Russia counting on Syria to keep arms exports high - report

MOSCOW Tue Jan 31, 2012 5:42pm GMT

MOSCOW (Reuters) - Russia is counting on President Bashar al-Assad keeping his grip on power to see through potential arms contracts worth up to $6 billion (3 billion pounds) (3 billion pounds) and help Moscow reach a record defence export year, according to the CAST defence and security think-tank.

Russia has been Assad's main defender as Western and Arab countries push for a U.N. Security Council resolution which would call for him to step down.

A veto-wielding permanent member, Russia has already criticised the resolution saying it will lead to civil war.

Having lost tens of billions of dollars in arms contracts with Libya after leader Muammar Gaddafi was ousted last year, Moscow is looking to Damascus to maintain a foothold, both politically and economically, in the region.

At stake for Russia, the world's no. 2 arms exporter, is billions of dollars in potential and current arms contracts with ally Syria, including deliveries on an order of 24 MiG-29M2 fighter jets signed in 2007.

Syria, where Russia maintains a naval base, is also the only ally Russia has left in the Middle East.

"(If Assad goes) Russia will lose everything," CAST Director Ruslan Pukhov said.

"Syria is one of Russia's top five clients. Russia already concluded with Syria contracts for $4 billion and has $2 billion more potential contracts on the way," Pukhov said.

Moscow-based CAST is Russia's most respected defence and security think-tank. Although it has good relations with the government it is independent.

Tests for the jet fighters began in December of last year, CAST said in a report obtained by Reuters before publication. Damascus was also likely to receive deliveries of Buk anti-aircraft missiles this year, it said.

Russia delivered a record $12 billion in weapons in 2011, CAST said in an annual report released before official data, boosted by sales to embattled Arab leaders and Asian countries eyeing China's rising military might.

Pukhov said while the funds are crucial for Russia's defence industry, which Putin built up during his 2000-08 presidency and lacks enough domestic orders to keep it profitable, they have little bearing on Russia's $1.85 trillion economy.

CAST said Damascus received eight percent of Russia's 2011 deliveries or nearly $960 million in jet fighter upgrades and anti-ship missile systems.

NO. 2 ARMS EXPORTER

Western U.N. envoys who support the plan calling for Assad's removal have already condemned arms sales to Damascus, where the United Nations says more than 5,000 civilians have been killed in a 10-month-old crackdown on opposition to Assad's rule.

In addition to upgrades and repairs to Syria's MiG-23 and MiG-29 fighter jets last year, it also received three different missile systems, including Bastion anti-ship missile units and another anti-aircraft missile system.

Foreign Minister Sergei Lavrov has said Moscow's arms exports to Syria need no explanation. While European Union and U.S. embargoes prevent selling arms with Assad's government, no international treaty with Russia is in place.

Russia has seen several years of record-breaking arms delivery growth, despite criticism that it is failing to deliver the technological benefits of Western suppliers or the low costs of emerging weapons exporter China.

Despite having signed $3.69 billion in new arms contracts in 2011, the total portfolio of Russia's arms exporting monopoly Rosoboronexport shrank to $35 billion from a size of $38.5 billion in 2010.

"We expect that results of 2012 will show that Russian export of arms will exceed the mark of $14 billion. Looking at the current portfolio...that level of export may be supported for at least another three years," the report said.

Rosoboronexport makes up around 80 percent of all arms exports in a given year, while nearly 20 independent firms make up the difference with sales of spare parts and upgrades.

Last year the top customer for Russian arms was India, whose arms ties extend to Soviet times and which received $2.5 billion worth of tanks and fighter jets as New Delhi ramps up its defences against China's growing martial might.

(Reporting By Thomas Grove; Editing by Angus MacSwan)