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Market Focus : Russia Looking East to Sell Arms : Desperate for cash, Moscow is challenging Western nations for the lucrative Asian market.


BANGKOK, Thailand — The collapse of the former Soviet Union is almost always viewed with a Western perspective: How it freed Europe from the Iron Curtain, for example, or ended the Cold War with America.

But the upheaval in Moscow is also having a profound impact in Asia, and that in turn may have far-reaching and unexpected consequences for the United States.

The announcement last month that Malaysia intends to buy 18 MIG-29 fighter aircraft from Russia to provide for its air-defense needs into the next century was only the latest sign of a dramatic turnabout in the region.

"Malaysia is an important first step for us," Russian Foreign Minister Andrei V. Kozyrev noted last week. "We are open to developing a partnership in the military arena with the other countries in the region."

Malaysia is an integral part of the Assn. of Southeast Asian Nations--a staunchly anti-Communist group that had always been regarded as part of the "Western camp" when it came to buying arms. Its last purchase of fighters, in 1976, was American F-4s.

"Where the Russians didn't exist in the past, now they're a factor in every government's decision," said Robert Karniol, Asia editor of the London-based Jane's Defense Weekly. "The key point is, now they are a player."

After Malaysia's announcement, the equally anti-Communist military leadership in Thailand said it was considering 30 Russian MI-17V transport helicopters as a successor to a squadron of aging Bell helicopters acquired from the United States in the early 1980s.

But it is economically desperate Russia's dramatically altered military relationship with China, its former bitter enemy, that has raised the most concerns in the region. Flush with foreign exchange earned through exports, China has embarked on a major military buildup in which Russian military hardware and technology are playing a central role.

"China's buildup with Russian help will drastically shift the balance of power in the region," said Bilveer Singh, a lecturer in political science at Singapore's National University. "With the United States pulling out, China will be the superpower in that part of the world."

China's shopping list so far has included 26 advanced Sukhoi 27 fighter-bombers, military transport planes (which can be used for midair refueling), diesel submarines, S300 ground-to-air missiles and 2,000 T-62 tanks. The Chinese are also believed to be negotiating to buy the advanced MIG-31 fighter.

While China's military modernization has been under way for some time, defense analysts said Beijing still lacks the technology to catch up on its own.

"The Chinese were having trouble advancing their technology, which was far behind advanced countries," said Jane's Karniol. "With Russian help, all of a sudden their military technology will be on a par with the most developed nations in the world."

A publication of the Chinese Public Security Ministry last week confirmed Western reports that China is building an air base in the Paracel Islands in the South China Sea. The islands are astride major sea lanes between the Middle East and Japan. Suddenly China will be projecting its power hundreds of miles from its shores.

One feature of the new Russian sales in Asia is the lack of ideology in the transactions. Whereas in the past the Soviet Union strove to assist "fraternal socialist" countries such as Vietnam or Syria, Russia's concern appears to be cold cash.

"The Russian military-industrial complex is in a position to earn enough, not only for its own requirements but to feed a considerable proportion of this country as well," Sergei Akimov, a consultant to the Russian government on foreign economic relations, wrote recently.

Russian salesmen now pay little if any attention to such concerns as limiting weapons proliferation and third-party arms sales. The only condition on the sale of advanced weapons to China, for example, was that they be based in southern China, far away from the Russian border.

It took immense pressure from Washington this month to force Moscow to abandon its plans to sell advanced rocket engines to India--a deal said to be worth $350 million to Moscow. The U.S. government was concerned because India has refused to accept an informal agreement to limit proliferation of missile technology that could be used for military purposes.

Russia's arms industry is so desperate for cash that it is striking unusual bargains to penetrate the U.S.-dominated market.

With Malaysia, for example, the Russians at first appeared to be losing out to a bid from McDonnell Douglas Corp. for the advanced F/A-18D fighter plane. Then Russian Vice President Alexander V. Rutskoi arrived in Kuala Lumpur in March and agreed to take half the purchase price for the MIGs in commodities such as palm oil.

Thailand said it was considering an offer to pay for half of the proposed $130-million helicopter deal with Russia in rice. The catch phrase for Russian arms became "bargain basement prices."

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