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Oct. 30, 2006
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Russia Chooses Between $1.5 Billion and $2 Billion
// Will Russia Honor Its Military-Technology Deals with China or with India?
China has appealed to Russia to include Pakistan in the list of countries with which Moscow has military-technological trade partnerships. Otherwise, China cannot fulfill its contract for the delivery to Pakistan of FC-1 fighter planes with Russian engines. If Russia refuses, it could complicate trade relations with China, which bring in $2 billion annually. Agreement, however, could threaten Russia's ties with India, which are worth more than $1.5 billion per year.
This week an official Chinese delegation will arrive in Moscow for negotiations. According to information obtained by Kommersant, the Chinese representatives will insist that Pakistan be included in the list of countries with which Russia has agreed to conduct military-technological trade. Otherwise, Beijing will have to default on its contract to deliver FC-1 fighter jets to Pakistan. According to the existing contract with Beijing, Russia has agreed to outfit Chinese fighter jets with Russian engines. Unfortunately for Beijing, however, according to an addendum to the contract, China does not have the right to re-export planes with Russian engines to a third country.

The FC-1 (also known as the Super-7), the first Chinese multifunction fighter jet, is oriented towards the international market. Chengdu Aircraft Industry began the development of the plane in the early 1990s. Around 50% of the costs ($75 million) were carried by Pakistan. China's National Aero-Technology Import and Export Corporation, Pakistan's Aviation Integrated Company, Israel's IAI, and Russia's OKB-Mikoyan Engineering Center all took part in the project. The FC-1 made its first flight in August 2003.

China signed an agreement with Pakistan to deliver 150 FC-1 jets under the name JF-17 Thunder. But it was impossible to get the Russian engines for them. "Pakistan is not included in the list of countries with whom Russia has military-technological trade, meaning that the re-export of Russian military goods to Pakistan is not possible," said the Russian military producer Rosoboronexport. The Federal Military-Technology Trade Service confirmed to Kommersant that it does not intend to include Pakistan. Including Pakistan could harm relations with India, with which Russia has signed an agreement not to deliver military technology to Islamabad. The trade in military technology between Russia and India is worth more than $1.5 billion annually. The MiG corporation has also won a tender from the Indian government to deliver 126 fighter jets for a sum of $6.5 billion.

However, Beijing could also bring its weight to bear on Russia in terms of future contracts: talks are being held concerning Su-33 fighters (up to 48 planes for up to $2.5 billion), 15 Be-200 amphibious planes with "Sea Snake" targeting systems ($400 million), almost 40 Ka-29 transport helicopters and more than 20 Ka-31 helicopters (around $200 million), and four Zubr ("Bison") hydroplane boats (around $210 million).

The terms of the contract signed by Rosoboronexport and China in 2005 for the delivery of 100 RD-93 engines for FC-1 fighters, along with parts and service, for $267 million is also under strain for a different reason. Russia was supposed to deliver 15 engines by September, but only ten have been delivered so far: the Chinese have refused to accept the remaining five because of technical problems, and delivery has now been pushed back to December. China is additionally suggesting that that RD-93 be modernized and its thrust increased from 8.3 to 9 tons in order to pump up the tactical-technical specifications of the FC-1. Rosoboronexport has yet to make a decision, since the modified RD-93 has not been completely developed yet in Russia.

Experts in the field believe that China will not succeed in winning a concession from Russia on the question of re-export and that it will have to seek a compromise with Pakistan. "Russia will never give China the right to re-export its military technology to Pakistan, since that would threaten [Russia's] multibillion dollar contracts with India," believes Russia/CIS Observer editor Maksim Pyadushkin. "However, Beijing will never drop the FC-1 program. The most important thing for the Chinese now is to get RD-93 engines that they can take apart and copy in the future, like they do with everything in China." In the opinion of experts, Beijing will most likely offer Islamabad either another plane or, if worst comes to worse, return its money for the development of the FC-1.

Ivan Safronov, Alexandra Gritskova, and Konstantin Lantratov

All the Article in Russian as of Oct. 30, 2006

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