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For complete information please contact authors at visti@unian.kiev.ua
MILITARY-TECHNICAL COOPERATION AS KEY COMPONENT OF UKRAINE’S MILITARY AND ECONOMIC SECURITY
Valentyn BADRAK (Fragment of CACDS Research MILITARY-TECHNICAL COOPERATION OF UKRAINE, September 1999)
COMPONENTS OF MILITARY-ECONOMIC SECURITY
Military-economic security of a country constitutes one of the most important components of overall national security and can only be ensured on condition that the country mobilizes all of its resources: political, military, technological and informational ones, and ensures the following:
1. Decision-making in due time on priorities and parameters for the development of the armed forces and other armed formations of the country in proportion to financial resources allocated for the implementation of priority tasks, as well as timely update of the nation’s military doctrine. This determines interrelation between the country’s goals and capabilities with due regard for changes in geopolitical situation and prompt reaction to them, including re-evaluation of [the scale of] threat to the state. This can be ensured by joint efforts of diplomats, intelligence services and scientific-analytical institutions of the army and the state. Ukraine is slow in determining its priorities. Analysts list among principal strategic planning mistakes the following: problem statement without ensuring adequate resources, outdated military doctrine, non-incorporation of Chief of General Staff (who coordinates issues related to the use of arms and forces to defend the country) into the Council for National Security and Defense, performance of the same functions by different military units etc. [1] At the same time, in the wake of the air campaign against Serbia Defense Ministry together with Ministry for Industrial Policy have intensified their strategic planning efforts. Thus, in particular, they have completed a three-year effort to draw up a Program for the development of weapons and military equipment. On top of that, effort is under way to evolve a fundamentally new structure of the Armed Forces, named Model’2010, while effort to draw up a new military doctrine is nearing its completion.[2] Mistakes of the state policy vis-a-vis military-economic security resulted in a cut in national defense budget funds designed for the purchase of new weapons and military equipment. That line in defense budget would only be sufficient for the purchase of either 20% of S-300 anti-aircraft missile launchers, or three Mig-29 fighters, or two Su-27 aircraft, or seven Ka-50 helicopters [3].
2. Support for research and development projects, inventory of technologies and creating favorable conditions for the transfer of technologies. This is the most difficult task, as it demands heavy investments. Ukraine’s scientific and technological potentials in certain defense industries still remain at the international level, but many research and development projects have been suspended for lack of funds. [4] High rate of transfer of technologies and inventory of technologies is due to lack of appropriate legislation and lack of funds for completion of promising development projects. Progress in this field has been seen since the setting up of the SpetsTechnoExport company in charge of supervising the transfer of technologies.
3. Creation of [favorable] conditions for the development of defense industry and its retooling with due regard for scientific and technological achievements. The development of Ukraine’s defense industry, which heavily depends on the overall economic situation in this country, is seriously impeded by the lack of [effective] crediting system, slow pace of defense industry reform and insufficient realization of the nation’s export potential.[6] Military-political situation is another factor of the development of defense industry. That factor influences practically every component of military-economic security. Since industry is the last link in the chain of decisions, it is precisely industry whose development heavily depends on the military-political situation. At the same time, according to the government’s statistics, since the beginning of 1999 Ukraine’s industrial output has risen 0.5 per cent. [8] The country also has to settle the problem of ensuring security at the level of individual defense factories, especially of those vested with or planning to win the right to independently trade in military products on foreign markets. This goal could be achieved with the help of prompt information back-up, government support for conversion projects and extension of legislation related to cooperation in military technology.
4. Cooperation in military technology, including cooperation with foreign partners in the effort to design and develop new types of weapons and military equipment, services and materials of military and dual purpose. Cooperation in military technology is a key component of the country’s military-economic security, since it ensures hard currency revenues, helps cut the cost of arms and hardware designed for domestic use due to batch production, provides jobs, maintains defense industry’s infrastructure and, lastly, serves as a catalyst for the nation’s economic and scientific-technological development. [9] On top of that, cooperation in military technology is directly connected with decision-making on the export of defense products, as well as with ensuring effective export control to prevent breaches of international agreements banning arms exports to countries with “hot spots”.
