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China, Russia and the shifting landscape of arms sales

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Following the end of the cold war and the break-up of the Soviet Union, there were rapid decreases in Russian military budgets. Soviet military expenditure had stood at almost USD $350 billion in 1988. However, by 1992 it had fallen to USD $60 billion and in 1998 was only USD $19 billion. The more flexible parts of the budget suffered the most, such as those for procurement and operations.

At the same time, the Russian arms industry saw several major clients for its weapons disappear, chief among them the former Warsaw Pact members and Iraq. By 1992, the arms industry Russia had inherited from the Soviet Union was in serious trouble. Most of its internal market and part of its export market was gone.

In parallel with this development, China was embarking on a serious military modernization. Boosted by its rapidly growing economy, it began to implement a long-planned reorganization of its armed forces and the acquisition of advanced weaponry. (This modernization had been planned since the 1970s and was given extra impetus by the poor performance of China’s armed forces against Viet Nam in 1979.) Chinese military spending has increased almost every year since 1989, the first year of Stockholm International Peace Research Institute (SIPRI) data for China, from USD $21 billion in 1988 to USD $215 billion in 2015. With this surge, China overtook Russia’s spending in 1998 and within five years had become the second largest spender globally behind the United States.

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Russian and Chinese military spending 1988–2015. Data and graphic: SIPRI

Mutual export and import dependencies

Because Chinese arms design capabilities had been relatively stagnant since the late 1960s, based on outdated Soviet designs and technologies, its industries sought the help of foreign suppliers and designers of equipment and components.

In the 1970s and 1980s, these specialists came primarily from Europe and the USA. However, these Western sources were largely closed off in 1989, primarily due to events in Tiananmen Square. Under these constraints, China began a search for alternatives.

By coincidence, rather than design, Russia and China found themselves in desperate need of a market and a source of military equipment respectively. During the 1990s and early 2000s, Russia’s arms industry survived largely because of its exports of newly produced combat aircraft, armoured vehicles and warships. China played a crucial role during this period. China was Russia’s largest client between 1999 and 2006, accounting annually for 34–60 per cent of the volume of Russia’s exports of major weapons.

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Exports of major weapons by Russia to China 1987–2016. Data and graphic: SIPRI

The decision to sell weapons to China, however, was not without opposition in Russia. There were warnings that Russia would be arming a potential adversary that many suspected had its eyes on the Russian Far Eastern Federal District. Moreover, concerns were expressed that China would copy, without permission and without paying royalties, whatever Russia delivered. In the longer term, worries grew that China might soon become a serious competitor in the global arms market, often in the same countries and regions as Russia. However, the fact that China needed significant numbers of a variety of weapons—and was willing and able to pay in cash—won the argument. At its peak in 2005, China accounted for 60 per cent of all Russian deliveries of major weapons.

By 2006, however, the mutually beneficial export-import relationship between Russia and China had begun to shift. China’s share dropped to below 25 per cent between 2007 and 2009. Moreover, since 2010, the share has halved again to approximately 10 per cent. By that time, however, Russia had consolidated some of its other traditional markets in countries such as India and Algeria and received large orders from newer markets, such as Venezuela. Improvements in the Russian economy also meant that its military spending began to allow for larger orders for its domestic arms industry, reducing the need for exports.

Reverse engineering and market shifts

China’s shift away from Russian exports was in part linked to its own growing manufacturing capabilities. In line with Russia’s original concerns over the potential for reverse engineering by China, copies were made without permission of a variety of Russian weapon systems. Just a few years after Russia delivered the Sukhoi-27 (Su-27) combat aircraft, for example, China released the Jian-11 (J-11). While this aircraft was labelled ‘indigenous’, it was a near-copy of the Su-27. Similarly, new Chinese surface-to-air missiles (SAMs) looked very much like S-300 platforms from Russia. Moreover, Chinese submarines sported features of the Russian Project-877 and Project-636 Kilo class submarines supplied by Russia.

