Why Ukraine's freeze on arms sales to Russia will hurt Kiev too

President Poroshenko has effectively ended $15 billion in arms contracts that keep Russia's military in the air and Ukraine's defense industry employed.

By , Correspondent

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    A Ukrainian Army helicopter flies close to Slovyansk, Ukraine, earlier this month. Ukrainian President Petro Poroshenko announced today that he was ending 'defense cooperation' between Russia and Ukraine, effectively terminating billions of dollars in arms deals between the two countries.
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In light of Moscow's continued support for armed rebels in Ukraine's east, it seems logical that Ukrainian President Petro Poroshenko has officially terminated "defense cooperation" between his country and Russia.

But Mr. Poroshenko's ban on all contacts in the military sphere will likely inflict massive pain on interdependent arms industries on both sides of the border. The effective termination of an estimated $15 billion in current contracts could lead to the collapse of some of Ukraine's major companies.

According to the official ITAR-Tass agency, 79 Ukrainian and 859 Russian defense firms will be adversely affected. These industries have been intertwined since Soviet times, when Ukraine accounted for about 30 percent of Soviet military shipbuilding and disproportionately high shares in aviation, missiles, armor, and space industries.

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The immediate blow is likely to fall hardest on Ukrainian defense industries that still produce many high-tech components – such as helicopter and jet engines, transport aircraft, air-to-air missiles, tanks, and rocket parts – and traditionally export almost two-thirds of their output to Russia.

For Moscow, the collapse in relations spells an expensive and technically difficult detour from President Vladimir Putin's ambitious 10-year, $800 billion rearmament program. Many parts of that plan must now be put off as Russian industries struggle to find substitutions for the high quality, custom-made parts they formerly received from Ukraine.

Russian Deputy Prime Minister Dmitry Rogozin, who is in charge of military industries, insisted Tuesday that Russia has a "fully worked out" program to replace all Ukrainian components within 2-1/2 years.

But Alexander Golts, a military expert with the online news portal Yezhednevny Zhurnal, says that's optimistic. "We are looking at very big delays in our rearmament program. Ukraine has a few unique technologies that are critical to Russian military production," he says. "It will be miraculous if we can replace those within three years as Rogozin claims."

One of those unique technologies is helicopter engines, mostly produced by the Zaparozhia-based firm Motor Sich. Mr. Golts says that up to 80 percent of Russian helicopters, particularly the Mil Mi-8 and Mi-24 series of transport and gunship helicopters, are powered by Ukrainian-built engines. There are few industries in Russia capable of stepping in to the gap, he adds.

There is only one major helicopter producer in Russia, the St. Petersburg-based Klimov company, which is now to be handed the problem of servicing the Russian military's entire helicopter fleet, according to the official RIA-Novosti agency.

Another key area is gas turbine engines, produced by the giant Mashproekt works in Nikolayev, Ukraine. The engines are critical components for Russia's newest generation of warships.

Yet another blow to Russia's military is the loss of production and cooperation with the huge, state-owned Kiev-based Antonov company, makers of the world's largest transport planes. Antonov may suffer the most, since about two-thirds of the components for its current line of products come from Russia-based factories. But a joint venture to build the Russian military's new transport workhorse, the An-70, has already been suspended, leaving Moscow scrambling to find a replacement.

Experts say that Russia, with its vast industrial base and petroleum-fueled state budget, will eventually recover from the sudden rupture of ties. Ukraine's military industries, mostly located in the strife-torn east of the country, may have far greater difficulties in surviving the loss of their former Russian markets.

Without major support from the nearly-bankrupt Ukrainian government, some large Ukrainian defense firms "will collapse," the Ukrainian Crisis Media Center quotes Anton Mikhnenko, deputy director of the Center for Army, Conversion, and Disarmament Studies in Kiev as saying.

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