During the Cold War, defense procurement was a fairly straightforward proposition. The Soviet Union would produce a new weapon, and the United States would respond with something bigger and better. The Russians would then respond with some weapon that challenged the American military. And so it went for many years. When the Berlin Wall came down and the U.S.S.R. disintegrated, the tit-for-tat move and countermove in defense spending came to an end. It was obvious there was never going to be a war in Central Europe–the primary justification and presumed battleground for a good deal of America’s arsenal–and the Russian defense industry was in danger of vanishing altogether.
The Russian MiG-35 is competing against the U.S. F-16 for
an Indian defense deal estimated at more than $8 billion.
At this point Russian and American defense business stopped being a one-on-one game, and the two industries went off in different directions. U.S. defense contractors starting thinking about different places they might need to deploy in the post-cold war world–and what type of a military machine you would need to be victorious in the brave new conflicts they envisioned. And Russian companies became primarily concerned with what their export customers wanted, with barely a care as to what their own military establishment wanted or needed. The question became what could be sold to India, China, and others in large enough numbers to make up for the practically nonexistent funding being disbursed Ministry of Defense in Moscow. Despite $70 a barrel oil and all of the other economic windfalls the Russians have lately begun to enjoy, they still are not providing much in the way of funding to their own defense industry. When asked here at Le Bourget how much his firm depends to this day on export sales for income, one Russian defense executive answered “about 90 percent.”
Through the 1990s, Russia sold hundreds of fighter aircraft, tanks, missiles, infantry weapons, and air defense systems–along with a smaller number of naval vessels and, most recently to India, a couple of aircraft carriers. These sales literally kept the doors open at dozens of factories and design bureaus in Russia. Meanwhile, U.S. defense planners tried to determine what weapon systems were going to be needed in a new world where we no longer contemplated a war with Russia–merely with a number of the countries being armed by Russia. And they did so with little regard as to how the new Russia might cut into the business base for U.S. firms. Look around the air show at Le Bourget and you will see that the Russians are no longer the Evil Empire but have become–from the standpoint of most marketing directors of large U.S. aerospace companies–something far worse. They are now–in addition to the Europeans–another bunch of government-subsidized competitors paying low wages and undercutting U.S. prices. Russian systems were not really much of a match technologically for U.S. fighter aircraft or missiles in the 1990s, but by the time the new century rolled around, they had made numerous advances. Now, U.S. companies find themselves competing against Russia in places like India and Malaysia–F-16s going head to head in tenders against MiG-35s or Su-30MKs. One look at the flight routines here, or on the faces of those watching from the exhibition stands, and it is easy to see that Russia is looking to stake its claim in the worldwide market. Strangely enough, Russian and U.S. industries now find themselves in rather similar situations. Neither has many sales supporting weapons systems that are currently in production. Orders are winding down, and while there is money being budgeted for next-generation programs, neither country has seen a huge spike in spending from the state budget. But Russian factories are busy these days. “Who could have imagined in 1994–in the depths of the dark days of the post-Soviet collapse,” one Russian aircraft factory director said to me, “that today we would have our order books full for the next several years.” The books are full, and some of this work is for the Russian military, which is finally starting to spend a little money after a 17-year hiatus. But some of this production is also headed for troubled regions of the world where it could have a seismic impact, and not of a type that would be favorable to U.S. interests. If Russia does “go off the reservation,” as President Putin seems to be more inclined to do these days, we could see some frightening armaments in the hands of some frightening people. The world could be headed for another arms race, only this one would be a race to see who can sell something to country X–not how we match up head to head. Tomorrow: Is Iran the next big arms customer?