China also started to field its own advanced weapons, such as the Jian-10 (J‑10) and J-11 combat aircraft, various air-to-air and air-to-ground missiles, and several types of warship. Thus, the emphasis of Chinese imports from Russia switched from complete weapon systems to components, such as engines. Only in the field of helicopters were Chinese efforts to develop indigenous systems slow, mainly because China had not yet mastered the production of propulsion systems, such as engines, transmissions and rotors. In this one area, imports of helicopters from Russia have remained significant (see table below; data from the SIPRI Arms Transfers Dataabse, received 2017).

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Major Russian weapons delivered to China 1987–2016. Data: SIPRI

Beyond the diminished need for Russian imports, China also rapidly transitioned into a major arms exporter. This resulted in Chinese forays into markets in which Russia was active, including Algeria, Nigeria, Venezuela, Indonesia and even the former Soviet state of Turkmenistan. (India and Viet Nam are the only important markets where Russia does not face Chinese competition.) Compounding initial Russian concerns over reverse engineering and loss of market potential, China’s L-15 supersonic training and light attack aircraft and the Hongqi-9 (HQ-9) SAM system have also shown signs of ‘borrowing’ from Russian weapons.

New phase or last spasm?

After almost five years of difficult negotiations, Russia and China moved to a new level of arms trade in 2015. Russia finally agreed to sell China 24 Sukhoi‑35 (Su-35) combat aircraft and four S-400 SAM systems for approximately USD $7 billion. These are currently among the most advanced weapons Russia produces. This agreement marked a turning point. It was the first significant sale of Russian major weapons to China since the mid-2000s, representing a sizeable addition to Russia’s total annual value of arms exports, which has hovered between USD $13.5 billion and USD $15 billion in recent years.

The agreement could herald a new phase of large sales of Russia’s most sophisticated arms to China. However, it could also be viewed as a last chance for Russia to gain some income from arms sales to China before the latter becomes self-sufficient. The first scenario would fit the picture of warming Russian–Chinese relations, following the crisis in Ukraine. The second scenario is more tightly bound to Russian financial hardships and the difficulties in its arms industry since 2015. This sale could well be the last chance for Russia to engage in a major sale of military equipment to China. At the same time as the Su-35 and S-400 are due for delivery, China will be introducing its own more advanced Jian-20 (J-20) combat aircraft, as well as its own advanced jet engines, large transport aircraft, helicopters and long-range SAM systems—many of which are on a par with or even better than Russian systems.

When it comes to the arms trade, China has not only learned from Russia, but succeeded in challenging it. Given its financial and defence industrial base, China is likely to have more chances to develop new military technologies than Russia. China’s electronics, composites, advanced materials and shipbuilding industries are all more advanced than those in Russia. The size of the Chinese economy means that it has many more resources and much more manpower to invest in research and development. Thus, it is more than likely that China’s military technology will surpass that of Russia on all levels.

This topical backgrounder is based on a chapter within the report ‘China–Russia relations and regional dynamics: From pivots to peripheral diplomacy’. The report contains case studies from 27 experts from 13 countries. Over two days in January 2017, these experts assembled at a workshop at SIPRI of over 70 participants to discuss their research and analyses on China and Russia in both non-traditional and traditional security domains. First published in SIPRI.org

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Defense

War to End or War to Follow?

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“It’s going to be hard to meet the May 1st deadline”. These were the recent words of US president Joe Biden in his address to the impending US withdrawal of Afghanistan. Whilst his opinion paints a ghastly picture for the forthcoming months, the negotiations run rampant to strike the common ground. However, with continued attacks being launched by the Taliban followed by incessant threats to the US regime to withdraw its troops by the agreed deadline, a hard stance seems legitimate both from the US front and the NATO: both facing a quandary that could either end the decades’ long warfare or fuel insurgency for decades to come.

The US invaded Afghanistan in the aftermath of the September 11th Attacks in 2001. Although the subsequent invasion of Iraq in 2003 followed a similar suit, the stint lasted only 26 days in a massive scale drive to disarm Iraq of the weapons of mass destruction; allegedly in tandem with the looming threat posed to the United States by the World Trade Centre debacle. However, the invasion of Afghanistan proved to be one of the costliest wars; both in terms of artillery and military men.

