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President of Russia Vladimir Putin: Good afternoon, colleagues.

This is the first meeting of the Commission for Military Technology Cooperation in its new composition. Dmitry Medvedev and Sergei Ivanov have been appointed deputy chairmen of the Commission, Yury Ushakov has become the Commission’s secretary, and Alexander Fomin is his deputy.

I am sure the Commission will maintain continuity in its work, make active strides to carry out the projects and programmes already planned, and resolve systemic issues in order to make our work more effective in this strategic sector.

I propose that we take an overall look today at the current situation and prospects of our military technology cooperation with foreign states, with our traditional partners, and with new partners too.

Our goal is to expand Russia’s presence on the global arms and military equipment market. This means expanding the number of countries we sell to, and expanding the range of goods and services we offer.

We also must make full use of military technical cooperation as a means for acquiring foreign technology and particular models that we need in order to develop our own defence industry and meet urgent specific equipment needs in our Armed Forces.

The arms market is complicated. Competition in this sector is very fierce. That Russia is the world’s second biggest arms and military hardware exporter is thus all the greater an achievement. I think it is an important indicator of our country’s industrial, technological, scientific, and political capabilities.

According to the Stockholm International Peace Research Institute, Russia is the world’s second largest arms exporter with 24 percent of the global market. The USA is in first place with 30 percent. We are followed by Germany with 9 percent, France with 8 percent, and Britain with 4 percent. In other words, we are in a solid position.

Russia has a time-tested reputation as a top-class producer of the most sophisticated military hardware. I stress the point, what’s more, that we always strictly respect all obligations we take on and fully comply with international law and the arms control and non-proliferation regimes. 

We see active military technical cooperation as an effective instrument for advancing our national interests, both political and economic. Growing demand for the goods our defence industry and related sectors produce brings more money into our state budget and creates new jobs.

Russia’s defence exports came to more than $6.5 billion in the first half of 2012, an increase of 14 percent compared to similar period last year. We must keep up this positive trend. Overall, annual exports of military products have increased more than two-fold over the last 7 years, from $6 billion in 2005 to $13.7 billion in 2011. Our exports over this whole period come to a total value of more than $44 billion. 

We currently export arms and military goods to 55 different countries, including India, Algeria, China, Vietnam, Venezuela, and the United States. Overall, we have military technical cooperation ties with more than 80 countries around the world.

So far this year, we have already signed new export contracts for a total of $5.7 billion — $2.4 billion more than in the first half of 2011. Our total export orders portfolio comes to around $43 billion. This will give companies in our defence industry and related sectors more money for development and modernisation.

We are investing considerable funds in the defence industry’s technological modernisation now. As you know, we have earmarked around 3 trillion rubles [more than $92 billion] in federal budget funds for this purpose over the coming years. The main goal of this work is to ensure that our defence industry is ready to carry out the large-scale programmes for re-equipping the Russian army and navy. But this investment should also bolster our defence industry’s export potential.

If we want to develop further, we need to optimise the work of all actors within the military technical cooperation system. The key demand here is to raise the quality of the goods we supply, and modernise the list of items we offer our foreign partners. We hope for good results in this respect from the big sector-based holdings such as Rostekhnologii, which have state participation and were set up precisely to address these tasks. 

We also need to make big improvements to our after-sales and maintenance services. This is a very profitable market that we cannot afford to ignore. I am referring to supplies of spare parts and assistance in repairing and upgrading equipment. In this respect I note the general systemic problem of work with potential customers.

The whole process of drafting contracts, examining official requests from customers, and getting all the various approvals sometimes drags on for too long. This is an issue we have raised many times already and we always find ourselves coming back to it. We need a clear and effective coordination and decision-making mechanism, and the working principles should be more flexible. Today, we will examine specific proposals on these matters.

I think the decisions and steps taken to give the companies and the authorities greater powers in the military technical cooperation sector are totally correct and justified, so long as they go hand in hand with greater responsibility for these decisions’ and measures’ implementation. Practice shows that this is an effective approach.

Some defence industry companies have obtained the right to export spare parts and provide repair and maintenance services for earlier deliveries directly. This led to an increase in exports of services of this kind, which came to $2.5 billion in 2011. 

Quality service, after-sales maintenance and service, and training for specialists are all important means for promoting our goods on foreign markets. Today we will look at the situation with implementing the Commission’s decisions to set up modern training and resource base for training foreign military specialists.

I note that the Defence Ministry has already carried out a lot of work in this area, with training now being provided for more than 170 types of new arms models, and more than 300 new classrooms opened for use. More than one billion rubles in federal budget money was invested in this work. As a result, the number of foreign specialists studying in the Russian Defence Ministry’s institutes increased by more than half over the last three years.

There is big demand for Russia’s training programmes for military specialists. For example, as part of the contract for delivering Mi-17 helicopters to Afghanistan’s armed forces, our specialists are training Afghan Air Force technical personnel, which makes sense. This is a not the only example.

I think we need to look at developing conceptual approaches to training for foreign military personnel in Russia. We continue to provide training as in the past, but the system needs to be improved and should become a separate area of activity within the military technical cooperation system. The important thing here is to ensure that top-class specialists – instructors and military interpreters – work with foreign military personnel.

In short, we have plenty to discuss. Let’s begin.

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