Russia » Economics
Author`s name Dmitry Sudakov

Russia loses deal of the century to Europe

Russia loses deal of the century to Europe. 44191.jpegRussia has lost the largest arms tender of this century - the delivery of the medium multi-role combat aircraft for India. Russia was taking part in the tender with its MiG-35 fighter jet (a modernized version of MiG-29). The contract stipulated the delivery of 126 fighter jets in the amount of over $10 billion.

Now there are two rivals left, both of them are European companies: Rafale, France, and Eurofighter Typhoon, built by the Italian-British-European consortium.

The decision of the Defense Ministry of India is extremely important for the whole world market. Russia's defeat in the tender virtually means that Russia's Air Force will not be receiving those fighter jets either. It may also mean that Russia's chances to sell the jets to someone else in the world have decreased considerably, observers say.

Russia was certain from the very beginning that her aircraft would win the tender. Indian experts also estimated Russia' chances for the victory as very high. The MiG-35 fighter jet was taking an advantage over its competitors with its lower price. The jet is well-known on the world market.

India has given its largest arms contracts to Russia during the recent decade. India ordered Admiral Kuznetsov aircraft carrier, a group of MiG-29K jets for the vessel, as well as frigates and a rented submarine. India also joined forces with Russia to build BrahMos cruise missiles, a fifth-generation fighter jet and the new MTA transport plane.

Now Russia has received the official refusal from India. On Thursday night, Rosoboronexport and MiG design bureau received a letter in which the Defense Ministry of India informed about the preliminary results of the tender which was announced in 2007. The letter contained the detailed analysis of the drawbacks of the Russian offer. One of the claims is reportedly about the engines.

Moscow is trying not to dramatize the situation saying that it was India's exclusive right to choose the aircraft supplier it needs.

Russia's Defense Ministry earlier said that it was planning to purchase 26 deck-based MiG-29 and not less than 72 MiG-35. The contracts have not been signed yet. The price of those fighter jets may turn out to be too high for the home market now, after the loss in the Indian tender. If Delhi had purchased the Russian jets, the largest contract would give an opportunity to set the home price for the jet a lot lower.

It now seems unnecessary to develop the production of MiG-35 jets for a relatively small order from the defense ministry. Most likely, Russia will have to shelve those plans. The loss also questions the promotion of the aircraft on other markets - in Latin America and in the Middle East.

MiG, a part of the United Aircraft Corporation, is the oldest designer and manufacturer of combat planes in Russia. The central product of the company is the MiG-29 fighter jet. There have been over 1,600 of them built since 1982.

According to the most recent financial report of the company over 2009, MiG received the profit of 24.8 billion rubles and suffered net losses of 7.9 billion. The debt of the company makes up 44 billion rubles. It is worthy of note that in 2009, Algeria refused from purchasing MiG-29 - the jets were eventually bought by the Russian Air Force.

The United States, another participant of the Indian tender, has lost too. India declined Boeing and Lockheed Martin. Originally, the American manufacturers were not considered as favorites, but they took the loss very painfully. US Ambassador to India Timothy Roemer stated that the USA was deeply disappointed with the preliminary results of the tender. Mr. Roemer unexpectedly stepped down on Thursday citing "personal, professional and family considerations."

The participants of the tender were fighting for their victory selflessly. Presidents of Russia and France, Sarkozy and Medvedev, British Prime Minister David Cameron and US President Barack Obama supported their manufacturers during the final stage of the tender. However, India made the choice which it considered right for itself - in favor of Europe.

Experts believe that India's choice for European aircraft makers is based on the intention to obtain the technologies required for the realization of its own TEJAS light fighter jet program. The Russian technologies, which India could obtain with MiG-35 jets, do not fit the program.

The key advantage of the Russian offer was the price. The MiG-35 is the cheapest of all other planes. The most expensive one is Rafale - $79.5 million, whereas the price of MiG is a little more than $40 million.

The contract stipulates the delivery of 126 multi-purpose fighter jets. The winner will have to supply 18 planes. The remaining 108 will have to be assembled in India. The fighter jets will be in service for over 40 years. The supplier will have to guarantee the technical servicing of the jets during that time period.

The list of participants included Russia's MiG with MiG-35, Europe's Eurofighter with EF-2000 Typhoon, USA's Boeing with F/A-18 Super Hornet and Lockheed Martin с F-16 Fighting Falcon, Sweden's SAAB with JAS-39 Gripen and France's Dassault Aviation with Rafale.

The cost of the contract is $10.5 billion. The price does not include the possible purchase of 64 more jets and the technical servicing.

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