S E C R E T SECTION 01 OF 04 MOSCOW 005154 



EO 12958 DECL: 10/09/2017 
REF: A. STATE 137954  B. MOSCOW 3207 
 C. MOSCOW 3139  D. MOSCOW 3023  E. MOSCOW 557  F. MOSCOW 402

Classified By: Ambassador William J. Burns. Reasons 

1.4 (b) and (d).

¶1. (C) Summary: FM Lavrov’s disinterest in establishing an expert level dialogue on arms sales begs the question of how best to address our concerns over Russia’s arms export policy. Russian officials are deeply cynical about our motives in seeking to curtail Russian arms exports to countries of concern and the threatened imposition of U.S. sanctions has not proven successful so far in modifying Russian behavior. Russia attaches importance to the volume of the arms export trade, to the diplomatic doors that weapon sales open, to the ill-gotten gains that these sales reap for corrupt senior officials, and to the lever it provides the Russian government in stymieing American interests. While Russia will reject out of hand arguments based on the extraterritorial application of American sanctions, Russian officials may be more receptive to a message couched in the context of Russian international obligations and domestic legislation, the reality of American casualties, and the backlash to Russian strategic interests among moderate Sunni governments. In making our argument, we should remember that Russian officialdom and the public have little, if any, moral compunction about the arms trade, seeing it instead as a welcome symbol of Russia’s resurgent power and strength in the world. End Summary

Russian Arms Sales Matter

¶2. (C) Russian arms sales are consequential, totaling
 approximately USD 6.7 billion in 2006, according to 
official figures. This amount reflects a 12 percent
increase over 2005, and a 56 percent increase since 2003. 
Russian arms sales are expected to total at least USD 8 
billion in 2007. Russia has made a conscious effort to 
improve after-sales customer service and warranties,
 which has added to the attractiveness of its weapons. 
As a result, Russian weapons command higher prices than 
previously. Russia is ranked second only to the United States
 in arms sales to the developing world, and a sizeable
 portion of its arms trade is with countries of concern to us.

¶3. (C) While no sales were reported in 2006 to Iran,
 Syria, or Sudan, in 2007 Iran reportedly paid Russia
 USD 700 million for TOR-M1 air defense missile systems. 
While Syrian economic conditions are a natural brake on 
trade with the Russians, as a matter of principle the GOR 
is prepared to sell “defensive” equipment such as anti-tank
missiles and Strelets (SA-18) surface-to-air missiles,
 as well as upgrade MiG-23 fighters. The GOR barred the
 sale of Iskander-E tactical missiles to Syria only after
intense international pressure. Venezuela remains a growth market,
 with arms transfers in 2006 totaling more than USD 1.2 billion, 
including 24 Su-30MK2 fighter-bombers and 34 helicopters. 
Russia has an “open arms” approach to Venezuela, and whether
 it’s the transfer of more than 72,000 AK-103 assault rifles
 or negotiations for the prospective sale of three Amur
 class submarines (valued at USD 1 billion), Russia is prepared
 to entertain Chavez’s grandiose regional visions.

¶4. (C) Defense experts emphasize that the American and 
European domination of traditional NATO markets and capture 
of new entrants (and old Soviet customers) from Central and
 Eastern Europe means that Russia must court buyers that 
fall outside the U.S. orbit. By definition, Iran, Syria, and
Venezuela are good markets for Russia because we don’t compete

¶5. (C) While concrete numbers are hard to come by, our best
 figures indicate that Russian arms sales to its traditional
 big-ticket customers -- China and India -- are growing. 
Russian experts, however, predict a declining trajectory in 
the medium term. In 2006, Russia completed approximately USD 
1.4 billion in sales to China, including eight diesel submarines
 and 88 MI-171’s, which means the PRC only narrowly edged out 
Chavez as Russia’s most important customer. Russian defense 
experts underscore that as China’s technological sufficiency
 and political influence grow, the PRC will develop increasing 
military self-sufficiency and greater ability to challenge
 Russia as a supplier. At the same time, sales to India totaled
 only USD 360 million. Russia and India, in fact, have signed 
arms deals worth USD
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2.6 billion, but not all deliveries and payments have been made.
 While Russian experts still downplay the ability of the U.S. 
to displace Russia in the Indian arms market, for reasons of 
cost and the legacy of decades’ old dependence, they recognize 
increasing American inroads and growing influence. 
Other notable Russian markets include Algeria, Czech Republic,
 Vietnam, South Korea and Belarus.

