Venezuela has a $52 million agreement with Russia for the supply of 100,000 Kalashnikov assault rifles and munitions, and two agreements worth $474.6 million on the construction in Venezuela of a plant to produce the AK-103 assault rifles under a license, along with a plant to manufacture 7.62 mm bullets for them. This time the two sides signed a contract worth $484 million for the delivery of 38 Mi-17V-5 helicopters, which combine transport, gunship and reconnaissance and rescue operations, and Mi-35M fire-support helicopters, as well as an agreement for the supply of Su-30MK2 multirole fighters.
Russian Defense Minister Sergei Ivanov said the contracts are worth more than $1 billion.
Latin America is not a traditional military-technical partner of Russia. It has always bought arms from the Untied States, which has prevented all other countries, including the Soviet Union/Russia, from gaining a foothold in that market. Moscow has lost many tenders for military supplies there only because the U.S. interfered.
In Brazil, the unique Su-35 fighters have consistently lost tenders. Brazil has usually invalidated the results because the Pentagon tried to force an aircraft on it whose tactical and technical characteristics and price did not suit the country's military. But try as it might, Latin America cannot break free of its "big brother's" embrace.
Venezuela used to be no exception to this rule, but its relations with Russia changed when openly anti-American Lieutenant Colonel Hugo Chavez came to power. He changed the country's military-technical policy, using as a pretext the U.S. embargo on the delivery of spare parts to the weapons and military equipment of the Venezuelan army.
This nearly cost the country its combat readiness, and Chavez said he would replace the 21 F-16 fighters with Russian-made aircraft. The Venezuelan president said: "The Russian Su-30 is the best fighter in the world," and promised to sell or give away the F-16s to Cuba or China.
The possibility of doing business with Latin America boosted the mood in the Russian defense industry. Russian pilots took two Su-30MK2 fighters to the celebrations of the 195th anniversary of Venezuela's independence, where thousands of Venezuelans and their guests admired their aerobatic mastery.
"I think it was the best advertisement for the aircraft and its engine," Ivanov said.
But Chavez wants more than fighters, choppers and rifles from Russia. He also wants to buy several Amur Class (Lada Class, in NATO terminology) submarines, the Tor-M1 and Osa-10 air-defense missile systems, infantry fighting vehicles, and other equipment worth $3 billion. That is nearly half Russia's total arms export revenues for 2005.
Significantly, Russian arms deliveries to Venezuela have nothing to do with Chavez's anti-Americanism or his striving to spite Washington. Russian defense producers say this is business, nothing personal, as the meeting between the Venezuelan leader and Russian President Vladimir Putin in the Kremlin showed.
Unlike in Minsk, the capital of Belarus, or Volgograd and Izhevsk in Russia, which Chavez visited before coming to Moscow, no political statements or criticism of the U.S. was permitted in the Kremlin. Putin is strictly adhering to his policy of avoiding membership in any "holy alliances".
"Our military-technical cooperation is not meant to spite other countries," Putin said in the presence of Chavez. "It is aimed at reviving the Russian economy and raising the living standards of the people."
There was nothing the Venezuelan president could say to that.
Arms deliveries to Venezuela, whose scope will not disrupt the balance of power in the region, are not an end goal for Russia. It has more challenging business plans for the country.
Russian energy giant Gazprom has won an oil production tender in the Gulf of Venezuela, oil major LUKoil is preparing to dig wells in the Orinoco Belt, where it will help local oil companies to produce hydrocarbons, and preparations are underway for the construction of an 8,000 km gas pipeline from Venezuela to Rio de la Plata in Argentina via Brazil. The cost of this challenging project is estimated at about $20 billion.
Taken together, these developments are proof that the two countries' pragmatic plans are based on business interests and a desire to improve the quality of life of their people.
As for military-technical cooperation, experts wonder whether the Russian defense industry will be able to fulfill the contracts. The weak spots of Russian defense enterprises are ageing equipment and personnel, the loss of many advanced technologies, the selling off of plants-especially fourth- and fifth-level ones-that produce component parts, and a heavy burden of idle facilities that increase primary costs, slash profits and hinder modernization.
These problems may complicate the fulfillment of contracts with Venezuela, especially because the Russian defense industry has commitments to China, India, Algeria and other countries. In addition, Russian state defense contracts for the national army have grown significantly. Will the industry be able to carry this weight?
According to the Russian Economic Development and Trade Ministry, the industry has three to five years to honor the contract with Venezuela, which fits in with the capabilities of the enterprises concerned. The advance payment made by Venezuela, as well as payments made in oil, will help the Russian defense industry modernize its equipment, strengthen the suppliers of component parts, and train skilled personnel.
Businessmen know that it is easier to combine forces and choose an effective tactic and strategy when you have a business plan for several years ahead.