Jun. 10, 2013 - By GERARD O’DWYER – Defense News
Talks With Russia Could Revive Defense Trade, Cooperation
HELSINKI — Finland has opened a potentially significant dialogue with Russia with the goal of identifying avenues for industrial cooperation.
Apart from the potential for weapons purchases and sales, future cooperation could increase Finland’s involvement in providing subcontracting capacity to Russia’s military modernization programs.
The offer of closer industrial cooperation was made on May 29 during meetings here between Russian Defense Minister Sergei Shoigu and Finnish officials headed by Defense Minister Carl Haglund.
Russia regards Finland as potentially a strong market for combat aircraft, missile systems and infantry systems, Shoigu said at a joint news conference with Haglund.
The Russian defense minister conceded that Russia’s ambitious military modernization programs, slated to run until 2020, are testing the ability of the country’s defense-industrial sector to deliver weapons and material under set deadlines.
“There are problems which we need to address and find solutions for. Part of the problem relates to our export successes and the need to fulfill export orders,” Shoigu said. “This has reduced our production capacity to deliver to domestic programs.”
The Finnish government is examining a broad range of measures to attract foreign investment to support a flagging export sector, weakened by a fall in global demand for Finnish products. It has reacted positively to the prospect of rekindling military trade with Russia.
“We will examine the potential for cooperation. We should have a much better idea of what direction this process will go in a year or so,” Haglund said. “The Finnish military needs to modernize and acquire new equipment, including for the Air Force, over the next 10 years.”
Broken Soviet Ties
Finland’s defense procurement and military-industrial trade with Russia failed to recover from the collapse of the Soviet Union in 1991, said Finnish Defense Ministry spokesman Jyrki Iivonen.
Under that old relationship, Finland acquired many of its core weapon systems from Russia, including MiG-21 fighter jets, Mi-8 helicopters and BUK air-to-air missiles. After 1991, Finland switched to Western suppliers for its big-ticket procurements, such as the decision in 1992 to acquire 64 McDonnell Douglas F/A-18C and D Hornet fighters. McDonnell Douglas, based in St. Louis, merged with Boeing a few years later.
A formal process will be established by both countries to determine which military materials could be bought or sold, and what other areas of industrial cooperation might exist, Iivonen said.
“This will happen in the next year or so,” he added.
As a non-NATO country bordering Russia, Finland’s defense industry is constantly looking for opportunities to expand business there, said Tuija Karanko, secretary general of the Association of Finnish Defense and Aerospace Industries, which represents the country’s 100 biggest defense companies.
“For certain, there is potential for cooperation. What the possibilities are, we have not closely examined yet, but we plan to do so,” he said.
Russia’s defense program may be the biggest since the collapse of the Soviet Union, but the scale of the capital spending plans is proving too much for the country’s often inefficient and heavily politicized defense industry to handle, said Dmitry Gorenburg, a senior Russian analyst at the Alexandria, Va.-based CNA think tank.
“It is far from clear whether or not the Russian defense [industry] as a whole is capable of meeting the production targets set in the current National Re-Armament Program that needs to be achieved by 2020. There is enough capacity, but it is not always correctly utilized,” Gorenburg said at a May 28 seminar on the modernization of Russia’s defense industry, hosted here by the Finnish Institute for International Affairs.
According to Gorenburg, several key reasons exist to hamper the delivery of core military systems by deadline.
“One is that state funding does not always reach the private-sector companies that are best suited to produce weapons materials,” he said. “The state promotes its own companies. This hurts innovation, raises costs and lowers quality.