s military-technical cooperation with other countries?

- Nobody has ever liked sanctions and it would be silly to say that we are totally independent from sanctions and have not been harmed at all. On the other hand, as we’ve said more than once, the sanctions have triggered the development of our own industries. It is noteworthy that our order books are stable. Last year saw growth in the export of Russian weapons and military technologies.We sold $15 billion worth of armaments.

- Will this year’s parameter be no worse?

- I do hope so, but as you may understand, weapons trade is prone to cycles. Armaments are a durable product. Weapons trade is far more complex. Markets get saturated with time. Military equipment is in use for a certain period of time, then there emerges the need for maintenance and upgrading. This is precisely why we say all the time that the most important segments of military-technical cooperation are post-sale maintenance and upgrade of previously provided equipment, as well as supplies of spare parts and components for our products.

As far as amounts are concerned, I believe that this year we will see approximately the same figures, but let us wait for official statistics to be released before summarizing any results.