Algeria spat shows challenge to Russian arms salesTue 1 Apr 2008, 12:45 GMT
By Lamine Chikhi
ALGIERS, April 1 (Reuters) - A spat between Russia and Algeria over fighter jets has given the West a chance to open up a new market and shows the challenge facing Russian arms sales to developing countries as they grow more prosperous.
Few expect a dramatic shift in arms purchases by OPEC member Algeria, the developing world's fifth largest market for weapons in 2006, following its unusual decision to return 15 MIG warplanes it says contained some substandard parts, experts say.
But the initial rebuff reflects a recognition that traditional Russian arms buyer Algeria and fellow north African oil exporter Libya, can afford to shop around with state finances boosted by oil near $100 a barrel.
That realization is part of a trend among increasingly wealthy developing nations such as India, which after decades of pro-Soviet ties has moved closer to Washington in recent years, with new arms sales and joint military exercises.
Algeria has increased its intake of U.S. arms since 2001, with Washington regarding the country among those on the "front line" in its efforts to thwart al Qaeda.
Malaysia is another country which now buys weapons from both sides.
"All the old certainties have gone," said Andrew Brookes, an aerospace expert at Britain's International Institute for Strategic Studies (IISS).
"The Algerians are learning, like everyone else, that if they've got money why should they get ... stuff that's inappropriate when they can get good stuff from French, Europeans, British, Americans and Chinese?"
BIG SHARE
The United States and Russia have the biggest shares of the market for conventional arms sales to the developing world, a market worth over $28 billion in 2006, according to a Sept. 2007 report on arms sales by the U.S. Congressional Research Service.
Washington had the edge, with 35 percent of the market in 2006 compared to Russia's 28 percent, the report shows.
Germany, France and the United Kingdom are also major players.
But Russia has dominated arms sales agreements in North Africa selling equipment worth $3.2 billion between 1999 and 2006 compared to $600 million for Western European states and $100 million for the United States, U.S. government figures published in the report show.
U.S. restrictions which limit the transfer of defense technology to countries not seen as close friends or sufficiently trustworthy mean that U.S. defense firms cannot sell to certain states -- markets where Russia has traditionally done well.
Algeria and the United States had almost no defense trade before 2001, but that has changed, threatening not only Russia's dominance but the hopes of other sellers such as France.
Libya, a repeat customer for Russian and eastern European manufacturers and emerging from years of Western sanctions, is considering buying 14 Rafale warplanes from France's Dassault Aviation as part of a rapprochement with Paris after the 2007 election of President Nicolas Sarkozy.
"You can get fantastic deals. The French will give you a fantastic deal on Rafales simply because they haven't sold any (abroad)," said Brookes.
In north Africa, traditional sales patterns are changing even in Morocco, which has no oil. The kingdom, which usually buys Western European or Russian, startled the defense industry last year by indicating it would spurn close ally France to buy F-16C/D fighters from America's Lockheed Martin Corp.
WIDER DEAL
Algeria's purchase of MIGs was part of a wider $7.5 billion arms deal signed in 2006 involving a range of defence equipment ordered by Algeria's largely Soviet-trained officer class. Most of the deal is expected to proceed without incident.
Along with the arms agreement, Russia agreed to write off a $4.7 billion debt Algeria had owed to the Soviet Union.
Russia, which denies any problem with the planes, has every reason to work hard to keep a historic weapons customer and sympathiser of the USSR with whom it also has close energy ties. Algeria earns $1.5 billion a week from oil and gas sales.
But unease in Algiers over the MIGs reflects a determination to obtain the best quality. The Algerian captain who discovered the alleged failings won a promotion and a decoration, Algerian newspapers reported.
"Business is business. When you pay for an apple you can't accept to get an orange," said an Algerian military analyst who asked not to be identified.
Russian media quoted Russian officials as saying Algeria's move stemmed from lobbying from other countries trying to sell weapons and from differences among various groups within the Algerian administration, and not from any technical problems with the MIGs.
David Hartwell, Middle East editor for Janes Country Risk, said Algeria's defence ties to Moscow were likely to survive.
"But obviously Algeria will be more demanding when it comes to quality," he said. He added that Algeria wanted "more effective and more updated aircraft".
Russia's position in Algeria is supported by old ties between their militaries. Also helpful is reluctance among some Western states about selling high-tech equipment to Algeria due to qualms about its human rights record.
Morocco remains a valued Western client. Suppliers eyeing the region will not want to alienate Rabat by providing too much high tech weaponry to regional rival Algeria, Hartwell said.
But Russia cannot regard its sales as guaranteed.
"The new younger officers coming in are going to want the new high tech stuff that's largely with the Western forces," said Brookes, referring to Algeria's air force. "That's not to denigrate Russian stuff. Their missiles are superb, for example."
He suggested Algeria's market could evolve in a similar way to Malaysia's.
"They're saying 'OK, we'll slowly alter our structure a) because we don't want to be dependent on one source that could be erratically turned off and b) there's a lot to be said for competition. It keeps everybody on their toes." (For full Reuters Africa coverage and to have your say on the top issues, visit:
http://africa.reuters.com/ ) (Additional reporting by William Maclean) (Editing by Jason Neely and Matthew Tostevin)
Link
http://africa.reuters.com/wire/news/usnCHI644149.html
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