Indian defence deal may not secure Russian aircraft maker`s future - paper
Russian Defence Minister Sergey Ivanov has just signed a major deal with India for the delivery of the aircraft
carrier Admiral Gorshkov and 16 MiG fighters. However, an article in Russian newspaper Izvestiya suggests that the deal
may not be enough to stave off the MiG corporation's financial crisis. The article points out that the
corporation's ability to raise funds to build new aircraft is hampered by the need to repay by 200m-dollar
government loan. The following is an excerpt from the article published in Izvestiya on 20 January (the day before
Ivanov signed the deal):
Russian Defence Minister Sergey Ivanov started an official visit to India on 19 January . There, he will finally sign
a package agreement to sell Delhi the aircraft carrier Admiral Gorshkov - a total of 20 separate contracts to repair and
modernize the ship, equip it with an aircraft group of 20 deck-based MiG-29K fighters, as well as install new missile
and navigation weapons. [Passage omitted]
The Admiral Gorshkov is Russia's latest large contract with India. Moscow wants to squeeze maximum advantage out
of its implementation. For example, it wants to take part in a planned tender to deliver to Delhi a fighter of
"light" class. Victory in this tender is claimed by the French Mirage 2000-5, made by Dassault, and the
Russian MiG-29. Winning the tender is a matter of life and death both for the Russians and French. [Passage omitted]
Victory is important for the MiG. The company is teetering on the edge of bankruptcy. The contract to build an
aviation wing of 20 deck-based MiG-29K fighters (a total price of 670m dollars) for the aircraft carrier Admiral
Gorshkov will not help the enterprise cope with its current crisis. The point is that the company has to pay back a loan
of 200m dollars to the state. Rumour has it that it is specifically because of the failure to return this money why the
enterprise's director-general, Nikolay Nikitin, lost his job.
Valeriy Toryanin, the new head of the MiG corporation, works under the same sword of Damocles. He has two options,
experts say not without malice: Build the fighters for India and get fired for failure to repay money to the state or
repay the loan, terminate the contract because of lack of money to build the aircraft, and again get fired. There is,
however, a third option, which is to win a tender to build "light" fighters for the Indian air force. The
order is for a total of 140 machines. The price is about 4.5bn euros, which would be enough both to pay back the state
loan and build the "ship" and "land" fighters.
"In fact, MiG remains a financial pyramid," says Ruslan Pukhov, director of the Centre for Analysis of
Strategies and Technologies (AST). "To fulfil some contractual obligations, it needs to undertake different
ones."
Yet, there are at least two "buts". India needs to diversify the purchase and on top of that buy an
aircraft with one engine, while the MiG-29 has two. But, Russian specialists say, there is a solution for this
situation. India could be offered a "fifty-fifty" option, which is to buy from France obsolete Mirages and our
more modern MiGs, which will be built with the help of foreign contractors, as is the case with the Su-30MKI, whose
navigation equipment is supplied by French and Israeli companies.
In this case, Moscow would be able to circumvent the notorious requirement for purchase diversification. As for the
engines, the only hope is that even with its two engines the MiG-29 will be considered a "light" fighter and
that it is always more reliable to have two fighters instead of one. In any case, as the Russian defence specialists
hope, the signature of a contract to sell the Indian Air Fore the aircraft carrier Admiral Gorshkov with a wing of
MiG-29K fighters offers an opportunity to convince our partners in military-technical cooperation that such a purchase
makes sense. [Passage omitted]
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