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. Last Updated: 07/27/2016

Selling Power

The United States threatens to retaliate against Russia for arms sales to what it perceives to be hostile nuclear threshold states. But it could still pay off to ignore looming U.S. sanctions and engage in a brisk trade in conventional weapons.

The countrys recent decision to resume sales of weaponry to Tehran will inevitably prompt the United States to slap sanctions on domestic defense companies, but trading arms with Iran and other so-called "states of concern" will eventually compensate for any losses from such sanctions, experts here say.

Washington has repeatedly threatened to impose sanctions on Moscow if the latter sells arms to Iran. At the same time, if the weapons trade resumes, Washington may push the International Monetary Fund to further delay issues of new credits to the country and block Russias admission to the World Trade Organization, experts say.

But the most concrete, probable and immediate blow that Washington could deal Moscow over Iran would be for U.S. legislators to limit the launches of U.S.-made satellites by Russian rockets, experts said. The U.S. administration has already indicated that it will not seek an extention to the launch quota agreement, which permits limited launches of U.S. satellites by Russian rockets and is to expire Dec. 31. However, the U.S. Congress is likely to demand that the next presidential administration continue to make launches conditional upon Russia showing some restraint in its arms deals.

Launches of Western-made satellites, mostly U.S.-made craft, by Russian-made rockets have earned the nation an annual average of more than $370 million in gross profits in the past few years, and if Washington bans such launches, it would be "quite a tangible blow," according to Vladimir Kirilov, of the Center for Analysis of Strategies and Technologies.

However, this blow could be offset financially by sales of Russian-made conventional arms to both Iran and other countries that Washington has labeled as states of concern and consequently slapped sanctions on, such as Libya, Syria and North Korea, say both Ruslan Pukhov, head of CAST, and Ivan Safranchuk, of the Center for Policy Studies, or PIR.

They estimate arms exports to these four countries could gross an annual average of more than $450 million.

Also, a hike in arms sales to these countries would lessen the national defense industrys dependence on China and India, which account for 80 percent of the nations total $3 billion in arms exports this year, Pukhov said.

There are no internationally recognized embargoes on arms exports to these four countries, which all need to overhaul their arsenals by procuring new weaponry, such as air-defense systems and multipurpose warplanes, according to Konstantin Makienko, deputy head of CAST.

The armed forces of Libya, Syria and North Korea would also be willing to turn to Russia for repairs, if not for upgrades of their armaments, as more than half of their weaponry systems were made in the former Soviet Union, Makienko says.

These three countries relied heavily on imports of Soviet-made arms, which they often acquired at large discounts, if not for free, for projecting themselves as political allies of the Soviet Union during the Cold War.

Now that Russia has largely abandoned the practice of free military aid, Iran, Syria, Libya and North Korea would have to pay mostly in cash for Russian-made arms, Pukhov says.

Secret Memorandum

Iran alone would be willing to spend anywhere from $250 million to $500 million a year on Russian-made arms, according to both Makienko and Safranchuk of PIR.

Foreign Minister Igor Ivanov has already officially notified U.S. Secretary of State Madeleine Albright that the Kremlin intends to back out of a self-imposed ban on sales of arms to Tehran.

U.S. Vice President Al Gore and then-Prime Minister Viktor Chernomyrdin inked a secret memorandum in 1995 that obliged Russia to complete by Dec. 31, 1999, deliveries of the weaponry systems that Russia and Iran had already agreed on and to refrain from signing new arms deals with the Moslem country after that.

In exchange, the U.S. authorities allowed launches of U.S.-made satellites by Russian rockets to continue. Russia has grossed some $1.7 billion from launches of Western-made satellites since 1993, according to CASTs estimates. But since 1995, Moscow has also lost several billion dollars in missed opportunities to sign new arms deals with Iran, according to Interfax.

If Russia resumes arms sales to Iran, that nation could be willing to update its arsenals by acquiring Su-27 fighters, Su-25 attack planes, Mi-17 helicopters, as well as air-defense systems ranging from the shoulder-fired Igla to the S-300 anti-aircraft missile system, among other hardware, Pukhov said.

The most advanced version of S-300 is dubbed S-300 PMU-2, has a range of some 200 kilometers and can intercept ballistic missiles and aircraft making this system an effective tool for warding off Israeli or Iraqi warplanes, Pukhov said.

Russia had delivered three Project 877EKM diesel submarines and eight MiG-29 fighters to Iran, and sold Tehran a T-72 tank production license in a series of deals signed before the 1995 Gore-Chernomyrdin memorandum.

It was also to sell the production license for the BMP-2 infantry fighting vehicle and deliver Su-24MK warplanes in accordance with these pre-memorandum deals, according to Pukhov. These deliveries could have been followed by the sale of warships armed with anti-ship supersonic Moskit missiles that even the U.S. military couldnt intercept, Pukhov added.

Having sold all these systems, the Kremlin would have then earned millions of dollars annually just from selling spare parts to Tehran, Pukhov said. But Iran has no great demand for Russian-made spare parts because the Soviet Union refrained from large-scale weapons sales Tehran, choosing to arm its arch-foe, Iraq, instead.

Interest in Libya

Like Iran, Libya is also casting about for air-defense systems, now that the United Nations has decided to suspend sanctions against Tripoli after it finally agreed to hand over two suspects in the Dec. 21, 1988, explosion of a Pan Am Boeing 747 over Lockerbie, Scotland, that killed 270 people.

