Can Belarus keep a strong position on the global arms markets?
In 2012, Belarus became 18th out of the world's 20 leading arms exporters, according to a report by the Stockholm International Peace Research Institute (SIPRI) published last month.
Despite this achievement, the situation of national arms industries remains precarious. Belarusian arms producers are increasingly loosing sway on the post-Soviet market. Since 2007, The Kremlin has pursued a policy of substituting Belarusian products with Russian ones.
Under these circumstances, Minsk is focusing on traditional Soviet-era markets (such as China and Vietnam) and cooperation with conservative regimes in the Middle East and Southeast Asia. For example, Belarusian firms are currently seeking a contract on modernisation of Malaysian MiG-29s. At the end of February, Belarusian officials signed new agreements with a major defence company from the United Arab Emirates.
Top-20 for the last time?
In 2012-16, Belarus sold $625m worth of arms. In comparison, neighbouring Ukraine sold $3.7bn worth of weapons over the same time period and managed to keep its place among the top-10 global arms exporters.
According to SIPRI, Minsk received the most revenue from aircraft sales – $312m, and air defence systems – $195m. The export of armoured combat vehicles brought in $96m. Most of these arms were remnants of the Soviet military, although they were usually modernised before sale. At the same time, the share of products of Belarus's own firms is rising, e.g., radars, optics, and electronics. Belarus has recently focused on developing complete weapons systems, such as the Palanez multiple-launch rocket system. However, it has yet to export them.
Even a cursory analysis of SIPRI's figures shows that this could be the last time Minsk manages to get into the top-20 global arms suppliers. Given the share of aircraft in its exports and the fact that Belarus effectively no longer has aircraft to sell, Belarus will face a significant decline in its revenues from arms exports.
This can be avoided only if it decommissions the Su-25, a close air-support aircraft of the Belarusian armed forces, and sells them. Such plans have in fact been articulated repeatedly in recent years. Another possible option – the sale of some of the Belarusian military's MiG-29s – is improbable, as this would undermine Minsk's commitments to the Single Air Defence System with Moscow.
The three largest importers of Belarusian arms in 2012-2016 were China ($170m), Vietnam ($150m), and Sudan ($113m). China and Vietnam have been traditional Belarusian partners in the defence sphere since Soviet times. Export to Sudan became possible when certain conservative Arab regimes, namely Saudi Arabia and the UAE, bankrolled the Sudanese.
Belarusian arms in the Middle East and Southeast Asia
Cooperation with Western-allied Arab regimes continues. On 21 February, Belarus's State Military-Industrial Committee and the UAE's Tawazun Economic Council – the UAE's national agency dealing with defence equipment procurements – signed an undisclosed agreement.
While the Russian media described the document merely as a 'memorandum of understanding,' an IHS Jane's Defence Industry analysis insisted that Belarus and the UAE had signed a 'defence technology transfer agreement.'
The agreement followed another weapons deal concluded between Belarus and the UAE just days before. According to the $14.37m deal, the Emirati military contracted the Belarusian defence firm Beltech Export to supply spares and provide repair services and technical support for the BMP-3 infantry fighting vehicles of the UAE armed forces.
Meanwhile, Belarusian defence industries are also actively working in Southeast Asia. In 2016, Belarusian firms concluded two major arms deals there by delivering surface-to-air missile systems and radars worth $51m and $30m to Myanmar and Vietnam respectively.
Currently, the Belarusian 558th Aircraft repair plant is struggling to get a contract on modernisation of Malaysian MiG-29s. It has a chance: the speaker of the lower chamber of the Malaysian parliament Pandikar Amin Mulia visited the plant in December.
Is the Kremlin spending tens of millions to undercut Belarusian partners?
Belarusian defence industries are still mostly oriented towards post-Soviet nations. Yet fundamental changes are afoot. Without much publicity, Russian defence industries are consistently undercutting Belarusian suppliers. Russian government agencies are planning to replace Belarusian-manufactured components – alongside Ukrainian and Western-supplied defence equipment parts – with Russian state programmes.
Russian officials openly boast about their successes in substituting Belarusian imports with Russian products and services. A case in point is the company Remdizel, a unit of KamAZ corporation, which separated from the latter and took KamAZ's military projects with it.
Initially, Remdizel repaired and overhauled KamAZ chassis and trucks. However, in an interview recently published by Russian the defence review Eksport Vooruzhenii, Faiz Hafizov, director general of Remdizel, announced an expansion. His enterprise will now provide maintenance and overhaul services for Belarusian MAZ-543 and prepares to do the same for Belarusian MZKT-7930. The Russian army widely uses both to carry missiles.
This squeezing out of MAZ and MZKT from the Russian market is not a private initiative of Remdizel, as proven by respective agreements it has concluded with the Russian defence ministry and its departments. The director of Remdizel expects that in 2017 the revenue his firm gets from maintenance and overhaul of MAZ and MZKT of only military types can increase by at least 8-9%. This means a corresponding decrease in revenues of Belarusian firms.
Can Russia live without MZKT?
The sixth issue of the review Russia in Global Affairs last year featured an article summarising the achievements of the Russian defence industries in substituting imports. Belarusian supplies were listed among foreign imports to be replaced by Russian analogues. Furthermore, the author, Russian defence analyst Andrei Frolov, admitted that although the Kremlin started adopting defence imports substitution programmes in 2013-2014, the Russian government had begun to get rid of post-Soviet partners years before.
For instance, the Russian Zavod Spetsialnykh Avtomobilei, based in Naberezhnye Chelny, since 2010 has been developing a series of chassis to replace the Belarusian MZKT analogues as prospective arms platforms. Moreover, Putin signed an order on respective R&D works as early as 2007.
This is only the beginning. In July 2016, the local daily Biznes Online revealed that the project in Naberezhnye Chelny had failed, and now Russia is launching a second large-scale programme to substitute Belarusian-manufactured chassis. The costs already amount to tens of millions of US dollars, but the Kremlin seems intent on getting rid of Belarusian MZKT at any cost.
Other Belarusian defence exports to Russia will be affected as well. For instance, the same Russia in Global Affairs review announced the 'production of [Russian] night vision sight matrices instead of French and Belarusian products' as another major achievement of Russia's defence industry. Given that Belarusian firms traditionally supplied sights and other optics for Russian-made tanks and armoured vehicles, it seems that the Kremlin is making no exceptions for Belarus in its drive towards autarchy.
Belarusian defence industries are undergoing arduous but relatively successful transformations. On the one hand, they are forced to develop new products, as their Soviet legacy has already been sold. On the other hand, Putin's policies have left Minsk with no choice in the long-term perspective: it must survive with less support from Russia. As the SIPRI report has shown, Minsk is so far surviving. Minsk's marketing efforts pursue a consistent and fastidious strategy by focusing on solvent customers, including certain former Soviet allies, conservative regimes in the Middle East, and beyond.