A Legalistic World View

¶6. (S) As the recent 2 2 consultations confirmed, Russian 
officials defend arms sales to countries of concern in narrow 
legal terms. In answering our demarches, MFA officials always
 identify whether the transfer is regulated by one of the
 multilateral arms controls regimes (e.g. Wassenaar Group, MTCR,
 etc.), UN resolutions, or Russian law. Senior officials maintain
 that Russia does take into account the impact on the stability
 of the region in determining whether to sell weapons and shares
 our concern about weapons falling into terrorists’ hands. 
This Russian decision-making process has led to a defacto
 embargo on weapons transfers to Iraq, where Russia is 
concerned over leakages to Iraqi insurgents and Al-Qaida;
 to a hands-off policy towards Pakistan, the country Russia 
views as the greatest potential threat to regional stability 
(with then-Russian Foreign Minister Igor Ivanov ruling out
 weapons sales to Pakistan as far back as 2003); and to a
 moratorium on “offensive” systems to Iran and Syria. 
Concern over leakage has prompted Russia to tighten its 
export controls, with the recent institution of new provisions
in arms sale contracts for Small Arms and Light Weapons (SALW)
 that require end-user certificates and provide Russia the 
right to inspect stockpiles of weapons sold.

¶7. (S) What Russia has not done is accept our strategic 
calculus and rule out the possibility of sales to Iran,
 Syria, Sudan, or Venezuela. The arguments made are broadly

-- With Iran, we are told that that Russia will not sell 
any weapon that violates a multilateral or domestic regime,
 nor transfer any item that could enhance Iranian WMD capabilities.
 Sales, such as the TOR-M1 air defense missile system, are 
justified as being defensive only, and limited by their range 
of 12 kilometers. While DFM Kislyak told us October 18 that he
 was unaware of any plans to sell Iran the S-300 long-range 
surface-to-air missile system, MFA officials previously told
 us that such sales, while under review, would not violate
 any Russian laws or international regimes.

-- With Syria, Russia also argues that its transfers are 
defensive in nature, and points to its decision to halt 
the sale of MANPADS. The MFA maintains that Russian weapons 
used by Hizballah in 2006 were not a deliberate transfer by
 the Syrian government, but involved weapons left behind when
 Syrian forces withdrew from Lebanon. Russia argues that 
tightened end-user controls will prevent any future transfers.

-- With Sudan, the GOR denies any current arms trade with 
the regime, and maintains that Russia has not violated UN
 sanctions or Putin-initiated decrees. However, based on our 
demarches, it is clear that -- in contrast to Syria -- Russia
 has adopted a “don’t ask, don’t tell” approach to Sudan’s 
adherence to its end-use requirements for its existing inventory 
of Russian/Soviet weapons.

-- With Venezuela, both MFA officials and Russian experts
 believe that a “Monroe doctrine” mentality, and not real
 concerns over regional stability, is behind U.S. demarches.

What Is Behind the Russian Calculus

¶8. (C) A variety of factors drive Russian arms sales,
 but a compelling motivation is profit - both licit and 
illicit. As former Deputy Prime Minister and senior member
 of the Duma Defense Committee Anatoliy Kulikov told us,
 “Russia makes very bad cars, but very good weapons,” and 
he was among the majority of Russian defense experts who 
argued that the laws of comparative advantage would continue 
to propel an aggressive arms export policy. While Russian 
defense budgets have been increasing 25-30 per cent for the 
last three years, defense experts tell us that export earnings 
still matter. The recent creation of RosTechnologiya State
 Corporation, headed by Putin intimate Sergey Chemezov, 
which consolidates under state control RosOboronExport 
(arms exports), Oboronprom (defense systems), RusSpetsStal 
(specialized steel production), VSMPO (titanium producer), 
and Russian
MOSCOW 00005154 003 OF 004
helicopter production, is further proof of the importance 
the Putin government places on the industry.

