Triangle Trade

This week’s Over the Horizon column suggests that the Russian arms industry is in for some long term trouble:

During the Cold War, the Soviet Union’s military-industrial complex sustained the massive Soviet military institution, which regularly gobbled up 15-25 percent of the nation’s GDP. In an odd and unexpected twist to the end of the Cold War, the Russian arms industry has turned to sustaining itself by arming a pair of Asian giants: Arms exports to China and India have proven lucrative for Russia — and have even had a synergistic and competitive quality. The unease each country has felt due to the other increasing its military capability has led to higher revenues for Rosoboronexport, the Russian state-owned arms exporter. For the post-Cold War Russian arms industry, this trade has represented a boon, helping to replace lost customers in the Middle East, Eastern Europe and the Russian military itself. However, this situation is almost certainly unsustainable in the long run, as both China and India appear to be outgrowing their dependence on the Russian military-industrial complex. This will spell trouble for Russia, which has had great difficulty developing exports based on anything other than arms or energy.