Cited as one of the rarest areas of agreement between President Biden and his predecessor, Mr. Donald Trump, both favoured the ‘Bring an end to the endless war’ slogan. Before leaving the office, Mr. Trump signed a waiver to ordain the Pentagon to level down the US troops in Afghanistan to 2500 troops, bypassing the reservations of the congress to retain the level at 4000 troops. President Biden, despite being prudent of the hasty withdrawal, rejoiced the idea to bring the soldiers back. In line with his narrative, the US recently proclaimed to withdraw the remaining combat forces from Iraq whilst retaining only the training forces in the country. The 3rd round of talks between Washington and Iraq culminated with the joint statement: “Based on the increasing capacity of the ISF [Iraq Security Forces], the parties confirmed that the mission of U.S. and Coalition forces has now transitioned to one focused on training and advisory tasks, thereby allowing for the redeployment of any remaining combat forces from Iraq, with the timing to be established in upcoming technical talks”.

It is evident that the US wants to enact the plan to bring back the troops, however, Afghanistan poses a paradox in comparison to Iraq. While alleged Iran-backed militants continue to lock horns with both the ISF and the US troops, the US has consolidated a stronger hold evidenced by the recent rebuttal via airstrikes against the Iran-backed militants in Syria. The US holds the premise that Iran seeks economic relief and thereby has no incentive to disrupt the peace but to maintain it. Similarly, the US wants to make a compromise with Iran via renegotiating the JCPOA accord, with a possibility of stretching the ambit to include Iran’s Ballistic Missile Program and the regional proxy wars purportedly financed by Iran, before a hard-line administration takes over the Iranian parliament later this year. So, with a fledgling Iraqi military and expanding prospects of negotiation with Iran, the US could safely pull out the troops whilst still maintaining pressure and presence in the guise of militaristic training in Iraq.

Afghanistan paints a graver reality in contrast. Despite rounds and rounds of negotiations over months, the continued violations of the agreement by the Taliban are making it riskier to draw out the troops. While the US wants to maintain its presence in the country, the wavering Ghani-administration adds oil to fire. A war that has claimed more than 2500 US soldiers and millions of civilians could face an impasse as the 3-week timeslot narrows over the decision-makers. Gen. Frank McKenzie, head of U.S. Central Command, has repeatedly claimed that the Taliban have not fully lived up to the commitments they made in the February 2020 agreement: “Violence levels are too high for a durable political settlement to be made”.

The Biden administration, CIA, and NATO face a dilemma to decide the mechanism of withdrawal before the clock ticks through. As the terror groups propagate in the neighbouring Middle East, an unplanned withdrawal could drive the entire region into jeopardy. This might be the primal concern of president Biden and the Pentagon. The flailing ISIS could find haven in the political fiasco the unravels after the US completely withdraws from the country, leaving the Afghani government at the whims of the insurgents. However, expecting a complete withdrawal is just naivety. The US is known to covertly operate hundreds of secret bases in cahoots with NATO throughout the infringed nations. While it’s supposedly claimed that the Taliban are privy to the location of the bases in Afghanistan, nothing definitive could be added in edgewise to the argument.

An alternative, and quite a plausible notion at present, could be an outright refusal to withdraw the troops before the Taliban strictly adhere to their side of the deal. The resulting warfare would subsume the past 2 decades of mayhem. The deal would most likely completely crumble and perish. The evidence is scattered over the last three months. In March, the attack on the Afghan security checkpoint in the northern Afghan province of Kunduz left 6 soldiers dead. An attack a few days ago in the province of Herat left 9 Afghan police personnel dead when the Taliban militants targeted two police checkpoints. The recent blow came when the Taliban attacked the NATO airbase in Kandahar: a base frequented by 100s of US troops. The brazen attitude and timing of the attacks could not send a clearer message of warning to follow the deadline.

President Biden faces a choice now. While the cards are clustered and the consequences are muddled, the foremost decision hangs: How to go about the negotiations? Whilst made abundantly clear that the troops might not withdraw completely from Afghanistan, he confidently patched his perspective by adding:“Can’t picture the US troops still being in Afghanistan next year”. So, while the agreement stands to make a safe withdrawal, the deadline of May 1st poses a challenge if the exceeding violence alludes to any clue. With mounting pressure from the republicans and a synonymous example of withdrawal in Iraq, President Biden should ideally emphasize on withdrawal of the troops, even if not entirely. This would allow the Biden administration to elongate the negotiations to quench violence instead of retreating without question. However, execution is the key. Deviating from the agreement forged by Mr. Donald Trump or taking an aggressive stance could easily incite the chaos further: making the Afghan war translate into Biden’s war for decades to follow.

