2007 August 21 Tuesday
Russia Tries To Revive Military Power

The Russians are wasting precious time and money trying to compete with the US in the military realm.

Vladimir Putin announced ambitious plans to revive Russia's military power and restore its role as the world's leading producer of military aircraft yesterday.

Speaking at the opening of the largest airshow in Russia's post-Soviet history, the president said he was determined to make aircraft manufacture a national priority after decades of lagging behind the west.

The remarks follow his decision last week to resume long-range missions by strategic bomber aircraft capable of hitting the US with nuclear weapons. Patrols over the Atlantic, Pacific and Arctic began last week for the first time since 1992.

Russia's oil fields are going to peak in production soon. The Russians can ill afford to squander their oil wealth.

The Kremlin should focus instead on development of the private sector. Kremlin plans for a revival of the Russian aerospace industry make more sense because the goal is to generate more revenue from sales of higher tech products.

Last week Russian officials said they planned to build 4,500 civilian aircraft by 2025, while the Kremlin has pledged 125bn to boost the civilian industry.

As part of the plan to boost significantly Russia's civilian aircraft industry, a new state-controlled organisation, the United Aircraft Corporation, has been created.

But can a corporation owned by the Russian government operate with sufficient efficiency to compete with Boeing and Airbus?

Russia has the potential to earn a lot more money from arms sales. But Businessweek reports that Russia's commercial aircraft industry is lagging behind its military aircraft industry.

Most industry observers agree that Russia's civilian aviation industry is lagging behind the fighter aircraft makers. "Our military aviation is all right. The commercial aviation is slowly recovering," says Ruslan Pukhov, director of the Moscow-based Center of Analysis of Strategies & Technologies, a defense think tank. To boost the Russian industry's ability to compete in passenger and transport jets against Boeing (BA) and Airbus, the Kremlin created United Aircraft, a state holding company combining key producers such as MiG, Sukhoi, Ilyushin, Tupolev, and Irkut. United Aircraft's ambitious goal: to produce and sell about 4,500 aircraft worth some $250 billion by 2025. For starters, Russian airlines are expected to order some $600 million in Russian-built aircraft at the Moscow air show.

When the Russians start sending their bombers out to skirt US and British airspace which audience are they playing to? European government leaders? American government leaders? The Russian public? Or maybe potential sovereign buyers of Russian military aircraft?

Share |      By Randall Parker at 2007 August 21 11:27 PM  Russia


Comments
Wolf-Dog said at August 22, 2007 5:23 AM:

Randall Parker wrote:
-----------------------------------------------------
Russia's oil fields are going to peak in production soon. The Russians can ill afford to squander their oil wealth.
When the Russians start sending their bombers out to skirt US and British airspace which audience are they playing to? European government leaders? American government leaders? The Russian public? Or maybe potential sovereign buyers of Russian military aircraft?
--------------------------------------------------------

The fact that the Russian oil fields are going to peak soon, is a good reason for Putin to wrestle away the enormous arctic oil reserves from Canada. But in order to do that, Russia needs a better prepared military infrastructure.
Thus in this case, the "audience" that the Russian military will have, are going to be other raw materials producing countries that Russia might make claims against.

Similarly, the oil fields of Iran will soon start to peak also... But once again, this is precisely Iran is arming itself to the teeth to grab the oil fields in Saudi Arabia.

Stephen said at August 22, 2007 5:28 AM:

Dear George,

Deploying ICBM interceptors unbalances the MAD equation because it gives you a first strike advantage. At the best of times we think that's entirely unnecessary and destabilising, but that goes double at the moment because the US is batshit insane. We're flying some strike bombers toward your airspace as a reminder of what it was like in the hair-trigger days before the treaties.

Regards, Vlad.

