Algeria Lays Down Russian Arms
$1.286-billion contract under threat
http://kommersant.com/p854040/military_hardware_foreign_relations, 18 february 2008
For the first time in the history of Russian military cooperation, a foreign customers is returning a military hardware purchase. Last week, an agreement was signed on the return of 15 MiG planes acquired by Algeria in 2006 and 2007. Algerian President Abdelaziz Bouteflika begins a visit to Russia today, during which military cooperation will be one of the main topics of talks. Experts say the Algerians actions are not due to objections to the quality of the Russian technology, but because of domestic conditions and problems with third countries.
On February 6, head of the Russian Federal Service for Military-Technological Cooperation Mikhail Dmitriev held talks with the Algerian armed forces chief of staff Salah Ahmed Gaid. Kommersant has learned that proposed returning the planes immediately, that is, before the president’s visit to Moscow, “on the basis of an oral agreement,” with documentary formalities to be taken care of later. However, according to a source in the United Aviation Construction Corp., the Federal Service for Military-Technological Cooperation, Rosoboronexport, the MiG Corp. and the Algerian Air Force signed an official agreement on the return of the planes to Russia. The Ministry of Industry and Energy confirmed for Kommersant on Friday that it was aware of “an agreement being reached with Algeria on the MiGs.”
The planes will be returned in the coming months. The contract will not be completely renounced, however, according to a UACC source. He said that Algeria was being offered more up-to-date MiG-29M2 or MiG-35 models or nonaviation hardware in exchange. The cost of one MiG-29M2 or MiG-35 is $5-10 million higher than of a MiG-29SMT. A Kommersant source in the aviation industry says that the lot of Su-30MKI(A) models for Algeria may be increased. In March 2006, a contract was signed for the delivery of 28 Su30MKI(A) jet fighters was signed and three of them were delivered last year. The returned MiGs may be sold to the Russian Ministry of Defense or to a third country. A source in the Federal Service for Military-Technological Cooperation said that it is possible that Algeria will take 15 planes back after they are improved. “It hasn’t been determined yet how Algeria will compensate the advances and the forfeiture of the contract, all the more so since the repayment of Algeria’s foreign debt was counted into the contract,” said the source.
The $1.286-billion contract for 28 one-seat MiG-29SMT and six two-seat MiG-29UB fighters was signed by Rosoboronexport in March 2006, during the visit of Russian President Vladimir Putin to Algeria. That contract was part of a package of agreements on military-technology cooperation with Algeria worth a total of about $8 billion. Russia agreed to write off Algeria’s debt to the former USSR (about $4.7 billion) as the contract as fulfilled. For the first time, the MiG Corp. delivered the planes with a trade-in program. As new planes were delivered, MiG-29SMT/UB models bought by Algeria in the 1990s from Belarus and Ukraine were returned to MiG.
The planes were supposed to be delivered between March 2007 and February 2008, but Algeria refused delivery after May 2007 and demanded that the first 15 planes delivered be returned. Algeria pointed to used or low-quality parts found in the planes. In August, the Algerian president sent a letter about that to Putin. Russia has already received a $250-million advance payment. In addition, since October of last year, Algeria has not made payments of $432 million on other military contracts, tying them to the return of the MiGs. As a result, according to the Russian Finance Ministry, on February 1 of this year, the total of payment received from Algeria on military contracts, recorded in a special account against the country’s debt, came to only $1.83 billion.
Russia long insisted that the claims were ungrounded. “The bodies of the planes were produced in the 1990s, but that was stipulated in the contract, and everything inside them, all the equipment, was new,” a source at MiG said, adding that Rosoboronexport representatives demanded an explanation that could serve as the basis for breaking the contract. “Algerian representatives wrote a receipt in Russia and in Algeria, then they began using those MiGs and only after that they made their claims,” a corporation spokesman said.
Experts connect the claims with the situation inside Algeria and France’s attempts to advance its Rafale fighter jet in the region. Deliveries of the MiG-29 were become an issue in domestics politics as well. Bouteflika intends to seek a third term. A competing clan is represented in the security forces of that country. They are using the crisis of the Russian planes to weaken the position of Ahmed Gaid Salah, who is loyal to the president. In addition, Center for the Analysis of Strategy and Technology expert Konstantin Makienko notes, “The Russian breakthrough in Algeria in 2006 was accompanied by powerful opposition by France, especially after President Sarkozy came to power.”
Relations between Russia and Algeria have become more complex in other spheres as well. In August of last year, the Algerian minister of energy announced the discontinuation of a memorandum of mutual understanding between Gazprom and the Algerian company Sonatrach, removing the legal basis for cooperation in producing hydrocarbons and liquefied natural gas in Algeria. Nonetheless, Gazprom representatives hope they will be able to return eventually to the joint activities outlined in that document.
Alexandra Gritskova, Elena Kiseleva, Konstantin Lantratov