Pukhov estimated Libya would be would be willing to spend some $90 million a year to first repair and upgrade its Soviet-made arsenal and to then purchase new weaponry systems from Russia.

Tripoli would be particularly interested in purchasing Tor-M1 and S-300 air-defense systems to prevent the U.S. military from launching more air raids against it, Makienko said. U.S. jets bombed Tripoli in 1986 to punish the countrys government for alleged involvement in an explosion in a German disco frequented by U.S. soldiers.

Back in the 80s, Libya reportedly acquired Soviet-made arms worth some $500 million each year. Tripoli owes $2.4 billion to Moscow for Soviet-era arms supplies. Until it is restructured, this debt could hinder sales of Russian-made arms to the oil-rich country, according to Safranchuk. Deputy Prime Minister Ilya Klebanov and Emergency Situations Minister Sergei Shoigu have visited Tripoli this year to discuss the debt issue and negotiate new deals with the country.

Syrias Wish List

As for Syria, Damascus would buy some $60 million worth of Russian-made arms if Moscow decided to ignore Washingtons and Tel Avivs opposition to such sales, says CASTs Pukhov.

Russia has already sold some arms, including 1,000 anti-tank Kornet missiles, to Syria, which Washington accuses of sponsoring international terrorism. In response, Washington imposed sanctions last year on several Russian defense companies involved in manufacturing hardware for the Syrian armed forces, which already owes 90 percent of its weaponry to the former Soviet Union.

Sanctions failed to impress the Russian leadership, however, which remains committed to honoring a 1998 agreement signed by Russian Defense Minister Igor Sergeyev and his Syrian counterpart that reportedly provides for up to $3 billion in arms to be delivered to Damascus.

In line with this agreement, a delegation of Syrian air force and air defense specialists visited Moscow in February to negotiate the possible purchase of Russian-made arms, including S-300 air-defense systems, Su-27 fighters and T-80 tanks, according to officials at the Defense Ministry.

This hardware would better enable Syria to ward off Israels much more advanced war machine if the already tense relations between the two Mideast neighbors devolved into war, Makienko says.

However, like in Libyas case, sales of Russian-made arms to Syria could be hindered by the fact that Damascus has yet to restructure its $12 billion Soviet-made debt to Moscow, Safranchuk says.

Setting Limits

Another state of concern that would be willing to procure Russian-made arms en masse is Iraq. But United Nations sanctions remain in place against Bagdad, which needs to procure new air-defense systems and warplanes as well as other hardware to overhaul arsenals crippled during the Gulf War.

While announcing the resumption of exports of conventional arms to Iran, the government continues to block sales of ballistic missile components and technologies to that country and other countries, although some domestic defense companies may try to dodge this ban as they have in the past, Pukhov and Safranchuk said.

Both Iran and North Korea have been actively pursuing ballistic missiles programs and can proceed with or without Russian help, according to Makienko.

"With the development of information highways, any nation can acquire such [ballistic-missile] technologies if it really sets its sight on it and is willing to pay," Makienko said.

Iran has already test fired its indigenous Shahab-3 medium-range ballistic missiles and ran ground tests of space rocket engines.

As for North Korea, it test-launched what it said was a Taepo Dong-1 space rocket in August 1998 to demonstrate its capability in building three-stage rockets. North Korean missile designers are working on a Taepo-Dong-2, which it is believed would be able to reach Alaska, Safranchuk said.

While taking pains to develop intercontinental ballistic missiles, North Korea has been and will be spending only $50 million a year on Russian-made military hardware, mostly spare parts for its Soviet-made weaponry systems, according to Pukhov.

And the Russian government also hasnt agreed to sell to either Iran or North Korea so-called sub-strategic systems, such as long-range Tu-22 bombers and atomic-powered vessels as well as high-precision missiles, such as the surface-to-surface Iskander missiles, Pukhov said.

Any attempt to sell these missiles, which have a range of 280 kilometers, to countries such as Syria or Iran would most definitely infuriate the United States and Israel, as these high-precision missiles could inflict serious damage in the event of a war with Israel, Pukhov said. Iskander designers maintain that two such missiles could cause as much destruction as one nuclear warhead.

And Russia isnt willing to sell Yakhont anti-ship missiles, which have a range that would allow countries like Iran to ward off U.S. aircraft in the Persian Gulf, Pukhov said. Yakhont has a range of 300 kilometers compared with Moskits 120 kilometers.

The United States may refrain from wide-scale punitive actions over sales of defensive systems such as the S-300 and the Tor-M1, but sales of high-precision missiles would probably prompt Washington to slap an economically crippling trade embargo on Russia, Pukhov said.

Quick Response

But while refraining from sales of sub-strategic systems, Pukhov said Russia should not delay offering to upgrade the weapon systems of Syria and Libya, as well as to deliver new arms to these two countries and Iran.

Otherwise, arms dealers from Ukraine and Belarus, as well as Western European countries such as France, could steal arms orders from under Russias nose, as they have done in the past, Pukhov said.

Both Ukraine and Belarus have inherited sizable chunks of the Soviet defense industry and these two countries arms exporters are generally quicker than their Russian counterparts in responding to weaponry inquiries from other countries.

As a result, Iran clinched a deal to procure 12 An-74 transport planes from Ukraine in 1997. Also, the Aircraft Manufacturing Co. of Isfahan, Iran, will begin assembling Ukrainian-designed An-140 transport planes next year.

"Generally speaking, we need to draw a line to define what exactly we want to export to these countries without a fear that this would provoke any large-scale actions on the part of the United States, and then pursue sales aggressively," Pukhov said.