Ned said at August 22, 2007 5:48 AM:

Wolf-Dog -

You make an excellent point about Iran. The Sunni-Shia fault line, historically a source of great political instability and numerous wars, currently runs through Iraq. Religious issues aside (if that's ever possible in the Middle East), Iranian oil production is peaking, and exports may disappear in a decade. This will have dire consequences for the Iranian regime, which lives off oil exports. Saudi Arabia is the great prize, with vast oil reserves plus the bonus of the Muslim holy sites. Wouldn't the Iranians just love to get their hands on those goodies! Of course, US foreign policy, with its foolish and unrealistic goal of "democratizing" the region, ignores these historical realities. When the US forces finally leave Iraq, a general Middle East war, fought more or less along Sunni-Shia lines, is a distinct possibility. This will send the price of oil through the roof, which is all the more reason we should start NOW to develop energy independence from these unstable regions.

daveinboca said at August 22, 2007 7:40 AM:

Putin reminds me of Markos Moulitsa on steroids.

Stephen said at August 22, 2007 8:04 AM:

how about just being nice to Iran? Its so crazy it just might work.

That said, the US needs an external enemy otherwise it will turn on itself.

John Smith said at August 22, 2007 8:49 AM:

Russia's days are over. With a shrinking population and a large amount of talented citizens who went abroad in search of better opportunities, how much juice do they have left? They are going to be a tier 2 power, competing with Japan and India, not tier 1 (US, China, EU).

Wolf-Dog said at August 22, 2007 1:26 PM:

Japan is not a tier 2 power. Japan keeps getting better.

But Russia's days are not over, since Putin has started a national program to allocate an enormous child subsidy funding program for all Russian women to have more children. Also, Russia is becoming a fascist, aggressive and expansionist country, with its eyes on many foreign raw materials. Their economy is currently strong enough to attract many talented Russian expatriates.

tommy said at August 22, 2007 3:23 PM:

Oh, well! When the economy is bad, thugs like Putin climb to the top. When the economy is good, thugs like Putin climb to the top. I'm beginning La Russophobe's cynical analysis of Russian culture is dead on.

Randall Parker said at August 22, 2007 5:57 PM:

Ned,

Saudi Arabia is no prize! The Ghawar oil field has already peaked. No, the Saudis do not have large untapped reserves. World production of oil starts declining in 2009?

tommy,

While Bush preaches how democracy is the necessary panacea for peace Russia becomes steadily less free by the day. I don't write posts about it very often but one press outlet after another in Russia has been getting shoved under control of allies of the Kremlin. Lots of reporters have been killed with no convictions of their killers. The Russian people are okay with a lack of freedoms. There's a lesson here applicable to the Middle East and other regions as well.

Dragon Horse said at August 22, 2007 5:59 PM:

What the hell kind of message is Putin sending with this? Russians are real men not to be mocked? :-)

http://www.iht.com/articles/ap/2007/08/22/europe/EU-GEN-Russia-Putins-Image.php

Lord nose most of our presidents are metrosexual. We haven't had a real man since Kennedy (although he was a leftist) and before him Eisenhower, Roosevelt (Franklin and Teddy)...we don't make them like we used to. Now we got men running for president who gets $500 hair cuts and spends more time in the mirror than Hillary Clinton. (sigh)

Wolf-Dog said at August 23, 2007 3:42 AM:

Randall Parker wrote:
The Russians are wasting precious time and money trying to compete with the US in the military realm.


------------------------------------------------------------------------------

I forgot to say one more thing: One who lives in a house made of glass, should not throw any stones at the neighbors. Given that we are wasting so much money in Iraq and many other inefficient military endeavors, the Russian militarization is nothing. For one thing, Russia still has an enormous trade surplus, not a trade deficit like the US, and hence the money that Russia is wasting in building weapons, is recycled internally even though this is an inefficient process.

Ned said at August 23, 2007 6:11 AM:

Randall -

Saudi oil production may or may not have peaked - the subject is controversial. Look at this (http://www.iags.org/n0331043.htm):

With over 260 billion barrels of proven oil reserves, a quarter of the world's total, Saudi Arabia is not only the top foreign supplier to the United States - the world's largest energy consumer - but also essentially the sole source of liquidity in the oil market. According to the Department of Energy's Energy Information Administration (EIA), the world will become more dependent on Arabian oil in the next two decades. To meet global demand for oil, Saudi Arabia will need to produce 13.6 million barrels a day (mbd) by 2010 and 19.5 mbd by 2020. Both the International Energy Agency and EIA assume Saudi oil output will double over the next 15 to 20 years. In a new study soon to be released, Matthew R. Simmons, president of Simmons and Company International, a specialized energy investment banking firm, contends that this is not likely to happen. He argues that Saudi Arabia's oil fields now are in decline, that the country will not be able to satisfy the world's thirst for oil in coming years and that its capacity will not climb much higher than its current capacity of 10mbd. Considering the growth in demand, this could easily spark a global energy crisis.