5. Formation of investment-friendly climate, including in high-tech industries. Not only cooperation in military technology and military-economic security, but the economy on the whole suffer from lack of foreign investments. Over independence, a mere 2.8 billion USD has come to Ukraine in foreign investments, a lion’s share of which has been invested in trade, rather than production sector. That figure is several times higher for former Warsaw Pact member states. Thus, in particular, annual foreign investments in Poland or Hungary are four times higher than overall investments in Ukraine over eight years of independence. [10] According to US Ambassador to Ukraine Mr S.Pifer, US investments in Ukraine made a mere 500 million USD, while that figure is 6 billion USD for Poland. [11]
6. Formation of a well-developed banking system for crediting the national defense industry. Commercial banks only provide short-term loans at an interest rate of 80-85 per cent per annum, which none of legal businesses can afford.[12]
7. Well-directed efforts by special services to protect high-tech scientific and industrial developments, as well as information containing government secrets. Search for information by special services and lobbying for national economic interests. Practically every state, wishing, on the one hand, to protect its technological potential from an intrusion from the outside, and, on the other hand, get an access to information from the outside, sets up its own special services to achieve these goals. Many industrialized nations set up intelligence communities for that purpose. But operation of those services requires an appropriate legal environment. Such an environment, in particular, a law of intelligence, is, however, absent in Ukraine. There were several abortive attempts to adopt such a law at Verkhovna Rada since 1995. The Parliament is going to resume examination of a bill of intelligence either late this year or in the early 2000. [13] Effective laws on the protection of government secrets leave much to be desired. [14]
8. Perfection of government’s information policy vis-a-vis military-economic security, in particular, information support for cooperation in military technology, from individual contracts to multinational projects. Information policy of the government in the field of military-economic security and military-technical cooperation has only got under way. Only in 1997 informational threats were set up and a national security concept (also including a chapter on information policy) was approved by parliament. [15] It is secret to nobody that Ukraine’s information space is highly vulnerable to intrusions from the outside. As far as military-economic security and military-technical cooperation are concerned, this year alone there were at least ten occurrences of rude pressure brought by foreign media to bear on this country, which had adverse consequences for Ukraine, ranging from negative image of military-technical cooperation within the country to serious political scandals. That is why informational support for military-technical cooperation shall be given a priority place in marketing and promotion programs of companies trading in sensitive products on behalf of the government.
All these factors are closely interrelated with one another, profoundly influencing the degree of Ukraine’s military-economic security. That is why a lack of attention to at least one of these factors could serve as a destabilizing link in the entire chain of nation’s security. The country’s ability to trade in arms on foreign markets is a component of its international image and an extra leverage to influence world’s political and economic situations.
LEGISLATION ON MILITARY-TECHNICAL COOPERATION
Ukrainian government officials in charge of arms exports complain about insufficient legislative basis for cooperation in military technology with foreign states. [16] The first study of questions related to arms trade issued in 1997 by the National Institute for Strategic Studies under the Council for National Security and Defense was the first to give a definition of the term cooperation in military technology. The definition says that cooperation in military technology with foreign states is part of international relations dealing with transfer, design, development and manufacture of products of military purpose. It also says that the “products” could be transferred both in the form of commodities or works and services. [17] The formation of a legislative basis for cooperation in military technology is nearing its completion these days. The climax to this effort will be a law of Ukraine’s cooperation in military technology with foreign countries, whose adoption has been planned either for the end of this year or for the beginning of 2000. Before February 1999, cooperation in military technology with foreign states was regulated by the following legal acts: The Law of Foreign Economic Activities Presidential decree #448 of October 12, 1993 “On the Perfection of the Procedures for the Sale of Military Property” Cabinet resolution #1247 of October 9, 1996 “On the State Company for the Import and Export of Products and Services of Military and Dual Purpose UkrSpetsExport” Presidential decree # 353/97 of April 19, 1997 “On the Concept of Economic Activities of the Armed Forces of Ukraine in the Context of Today” Cabinet resolution # 1420 of December 22, 1997 to confirm the Procedures for the Sale of Property of the Armed Forces and Other Military Formations of Ukraine Cabinet resolution # 775 of June 2, 1998 to confirm the Procedures for the Update of Weapons and Military Equipment of Foreign Clients. Since February 1999 to June this year the President of Ukraine signed six more decrees related to cooperation in military technology with foreign states. The first of the decrees was designed to perfect both export controls and decision-making on cooperation in military technology with an eye to political situation in individual regions. [18] The decree, in particular, set up on February 4, 1999 the State Commission for Export Controls and Cooperation in Military Technology with Foreign States under the President of Ukraine. The Commission assumed certain functions of the state company for the import and export of products and services of military and special purpose Ukrspetsexport, as well as those of the State Service of Export Controls of Ukraine. It follows from the decree that decisions made by the Commission would be of an advisory character. The Commission includes, apart from the Chief, 13 members representing each of the government agencies related to arms trade, plus four men representing the Ministry for Industrial Policy and the Council for National Security and Defense. [19] Having adopted on June 12 a special resolution granting several subjects of foreign economic activities the right to import and export military products and commodities containing government secrets, the Ukrainian government thus completed the effort to update the national arms trade system. In keeping with the resolution, the right to import and export such commodities has been given to UkrSpetsExport’s branch companies – UkrOboronService, Progress, UkInMash, PromOboronExport and SpetsTechnoExport. The same powers to import and export explosives, ammunition and their elements have been given to the government-controlled company TASKO-Export, the state-owned holding company Artem, the Motor-Sich public company, Kyiv’s state-owned