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Indonesian arms deal marks breakthrough for Russia

Reuters - August 5, 1997

Andrei Khalip, Moscow – Indonesia's decision to replace a big defence order from the United States with arms from Russia heralds a big breakthrough for an industry badly hit by the collapse of the Soviet superpower.

Russia's biggest arms exporter Rosvooruzheniye said loose ends still had to be tied up following Jakarta's announcement on Tuesday that it wanted to buy Russian warplanes and helicopters.

But while the deal remained swathed in secrecy, officials and analysts say it strikes an important blow for Moscow in a battle for arms markets which has outlived the Cold War.

In June, Indonesia cancelled a deal to buy U.S. F-16 fighters over Congressiona attacks on its human rights record. Military analysts in Jakarta said the rebuff to Washington meant U.S. arms sales to Indonesia were unlikely in the next few years.

Rosvooruzheniye spokesman Valery Kartavtse said a conflict of interests between Moscow and Washington was natural in Indonesia. "Of course it is in our interest to sell armaments to the regions of Southeast Asia," Kartavtse said.

"This is what business is about... If they buy from one of us, it means they do not buy from the other."

A Russian military analyst said it was not yet clear exactly how profitable the deal would be, but it represented a big step forward for the industry.

"It is good news for Russia. Indonesia is known to pay well under all of its contracts," he said. "It also means re-establishing old ties in Southeast Asia."

The general director of the multi-billion-dollar state arms agency last month accused foreign competitors, mainly the United States, of conspiring to prevent Russia from completing lucrative new contracts.

He called the potential Indonesian deal "a huge breakthrough for Russia in the arms market in Southeast Asia, which was formerly under the complete control of the United States".

Indonesia expressed interest in buying Russian jets, helicopters, guided missiles and radars after cancelling a deal to buy nine U.S. F-16 jets in June.

On Tuesday, it said it would buy 12 Sukhoi Su-30K fighters and eight MI-17-1V helicopters.

The Russian analyst compared the situation surrounding the Indonesian contract with the aftermath of political unrest in China in 1989, when the People's Liberation Army crushed unarmed students on Tiananmen Square.

"The political angle recalls how the Soviet Union got hold of Chinese arms orders after the Tiananmen events. The West then warned China on human rights and Russia immediately jumped on the arms contracts, sqeezing the West out," the analyst said.

Ideally Indonesia wants to buy 20 fighters, and said it would consider further purchases from Russia. It is also in the market for a full upgrade of its air defence system and overall air traffic control.

Rosvooruzheniye is responsible for 95 percent of Russian arms sales and its exports in 1996 reached $3.5 billion. It has contracts worth $7 billion and hopes to increase the amount to $9 billion by the end of the year.

Indonesian officials said Jakarta and Moscow had yet to finalise price and payment conditions, technology transfers, spare parts and after-sales backup forthe deal, which included possible counter purchases of palm oil, coffee and rubber.

Officials at Russia's Defence Ministry and Sukhoi design bureau declined to comment on the negotiations.