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. Last Updated: 07/27/2016

Russia and Malaysia Sign Palm-Oil-for-Planes Deal

KUALA LUMPUR, Malaysia -- Malaysia broke with its tradition of buying weapons only from the West, agreeing Tuesday to pay $600 million to Russia for 20 MiG-29 jet fighters, about 20 percent of which will be paid for in palm oil. Russian officials at the signing ceremony said it was their first major weapons sale in Southeast Asia in 30 years, and they hope for more. Viktor I. Samoilov, the head of the State Corporation for Export and Import of Armaments and Military Equipment, told reporters that Malaysia would pay the entire $600 million in cash. Russia then will distribute funds to the various companies involved, which will offset some of the cost by buying $95 million-worth of palm oil and $55 million-worth of other goods from Malaysia over five years. Samoilov said 16 single-seat and two twin fighters, known to Western air forces by the code name Fulcrum, would be supplied to Malaysia's air force for defense purposes. Two other MiG-29s would be sent to the Technical Services Center for training. Each aircraft was worth about $20 million, he said. The package includes organizing the TSC as a joint venture between the two countries for technical support for the MiG-29. Malaysian Deputy Prime Minister Anwar Ibrahim, who witnessed the signing, said the first aircraft would be delivered between next May and August. Russian First Deputy Prime Minister Oleg Soskovets said in a speech: "Today's signing takes us to a new stage in our relationship. There is great potential for cooperation in other areas also." Other Russian officials said that since the failed Communist coup in Indonesia in 1965, Moscow had made no major military hardware sales in the region, but Russia was back again and hoped for increased sales in all fields. Malaysia would be the only country in the region to fly the Russian jet fighters. Its neighbors use mainly Western warplanes, most from the United States. Kuala Lumpur coupled the announcement of the MiG-29 purchase last year with a consolation prize for Washington: an order for eight F/A-18 fighters from McDonnell Douglas. Anwar said training and other assistance in operating the MiGs would come from Russia with an assist from India, which has been flying the plane for many years. The package signed Monday specified the transfer of technology from Russia over 10 years. Initially, Airod Pvt. Ltd., which services aircraft, Syarikat Malaysian Explosives Pvt. Ltd., which makes ammunition and Sapura Holding, which makes telephones and telecommunications equipment, have been identified as early recipients of the technology. Anwar said it took two years to reach agreement, not because of differences over the barter trading arrangement, but because of the working out of details for technology transfer and the price of the aircraft. Russians were earlier reported asking about $28 million per plane, while Malaysia sought 50 percent payment in palm oil. Palm oil has become a controversial export for Malaysia since medical research has shown it can raise blood cholesterol levels in humans, a key cause of heart disease.