company AVIANT, state-owned company Kvant-Radiolokatsiya Research Institute of Radar Systems, as well as to Kyiv’s Antonov Research and Production Concern. On top of that, the right to export services related to air cargo carriage of military products and sell Defense Ministry’s aircraft (through a government mediator) has been given to Defense Ministry’s Ukrainian Air Transport Company. The resolution also orders that, in trading in defense products, subjects of foreign economic activities authorized do so shall carry out market studies and set export prices only on agreement with UkrSpetsExport. [20] In fact, that Cabinet resolution is none other but the restoration of UkrSpetsExport’s monopoly of arms trade. Many Ukrainian defense companies have a sufficient potential to independently trade on foreign markets without the help of a government mediator. On June 22 this year, the Cabinet made a decision allowing 60 defense factories to take part in cooperative production in the CIS territory. There is another loophole for defense companies. They have been allowed to supply parts and assemblies within the framework of intergovernmental agreements, providing they are subjects of such agreements. [21]
PERSONNEL SELECTION AND PLACING POLICY IN THE FIELD OF MILITARY-TECHNICAL COOPERATION
Regardless of the fact that by 1997 Ukraine had exported her arms to 30 countries, many agencies exporting arms to foreign states complained about the lack of qualified experts in arms business. [22] Organizational and staff structure of the government mediator UkrSpetsExport and organizational and stuff structure of another agency directly participating in cooperation in military technology with foreign countries -- the State Service of Export Controls of Ukraine -- had been formed by mid-1999.
REALITIES OF MILITARY-TECHNICAL COOPERATION
While in 1997 Ukraine exported its military products to 30 countries, then today this figure increased to over 50. By the beginning of 1999, Ukraine had been trading in arms on all of the continents, due to which in 1998 the number of orders placed by UkrSpetsExport with Ukrainian defense companies increased by 3.5 times, and their value reached 56 million US dollars. [23] Judging by results of the work done in the first three months of this year, as well by the number of licenses issued in the same period, overall figures of arms exports will rise in the first six months. [24] Analysts of the state company for the import and export of products and services of military and special purpose UkrSpetsExport came to the same conclusions. Their calculations show that, compared to 1997, last year’s arms exports increased by 40 per cent, while arms exports in the first six months of this year made 90 per cent of the amount reported for the whole of 1997. If this trend continues, by the end of this year this figure would be 180 per cent as compared to 1997. [25] The perfection of export control in combination with new approaches to marketing studies and exhibition activities have also contributed to an increase with every passing year in Ukrainian exports of weapons, military equipment and dual purpose products. This made it possible to shorten decision-making period down to ten days. [26] It must be noted for that matter that Ukraine’s return to the international arms market as an independent state now, rather than part of the Soviet Union, was no easy, given peculiar features of that market: a limited number of exporting countries, wild competition and close interrelation of political and military-strategic aspects with economic ones. Another factor that impeded that effort of Ukraine was market shrinkage. On the other hand, there were positive factors as well. Before independence, Ukraine inherited from the Soviet Union huge quantities of military equipment, which by far exceeded its defense needs. Another important change which occurred in the structure of military-technical cooperation was an increase in the number of contracts for the update of military equipment up to 30 per cent of the overall number of contracts signed in 1997. [27] Today, Ukraine cooperates in the military-technical field with as many as 78 countries. [28]
CONDITIONS FOR THE DEVELOPMENT OF MILITARY-TECHNICAL COOPERATION
Among Ukraine’s defense industries whose products meet international standards exoerts list rocket-space industry, armored vehicle building industry, optoelectronic industry (which in Soviet days was world’s leader in the manufacture of radars), highly-developed ship-building industry, aircraft building and aircraft engine industries. Aircraft engine factories, in particular, have broad opportunities for cooperation with foreign states in basic and maintenance repairs of engines for helicopters of the Mi and Ka families. In 1995, aircraft engine exports alone brought over 100 million US dollars to Ukraine. Ukraine is rated among world’s leaders in the manufacture of navigational equipment, homing devices for ground-to-air missiles, radio control stations, sophisticated control systems, radio communication equipment, missile and aircraft aiming devices etc. [29] Ukraine should gain in foothold in the club of exporters of science-based and high-tech products, experts of the council for national security and defense say. Otherwise it will face a speedy sale of its most valuable scientific and technological achievements, and, consequently, “erosion” of the defense industry’s high-tech sector. “Certain countries treat cooperation in military technology as a means to create effective national economies. Among such countries are South Korea, Israel, South-African Republic, Singapore, Taiwan etc. Over ten or twenty years, not only they succeeded in filling in the gap with the rest of the world in terms of economy, but even launched the manufacture of weapons of their own due to the introduction of science-based technologies. Today those countries do not spare money for research and development projects in the field of design and development of new types of weapons, in the first place for naval and aerospace forces,” says Strategic Panorama journal (issued by the council for national security and defense), implying that Ukraine should retain its leadership in the above-mentioned industries. [30] Of no less importance for military-technical cooperation is government support for defense companies, which, however, is insufficient for the time being. A lack of government support resulted in a slight decline in the defense industry output in 1998. Speaking in an UNIAN interview in the summer of 1998, Industrial Policy Minister Vasyl Hureev pointed out a decline in defense industry output, in particular in such industries as shipbuilding, radiotronic industry, as well as in the output of certain types of special purpose equipment. According to the minister, the share of defense products in overall structure of exports of engineering products fell “down to six per cent.” Despite Ukraine’s huge arms export potential, her achievements on the international arms market would not be that impressive against the contract with Pakistan for the supply of 320 tanks. Ukraine’s arms export potential depends on several factors. Among these factors are, in the first place, internal-organizational and foreign policy ones, which are closely interrelated with one another, as well as the government’s ability to give sufficient support to the country’s defense industry, in particular, provide finds or loans for research and design projects.
