The Ukrainian Crisis: Possible Implications for the Russian Military Industry

The greatest threat to Russia’s defense capability comes from cutting off military imports from Ukraine. Being able to promptly replace Ukrainian manufacturers seems unrealistic, and a ban on Ukrainian defense product supplies could become a real threat to proper performance under the state defense order and several export contracts.

The events in Ukraine and ensuing changes in Crimea have become among the highlights of 2014 and the entire post-Soviet period. Along with changes in the administrative territorial division of Ukraine and Russia, the declaration of an independent Autonomous Republic of Crimea and its accession to Russia directly affected the Russian armed forces.

Thus, in the wake of the movement of Russian troops to Crimea, the Ukrainian army’s property that was located in Crimea as of February went first to the Crimean authorities and then to Russia. In addition to the Air Force and Army units, the Russian Defense Ministry has received a considerable number of ships and vessels of the Ukrainian Navy based in Sevastopol and Donuzlav. In all, about 70 combat ships, speed boats and support vessels came under Russian control between March 20 and 26. However, they do not have any particular combat value, because most of them are significantly worn out, are morally and physically obsolete, and are in poor technical condition due to Ukraine’s financial constraints, which prevented it from maintaining them properly. After assessing their condition, the Russian leadership decided to return these ships to the Ukrainian Navy. By April 21, Ukraine had received back more than a dozen ships of various classes, including a Project 773 medium landing ship, a Project 1124P ASW corvette, a project 206 MR missile boat and several other ships and vessels. Given the current condition of the Russian Black Sea Fleet and the expected massive supply of new equipment, including six Project 11356 frigates, six Project 06363 submarines, three Project 21631 small missile ships and several other vessels, the outdated former Ukrainian ships would have only decreased its combat capability. That’s the reason why the Ukrainian ships will be returned to Ukraine.

Certain risks may be associated with Russian-American space cooperation. On April 3 the U.S. National Space Agency announced that it had decided to suspend cooperation with Russia in most joint programs and projects. However, the flagship bilateral cooperation project – the U.S. astronauts’ launching to the International Space Station scheduled to last up to 2017 – is continuing to operate and bring the bulk of proceeds from space cooperation program to the Russian side. However, NASA purchases of RD-180 engines for Atlas III and Atlas V rockets may be jeopardized. In this case, the engine manufacturer, Energomash, will lose almost $9 million per engine. Since the U.S. planned to buy 101 such engines, and only 50 have been shipped as of mid-2011, the lost opportunity could cost up to $500 million and adversely affect Energomash’s activities, since it is impossible to find Russian customers for these engines. Threats to supplies of NK-33 engines made by Kuznetsov company are less obvious. As of mid-2013, there were about 20 of these 1960-made engines, and their prospects depend on the success and the frequency of a new U.S. Antares carrier for which the American side has already purchased 37 NK-33 engines.

Concerns that the Makarov Yuzhny Machine-Building Plant (Yuzhmash) may sell R-36 ballistic missile technology abroad seem to be unfounded. This would directly violate Ukraine’s obligations under the Missile Technology Control Regime (MTCR) which Ukraine joined in 1994. The number of possible buyers of these technologies is fairly small and includes China, North Korea and Iran. Clearly, the U.S. will do all it can to prevent such a transfer. Chinese and North Korean special services had on several occasions been caught in attempts to break into Yuzhmash. In 1996, the Security Service of Ukraine (SBU) caught three Chinese spies red-handed, who had bought secret documents on intercontinental ballistic missile engines from a Dnepropetrovsk-based Yuzhnoye State Design Office employee. However, under pressure from the Chinese Embassy, the Ukrainian authorities forced SBU to release the detained Chinese spies the very next day after their arrest.

Finally, the exacerbated confrontation between Russia and the West could lead to a revision of some of the projects for joint creation of new weapons systems or upgrading existing ones. A project by Renault Trucks Defense – a member of the Volvo Group – and the Russian Uralvagonzavod Corporation to design a wheeled combat vehicle, ATOM, a concept for which was introduced in the autumn of 2013, is among the most high-profile ones. This project has not been commissioned by the
Russian Defense Ministry, but was instead initiated and developed by the two companies seeking, perhaps, to attract the attention of the Russian military and enter into competition with the Boomerang wheeled armored vehicle that is being developed by the Military Industrial Company. Following the events in Crimea, Volvo froze its part of the project, announcing, in particular, a ban on supplying the Renault-made engine for this combat vehicle. To begin with, this concept raised many questions in the expert community regarding its viability, so it’s unlikely to affect significantly the Russian defense industry.

Meanwhile, France is continuing to build two Mistral-class amphibious assault ships for the Russian Navy. This is Russia’s largest project to procure foreign-made military equipment, and it will most likely be completed, albeit with certain delays.

At the same time, it is quite possible that smaller contracts can be suspended. For example, the German Rheinmetall AG refused to build a troop training center in Mulino (the Nizhny Novgorod Region) for the Russian Defense Ministry. The execution of the contract signed between Rheinmetall and Rosoboronservice in 2011 will be suspended until the situation concerning Crimea is settled. Interestingly, the construction of the training complex in Mulino was to be completed in June 2014 under the contract.

Yet, the greatest threat to Russia’s defense capability comes from cutting off military imports from Ukraine. Being able to promptly replace Ukrainian manufacturers seems unrealistic, and a ban on Ukrainian defense product supplies could become a real threat to proper performance under the state defense order and several export contracts. 

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.