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Dual Use Technology Imports Aiding Pakistan’s Covert Nuclear Programme

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Terrorism

A recent threat assessment report by the Norwegian security agencies reportedly highlighted the unhindered exploitation of dual use technology by Pakistan. Norwegian authorities have determined Pakistan to be among the countries posing greatest threat to them. With this report, Norway became the latest country to raise alarm about the ‘Pak’ practice of bypassing all international safeguards in gaining latest nuclear technology on the pretext of using it for education and health.

However, Norway is not the only country to realise the immense risk stemming from transferring critical technologies to Pakistan. Its assessment follows several other countries’ public acknowledgement of the nuclear threat posedby Pakistan. Czech Republic in its report titled “Annual Report of the Security Information Service for 2019” also drew global attention towards Pakistan misleading the world in procuring internationally controlled items and technologies to aid its nuclear programme.

The evidence of Pakistan’s covert nuclear programmes go well beyond these reports. In 2019,the US Department of Justice indicted five persons associated with a Pakistan based front company for operating a network that exported US origin goods to Pakistan. The indictment identified 38 separate exports involving 29 different companies from around the country between September 2014 and October 2019. The network used to conceal the true destinations of the goods in Pakistan by showing front companies as the supposed purchasers and end users. However, US Justice Department statement disclosed that the goods were ultimately exported to Pakistan’s Advanced Engineering Research Organization (AERO) and the Pakistan Atomic Energy Commission without export licenses. Both AERO and PAEC are on the US Commerce Department’s Entity List, which imposes export license requirements for organizations whose activities are found to be contrary to US national security or foreign policy interests.

Similarly, German authorities disclosed in 2020 that Pakistan had sought technology for weapons of mass destruction (WMD) “in order to retain a serious deterrent potential against ‘arch enemy’ India”. The agency provided a detailed account of Pakistan’s efforts to steal information and material about nuclear weapons.

However, to fulfill its destructive agenda, Pakistan does not shy away from using the name of its poor public and students. Its government has repeatedly claimed that it seeks the dual use technologies for social and economic upliftment of the country by utilizing the technology in its health and education sectors.

But, these baseless arguments no longer seem to cut the ice with western countries. Meanwhile, on their part, Pak officials have complained against the latest Norwegian report on grounds that other countries may deny access to technology to Pak students for their advanced studies and Pakistani researchers would be refused admission to International institutes and universities. However, the Norwegian authorities have maintained their stance as based on independent assessment of the issue, including confidential inputs.

Several instances of Pakistan having gained access to dual technology in the garb of peaceful purposes have come to light in the recent years. And the risk continues considering Pakistan’s terror background and its history of stealing technologies from different parts of the world. It is the unsavory reputation of Pakistan as a troublemaker that has gone global and the country is viewed with suspicion even when humanitarian considerations come to fore.

Given the poor governance standards and history of failure of civil institutions in Pakistan, these observations provide a justification for apprehensions of the western countries. It remains to be seen whether these disclosures lead to sanctions or new export controls against Pakistan or the country again succeeds in misleading the world by playing victim’s card.

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Kickbacks in India’s defence purchases

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Prime minister Narendra Modi of India boasts his government of being corruption- free. But, his claim has become questionable in the light of recent audit of Rafale purchase in France.

India had ordered 36 of these fighter aircraft from France in September 2016. The 7.8 billion government-to-government deal for 36 fighter jets was signed in 2016. The Indian Air Force has already raised its first squadron of the Rafale jets at Ambala and is due to raise the second one at Hasimara in West Bengal.

India expects to receive more than 50 percent of these fighters by April-end. The first batch of five Rafale jets had arrived in India on July 28 and was officially inducted on September 10 by the government.