SOURCES
[1] Zerkalo Nedeli weekly newspaper, # 23 of June 12, 1999, page 3 [2] News-conference by Defense Minister Olexandr Kuzmuk, September 2, 1999 [3] Time (Kharkiv), August 12, 1999 [4] Strategic Panorama, scientific quarterly of the Council for National Security and Defense [5] UNIAN’s interview with director if SpetsTechnoExport state-owned company Y.Tereschenko, April 4, 1999 [6] Strategic Panorama, scientific quarterly of the Council for National Security and Defense, pages 136-137 [7] Arsenal, scientific review, #2, 1999, pages 9-11 [8] UNIAN, April 4, 1999 [9] Arsenal, scientific review, #2, 1999, page 10 [10] Nauka i Oborona, #2, 1999, page 33 [11] Den daily, August 3, 1999, page 3 [12] Nauka i Oborona, #2, 1999, page 33 [13] UNIAN’s interview with chairman of Verkhovna Rada’s committee for national security and defense Georgy Kriuchkov, August 23, 1999 [14] News conference by Security Service officials, UNIAN’s news bulletin of August 5, 1999 [15] Zerkalo Nedeli weekly newspaper, # 35, September 4, 1999, page 6 [16] UNIAN’s interview with A.Kukin, general director at state-owned company for the import and export of products and services of military and special purpose UkrSpetsExport, UNIAN’s news bulletin, December 16, 1996 [17] V.Chumak, V.Begma, A.Kukin, V.Zaborsky, Monograph, Kyiv, 1997, page 7 [18] Volodymyr Radchenko, Chief of the Commission for Export Controls and Cooperation in Military Technology with Foreign States. Press-conference of Ukrainian delegation at the IDEX-99 international arms exhibition, UNIAN’s news bulletin, March 16, 1999 [19] Presidential decree # 121/99 of February 4, 1999 on “Issues of Cooperation in Military Technology with Foreign States, Exports Controls and Military-Industrial Policy” [20] Cabinet resolution # 1228 of July 12, 1999 “On the Granting of the Right to Export and Import Defense Products and Commodities Containing Government Secrets to Subjects of Foreign Economic Activities [21] News conference at Industrial Policy Ministry , July 26, 1999 [22] V.Chumak, V.Begma, A.Kukin, V.Zaborsky, Monograph, Kyiv, 1997, page 7 [23] Valery Malev, general director at state-owned company for the import and export of products and services of military and special purpose UkrSpetsExport, a press-conference of Ukrainian delegation to the IDEX-99 international arms exhibition, UNIAN’s news bulletin, March 16, 1999 [24] UNIAN’s interview with V.Hubenko, chief of State Export Control Service of Ukraine, June 12, 1999 [25] Figures taken from Ukrspetsexport’s database [26] UNIAN’s interview with Valery Malev, general director at state-owned company for the import and export of products and services of military and special purpose UkrSpetsExport, July 26, 1999 [27] UNIAN’s interview with the first general director at UkrSpetsExport A.Kukin, December 16, 1996 [28] Defense Minister Olexandr Kuzmuk, a press-conference of Ukrainian delegation to the IDEX-99 international arms exhibition, UNIAN’s news bulletin, March 16, 1996 [29] Strategic Panorama, scientific quarterly of the Council for National Security and Defense, # 3-4, 1998, page 134 [30] Strategic Panorama, scientific quarterly of the Council for National Security and Defense, # 3-4, 1998, page 135
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