- -

Saudi Aramco officials flew especially to Washington to refute Simmons' analysis. In a speech before the Center for Strategic and International Studies in Washington DC, Nansen G. Saleri, a manager of reservoir management for Saudi Aramco said Saudi Arabia can maintain production capacity at the current rate of 10 mbd for the rest of this decade and if needed they could increase maximum output by 20-50% within a decade. His colleague Mahmoud Abdul-Baqi, Saudi Aramco's vice president for exploration also expressed optimism about the future of their industry. "We have a lot of area to explore and find a lot of oil and gas. Our track record shows we delivered for the past 70 years and we will continue to deliver in the next 70 years and beyond." Saudi Aramco says that with more investments it can expand its capacity to 12 mbd or more. But according to the New York Times, privately, Saudi oil officials are less self-assured, cautioning that production beyond 12 mbd would damage the oil fields. Even if their prediction is wrong, the road to the 19.5 million barrels a day by 2020 projected by the EIA is very far.

Some economists who reviewed Simmons' work rejected it on the basis that if oil prices rise high enough, advanced recovery techniques will be applied, averting supply problems. But Simmons disputes this wisdom. For a decade the technological revolution which includes horizontal drilling accelerated the extraction and created "monstrous decline rate." He is adamant that the Saudi oil miracle is fading. "The next generation of Saudi oil will also be harder to extract and therefore more expensive. In 2-3 years we will have conclusive evidence that Saudi oil is peaking," he told Energy Security. Furthermore, he explained that in Saudi Arabia, seawater is injected into the giant fields to pressure the oil toward the top of the reservoir. The problem is that over time, the volume of water that is pumped along with the oil increases, and the volume of oil declines proportionally until it becomes uneconomical to lift the oil.

Analyzing Saudi Arabia's capacity is not an easy task. Saudi Aramco, the state-owned oil company, has not provided production data for more than two decades. OPEC, the IEA and EIA data systems shed little light on what underlies Saudi sand. "Their predictive track record has been awful. In the land of the blind, reliable OPEC data is either untrusted or non-existent " Simmons said. Simmons calls for a new era of true energy transparency. "The IEA should roll up their sleeves and work to obtain far better demand and cost data and far better decline data for non-OPEC oil. OPEC should provide field by field production and well-by-well data, budget details and third party engineering reports."

- -

Anyway, it really doesn't matter. Whether or not production has peaked, Saudi oil reserves are still vast, the largest in the world for a single nation. Ans as Iranian production is certainly peaking, that nation would love to get its hands on the Saudi oil, especially since much of lies in the eastern provinces. This is where much of the Saudi Shiite minority lives. The Wahabis treat the Shiites like dirt, barely tolerating them, and the Iranians would just love to "liberate" them and also seize the Muslim holy sites.

Randall Parker said at August 23, 2007 5:38 PM:

Ned,

The Saudis do not have 260 billion barrels of proven reserves. They have 260 billion barrels of claimed reserves. They do not make available data that demonstrates their claims. Why do you suppose that is?

As for what current Aramco officials say: You ought to pay attention to what former Aramco officials say. The optimistic view is good for a laugh.

LONDON (Dow Jones)--The former head of Saudi Arabian Oil Co.'s (SOI.YY) oil exploration Wednesday sharply criticized U.S. government oil supply projections.

"The whole industry laughs at it," said Sadad Al-Husseini, former executive
vice president of exploration and production at Aramco, the world's biggest oil
company.

Canadian bitumen reserves are probably bigger than Saudi conventional oil reserves.

HellKaiserRyo said at August 25, 2007 5:55 AM:

Believe me, some fundamentalists will interpret this as evidence for the end times.


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