In a startling disclosure, the French Anti-Corruption Agency, Agence Française Anticorruption

has announced that their inspectors have discovered an unexplained irregularity during their scheduled audit of Dassault. According to details, “the manufacturer of French combat jet Rafale agreed to pay one million euro to a middleman in India just after the signing of the Indo-French contract in 2016, an investigation by the French publication Mediapart has revealed. An amount of 508,925 euro was allegedly paid under “gifts to clients” head in the 2017 accounts of the Dassault group  ( Dassault paid 1 million euro as ‘gift’ to Indian middleman in Rafale deal: French report India Today Apr 5, 2021). Dassault tried to justify “the larger than usual gift” with a proforma invoice from an Indian company called Defsys Solutions. The invoice suggested that Defsys was paid 50 per cent of an order worth 1,017,850 for manufacturing of 50 dummy models of the Rafale jets. Each dummy, according to the AFA report, was quoted at a hefty price of 20,357. The Dassault group failed to provide any documentary evidence to audit about the existence of those models. Also, it could also not explain why the expenditure was listed as a “gift to clients” in their accounts.

Shady background of Defsys

Defsys is one of the subcontractors of Dassault in India. It has been linked with notorious businessman Sushen Gupta. Sushen Gupta. He was arrested and later granted bail for his role in another major defence scam in India, the AgustaWestland VVIP Chopper case.

The Enforcement Directorate charged Sushen Gupta for allegedly devising a money-laundering scheme for the payouts during the purchase of the helicopters.

Rampant corruption in India

Corruption in defence deals is a norm rather than an exception in India. They did not spare even aluminum caskets used to bring back dead bodies from the Kargil heights (“coffin scam”). Investigations into shady deals linger on until the main characters or middleman is dead. Bofors is a case in point.

Why investigation of defence deals since independence recommended

India’s Tehelka Commission of Inquiry headed by Mr. Justice S N Phukan had suggested that a sitting Supreme Court Judge should examine all defence files since independence.

Concerned about rampant corruption in defence purchases allegedly involving Army personnel, he desired that the proposed Supreme Court Judge should by assisted by the Central Vigilance Commission and the Central bureau of Investigation.

He stressed that unless the existing system of defence procurement was made more transparent through corrective measures, defence deals would continue to be murky. He had submitted his report to then prime minister Atal Behari Vajpayee, but to no avail. The Commission had examined 15 defence deals including the AJT, Sukhoi, Barak missiles, T-90 tanks, tank navigation systems, simulators, hand-held thermal. imagers, Karl Gustav rocket and Kandla-Panipat pipeline. The irregularities in the scrutinised defence deals compelled the Commission to suggest de novo scrutiny of all defence purchases since independence.

Tardy trial

The courts have absolved Rajiv Gandhi of involvement in the BOFORS scam. However, a considerable section of Indian people still believes that ‘Mr. Clean’ was not really so clean. The BJP exploited Rajiv’s acquittal as an election issue. Kuldip Nayyar, in his article “The gun that misfired” (Dawn February 14, 2004) laments, “There was practically no discussion on Bofors-guns kickbacks in the 13th Lok Sabha which has been dissolved for early elections. Once Rajiv Gandhi died the main target – the non-Congress parties lost interest in the scam”.

According to analysts, the mechanisms of public accountability in India have collapsed. Corruption has become a serious socio-political malady as politicians, bureaucracy and Armed Forces act in tandem to receive kickbacks. The anti-corruption cases, filed in courts, drag on for years without any results. To quote a few case: (a) There was no conviction in Bofors-gun case (Rs 64 crore), because of lethargic investigation (the case was filed on January 22, 1990 and charge sheet served on October 22, 1999. Among the accused were Rajiv Gandhi, S K Bhatnagar, W N Chaddha, Octavio, and Ardbo. The key players in the scam died before the court’s decision). (b) No recoveries could be made in the HDW submarine case (Rs 32.5 crore). The CBI later recommended closure of this case. (c) Corruption in recruitment of Armed Forces.

