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Russian Arms Dealers Seek New Clients - 2003-11-08

More than a decade after Soviet soldiers left the region, Russia is seeking to return to eastern Europe, this time with lucrative arms deals aimed at competing with the expanding NATO alliance.

At the Central European Defense Equipment and Aviation Exhibition in Budapest, arms traders and their clients shout for attention.

Among those potential clients are Hungary's riot police, once feared by dissidents protesting against communism. Today it is showing the public how it copes with challenges of a new, democratic era.

But one thing has remained the same, the evident need for weapons and bulletproof vests. And if it's up to Russia, Hungary and other former Soviet satellite states will continue to look to Moscow to supply them.

The presentation by one Russian arms export company, the Rosoboronexport State Corporation, was one of the main attractions at this year's three-day exhibition.

With annual exports valued at about $4 billion, Rosoboronexport claims to be the world's second largest weapons trader, selling anything from tanks and missiles to supersonic jet fighters.

But its profits have come under pressure as NATO expands toward countries that were once part of the Soviet military alliance, known as the Warsaw Pact, and other nearby nations.

New NATO members such as Hungary, the Czech Republic and Poland are often pressured to buy from western defense companies to upgrade their Soviet-style military.

But Rosoboronexport's spokesman, Ivan Skriljnik, tells VOA that his state-owned company believes it can keep some of its defense market in eastern Europe by providing logistical support.

"In the Hungarian armed forces and in the armed forces of a number of other central and eastern European states which used to be the members of Warsaw Pact organization, they still have in their service the Russian-made or Soviet-made equipment, military hardware," he explained. "And we suggest, and they are going to, use them within the next at least 10 years, so 15 years. And both sides, Russia and this countries and Hungary, have plans to support this military hardware and modernize it."

This hardware includes Russian fighter jets and tanks.

Mr. Skriljnik says Russia is also negotiating with Hungary to deliver military helicopters as a way to pay off its [Russia] Soviet era-debt. He adds that similar talks are under way elsewhere in the region, as part of Moscow's efforts to remain strong in eastern Europe, where the last Soviet soldiers left more than a decade ago.

But Mr. Skriljnik abruptly ended the interview when asked whether the Russian war in Chechnya led to more business for his company to offset financial losses elsewhere.

Russia's renewed interest in Hungary comes after several turbulent years under the previous center-right government, when diplomatic relations cooled. The current, Socialist-led cabinet, which includes former communists, has pledged to improve Hungary's ties with Russia.

These developments were welcomed by Geza Kovacs, the president of the Defense Industry Association of Hungary, who says he dreaded the day that the Warsaw Pact was buried in 1991.

"With the signature [to dissolve] the Warsaw Pact we lost 80 percent of our markets," said Geza Kovacs. "Eighty percent. It's quite a huge figure. Therefore many of the companies working in the defense industry became very under-loaded, generating losses. Therefore they have been liquidated."

Mr. Kovacs says the market economy did not help, as the government initially refused to rescue the bankrupt companies because it viewed the defense industry as no different from any other sector.

There was more good news for Mr. Kovacs. During the exhibition news reports circulated that Hungarian defense industry officials had signed a letter of intent to join a consortium of NATO countries providing ground surveillance technology.

Hungary's defense industry is expected to gain hundreds of millions of dollars if the deal goes through. But Mr. Kovacs stresses that these activities do not mean that his industry is turning its back on Russia.

"Russia for us in the commercial concept is a natural market for us," he said. "So I support to maintain the contact with Russia, of course. And to be honest, Russian equipment is quite reliable equipment. And we have the techniques, we have the history with that equipment. Of course, it is a political question also."

Organizers of the exhibition say they are pleased that both Russian and NATO companies are competing for defense contracts on Hungarian soil.

They say it shows that this small nation of 10 million people is no longer seen as little more than a former Warsaw Pact country.