¶9. (C) Likewise, it is an open secret that the Russian 
defense industry is an important trough at which senior 
officials feed, and weapons sales continue to enrich many. 
Defense analysts attribute Russia’s decision to sell weapons 
that the Venezuelan military objectively did not need due to 
the interest of both Venezuelan and Russian government officials
 in skimming money off the top. The sale of Su-30MK2
 fighter-bombers was cited as a specific example where
corruption on both ends facilitated the off-loading of moth-balled
 planes that were inadequate for the Venezuelan Air Force’s needs.

¶10. (C) A second factor driving the Russian arms export policy 
is the desire to enhance Russia’s standing as a “player” in areas
 where Russia has a strategic interest, like the Middle East.
 Russian officials believe that building a defense relationship
 provides ingress and influence, and their terms are not
constrained by conditionality. Exports to Syria and Iran are part
 of a broader strategy of distinguishing Russian policy from that
 of the United States, and strengthening Russian influence in
 international fora such as the Quartet or within the Security
 Council. With respect to Syria, Russian experts believe that
 Bashar’s regime is better than the perceived alternative of 
instability or an Islamist government, and argue against a U.S.
 policy of isolation. Russia has concluded that its arms sales 
are too insignificant to threaten Israel, or to disturb growing
 Israeli-Russian diplomatic engagement, but sufficient to
 maintain “special” relations with Damascus. Likewise, 
arms sales to Iran are part of a deep and multilayered bilateral
 relationship that serves to distinguish Moscow from Washington,
 and to provide Russian officials with a bargaining chip,
 both with the Ahmedinejad regime and its P5 1 partners. 
While, as a matter of practice, Russian arms sales have
 declined as international frustration has mounted over 
the Iranian regime, as a matter of policy, Russia does not 
support what it perceives as U.S. efforts to build an
 anti-Iranian coalition.

¶11. (C) A third and related factor lurking under the
 surface of these weapons sales is Russia’s inferiority 
complex with respect to the United States, and its quest 
to be taken seriously as a global partner. 
It is deeply satisfying to some Russian policy-makers
 to defy America, in the name of a multipolar world order,
 and to engage in zero-sum calculations.
 As U.S. relations with Georgia have strengthened,
 so too have nostalgic calls for Russian basing in
 Latin America (which Russian officials, including Putin,
 have swat down). While profit is still seen by experts as 
Russia’s primary goal, all note the secondary thrill of causing
 the U.S. discomfort by selling weapons to anti-American governments 
in Caracas and Damascus.

Taking Another Run At Russia

¶12. (C) As FM Lavrov made clear during the 2 2 consultations, 
Russia will not engage systematically at the expert level on 
its arms export regime. While the prospect of Russia changing 
its arms export policy in response to our concerns alone is 
slim, we can take steps to toughen our message and raise the
costs for Russian strategic decisions:

-- Although U.S. sanctions are broad brush, the more we can
prioritize our concerns over weapons sales that pose the biggest
 threat to U.S. interests, the more persuasive our message will be.
 Demarches that iterate all transactions, including ammunitions
 sales, are less credible. Since Lavrov has rejected an 
experts-level dialogue on arms transfers, it is important to
 register our concerns at the highest level, and to ensure that
 messages delivered in Moscow are reiterated in Washington with 
visiting senior GOR officials.

-- In the context of potential violations of international 
regimes and UNSCR resolutions, Russia needs to hear the 
concerns of key European partners, such as France and Germany. 
(In the wake of the Litvinenko murder and subsequent recriminations,
 UK influence is limited.) EU reinforcement is important for
 consistency (although Russia tends to downplay the “bad news” 
that European nations prefer to deliver in EU channels, rather
 than bilaterally).


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