Procurement: Russia Buys Its Way In

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January 6, 2013: A Russian bank will handle a $400 million loan to Indonesia for the purchase of six more Su-30 jet fighters. The Russian government is guaranteeing the seven year loan. Indonesia agreed to this purchase a year ago but sorting out details delayed closing the contract until recently. Indonesia already has ten Su-27s and Su-30s but wants at least 16 of these modern aircraft, so they will have a full squadron. Although expensive, the Russian fighters are modern and look great. They are also relatively cheap to maintain.

This was all part of a plan to switch from American fighters (ten F-16s and 16 F-5s) to Russian Su-27s and 30s. But used F-16s are so much cheaper than Su-27s, and the public pressure forced the Indonesian politicians to hang on to the F-16s and upgrade existing F-16s, an expensive proposition that appeals to corrupt Indonesian officials.

Although Indonesia originally wanted to buy 180 Su-27 and Su-30 fighters from Russia, they found that there was not enough money for that and are now rebuilding their older force of early model F-16s. In addition, Indonesia has ordered 24 used, but modernized, F-16Cs for $31 million each. The ten older F-16s will also be modernized to the same standard.

Indonesian Air force generals opposed the acquisition of the F-16s because they fear this will lead to a reduction in the procurement of new Russian fighters. The generals believe the Russian fighters are a better match for the F-18Es and MiG-29s that neighboring Malaysia is acquiring and the F-35s that Australia is buying. But the F-16s have a proven combat record that the Su-27s and Su-30s lack.

Six years ago Russia broke into the Indonesian market by guaranteeing a billion dollars in loans so Indonesia could purchase eight Su-30 fighters, two submarines, and four Mi-26 assault helicopters over five years. The U.S. had not sold weapons to Indonesia for a while because of human rights issues. The Russians stepped in with low prices, immediate delivery, and, most importantly, attractive credit terms. Many Indonesian military leaders preferred Western equipment and that attitude proved a constant obstacle to additional Russian sales. But the Russians have their foot in the door and will use easy credit and fast delivery to remain competitive.

 

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