Legal cover for middlemen

Central Vigilance Commissioner P Shankar had alleged (October 2003): “The CVC had submitted its defence deals report on March 31, 2001. Yet a year later, the government has not conducted the mandatory departmental inquiry to fix responsibility”. Shankar explained that the CVC had examined 75 cases apart from specific allegations made by former MP Jayant Malhoutra and Rear Admiral Suhas V Purohit Vittal. Malhoutra’s allegations were about middlemen in defence deals. After his report, the ministry lifted the ban on agents in November 2001 to regularise the middlemen. Purohit, in his petition in the Delhi HC on a promotion case, had alleged unnecessary spare parts were bought from a cartel of suppliers instead of manufacturers, at outrageous prices and at times worth more than the original equipment.

Past cases forgotten to continue business as usual

There were ear-rending shrieks about the Taj-heritage corridor case, Purulia-arms-drop case and stamp-paper cases. Indian Express dated November 11, 2003 reported that the stamp-paper co-accused assistant Sub-Inspector of Police drew a salary of Rs 9,000, but his assets valued over Rs 100 crore. He built six plush hotels during his association for 6 years with the main accused Abdul Karim Telgi. The ASI was arrested on June 13 and charged under the Maharashtra Control of Organised Crime Act. Investigations by the Special Investigating Team (SIT) probing the stamp scam had found that the ASI Kamath accepted Rs 72 lakh from the scam kingpin, Abdul Karim Telgi, on behalf of IGP Sridhar Vagal.

The problem is that the modus operandi of corruption ensures that it is invisible and unaccounted for. There are widespread complaints that the politicians exercise underhand influence on bureaucracy to mint money. For instance, the Chief Vigilance Commissioner complained to Indian Prime Minister (November 8, 2003) that at least “six cabinet ministers, handling key infrastructure ministries, are harassing chiefs of public sector undertakings for ‘personal favours’, and in some cases even for pay-offs”.

For example, one PSU (Public Sector Udertaking) chief is said to have complained that he was asked to get Rs 20 crore delivered to his minister’s party office and when he refused, he was “denied” an extension. Indian Express dated February 19, 2004 reported, under reportage titled “Figuring India” that ‘Rajiv Pratap Rudy is only one in a long line of ministers who have misused the funds and facilities of Public Sector Undertakings”. The newspaper appended the following bird’s-eye view of the funds (available for corruption) at the PSUs command: Rs 3, 24,632 crore total investment in PSUs, Rs 36,432 crore profits, 12,714 crore profits of monopolies in petroleum, Rs 5,613 CRORE profits of monopolies in power Rs 7,612 crore, profits of monopolies in telecom Rs 10,388 crore, Rs 61,000 crore invested in PSUs in 1991-1998, Rs 19,000 crore returns during 1991-1998.”

Corruption as proportion of gross Domestic Product

Professor Bibek Debroy and Laveesh Bhandari claim in their book Corruption in India: The DNA and RNA that public officials in India may be cornering as much as ₹921 billion (US$13 billion), or 5 percent of the GDP through corruption.

India 86th most corrupt (Transparency International corruption ranking Jan 29, 2021)

India’s ranking on the Corruption Perception Index– 2020 is 86. The index released annually by Transparency International ranks 180 countries by their perceived levels of public sector corruption according to experts and business people. It uses a scale of zero to 100, where zero signifies the highest level of corruption and 100 is very clean.

All-round corruption

In India, anti-corruption focuses on big ticket graft. But it is petty corruption that hurts common people more. Both need to be weeded out. A former World Bank president Robert Zoellick once said, “Corruption is a cancer that steals from the poor, eats away at governance and moral fibre, and destroys trust.”

According to Transparency International, CPI-2020 shows that corruption is more pervasive in countries least equipped to handle Covid-19 and other crises. “Covid-19 is not just a health and economic crisis. It is a corruption crisis. And one that we are currently failing to manage,” Delia Ferreira Rubio, chair of Transparency International said. “The past year has tested governments like no other in memory, and those with higher levels of corruption have been less able to meet the challenge. But even those at the top of the CPI must urgently address their role in perpetuating corruption,” she added.

Concluding remarks

Click Wikipedia to know that Narendra Modi’s “Net worth” is “₹ 2.85 Crore” (June 2020). This figure defies his humble financial background. He has a penchant for hobnobbing with “crony capitalism”. It appears he is worth a lot more.  Those who make illicit money have a knack to hide it.

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