During the cold war, the Soviet Union and the United States used arms transfers and military assistance as one element in foreign and security policies that was primarily intended to further a political and ideological competition. But with the end of the cold war, the international arms trade no longer has the same politico-military underpinning.
In the late 1980s, the changes in foreign policy initiated by President Mikhail Gorbachev and Foreign Minister Eduard Shevardnadze transformed the pattern of Soviet arms exports. After 1992, decisions by Russia about foreign, domestic and economic policy altered the size and pattern of arms exports even further. According to the Office of the President, in 1996 military-technical cooperation generated $2.5 billion in revenue of which $2.1 billion was in convertible currency and the rest in currencies that could not be freely converted. Russia also delivered arms and military equipment against debts owed to several foreign countries (www.sipri.org/publications/1998/russia-and-arms-trade).
The exports of black and gray arms represent between 5-15% of total weapons exports from Russia. For example, when the official exports of weapons and military equipment from Russia amounted to $3.8 billion in the early 2000s, the black and gray export was closer to $380 million. Russian merchants of death also have a large scale operation in the Middle East. Russia was accused of supplying arms to terrorist organizations such as Hamas, IG, and Hezbollah with the ruling Assad regime in Syria acting as an intermediary.
Syria has been in a state of civil war for many years with rebels trying to overthrow the pro-Kremlin regime. Since the beginning of the war, Russian arms supplies to Syria have grown exponentially. Moscow officially claims that deliveries are made on previous contracts, but it cannot explain why the number of these contracts suddenly increased many times over. In this case, there is real doubt that the weapons contracts are paid for, since it is no secret that the Assad regime is bankrupt and unable to buy the mountains of weapons supplied over these years from Russia, including small arms, anti-aircraft, and anti-ship missiles, C-SAM (ZRK S-300), tanks T-72 and T-80, and MiG-29 and Su-25 aircraft. And that doesn’t even include the cost of ammunition.
Israeli intelligence agencies have repeatedly implicated the Kremlin in the supply of weapons to Hezbollah, including rockets, ammunition, and small firearms. In fact, the IDF has actively prevented completion of several Kremlin plans for the armament of Hezbollah brokered by Assad. Israeli aircraft have repeatedly destroyed the anti-aircraft missiles S-300, anti-ship missiles Yakhont, and ground-to-ground missiles on Syrian territory that were intended for Hezbollah. Israeli forces seized Russian-made weapons, the ATGM Cornet, from Hamas militants in the Gaza Strip.
Russian smuggling in the Middle East is not limited to the supply of weapons to Hamas and Hezbollah. There are reasons to believe the Kremlin is also supplying weapons to the terrorist group ISIS. Russians could not transfer weapons to militants openly, because it officially recognized ISIS as a terrorist organization. Then there was a scam—a series of staged assaults by militants on the bases of Syrian government troops. Assad’s army retreated without a fight, leaving the entire base along with loads of weapons. Hence, this was a way to deliver arms under the guise of trophies. It is noteworthy that when the relationship between ISIS and the Assad regime went sour, attacks on government troops became violent and the weapons were destroyed (informnapalm.org/).
By 2015, the US was first in value of all arms deliveries made around the world, at a value of $16.9 billion or 36.62% of the total. The US and Russia made up just over half of all arms transfer agreements to developing world countries. Each year, between 2008 and 2015, two or three major suppliers made most of the arms transfers to that market. It was the eighth year in a row that the US was first in this category, and Russia was second in each of those eight years.
Russia is able to offer a variety of munitions, from low-tech gear to advanced weapons systems. It has sold combat aircraft and main battle tanks to China and India and made arms deals with the likes of Malaysia, Burma, and Algeria. Moscow has focused its recent arms-sales efforts on Latin America, where Venezuela has been a principal buyer. Russia has also worked to make it's weapons deal terms more flexible and to improve its follow-on services to clients (www.businessinsider.com/us-russia-global-arms-sales-2016-12).
Recently the issue that has come between the US and Russia is the sale of the S-400 air defense system. The S-400 Triumph (NATO reporting name: SA-21 Growler) is an air defence missile system developed by Almaz Central Design Bureau of Russia. The S-400 Triumph air defence system integrates a multifunction radar, autonomous detection and targeting systems, anti-aircraft missile systems, launchers, and command and control centre. It is capable of firing three types of missiles to create a layered defence. The system can engage all types of aerial targets including aircraft, unmanned aerial vehicles (UAV), and ballistic and cruise missiles within the range of 400km, at an altitude of up to 30km. The system can simultaneously engage 36 targets. The S-400 is two-times more effective than previous Russian air defence systems and can be deployed within five minutes. It can also be integrated into the existing and future air defence units of the Air Force, Army, and the Navy. Russia intends to supply export versions of the S-400 Triumph system to the armed forces of China. Turkey also expressed interest in purchasing S-400 air defence systems (www.army-technology.com/projects/s-400-triumph-air-defence-missile-system/).
Russia’s ability to sell its S-400 air defense system to several different countries in different theaters illustrates the geopolitics of this particular system. Despite US sanctions on the Russian defense company Almaz-Antey, Moscow is offering or has sold the S-400 to a number of countries, including NATO member Turkey. The US is also watching closely for other S-400 sales to countries such as Algeria, Belarus, Iran, and Vietnam, thus reducing the American sphere of influence and boosting Russia’s ability to arm, equip, and train other countries’ air defense capabilities regardless of the theater. The key issue here is what the US will do given the defense requirements of other countries who want to continue to do defense business with Moscow. Both Turkey and, in particular, India now stand out (www.arabnews.com/node/1390056). The U.S. aggressive stance has also set it at further odds with China.
The Trump administration imposed sanctions on the Chinese military on Thursday for buying fighter jets and missile systems from Russia in breach of a sweeping US sanctions law punishing Moscow for meddling in the 2016 US election. The US State Department said it would immediately impose sanctions on China’s Equipment Development Department (EDD), the military branch responsible for weapons and equipment, and its director, Li Shangfu, for engaging in “significant transactions” with Rosoboronexport, Russia’s main arms exporter. The sanctions are related to China’s purchase of 10 SU-35 combat aircraft in 2017 and S-400 surface-to-air missile system-related equipment in 2018, according to the State Department. In Beijing, the Chinese government expressed anger and demanded the sanctions be withdrawn (www.reuters.com/article/us-usa-russia-sanctions/u-s-sanctions-china-for-buying-russian-fighter-jets-missiles-idUSKCN1M02TP).
This intelligence site has previously reported that Russia is building its economic base and influence in the world by availing itself to countries under US or UN sanctions as a viable trading partner. Based on this strategy it is using its arms business to further undermine the effectiveness of US sanctions and bolster its own position as a sphere of influence in the world.
It is also a source of revenue for the Russian economy they will continue to foster through both legitimate sales and black-market deals. In the long run, Russia’s arms sales will constitute a serious threat for the United States. In addition to eroding the effectiveness of US sanctions, technology such as the S-400 changes the battlefield dynamics by enhancing the defenses of hostile countries. The fact that Russia has been willing to turn a blind eye or actively encourage an illicit market to further their customer base explains how important the arms market has become for them.
The US needs to recognize that Russia’s arms business is only going to expand and proliferate, especially to countries and groups that are sanctioned by the US. Russia has grown to become the second largest arms merchant in the world just behind the United States. In time it is capable of becoming the largest, thus Russia will remain a significant threat to US authority. In response, the US needs to start developing more diverse measures and threats to deal with foreign adversaries; measures that do not rely solely on sanctions. It will also have to deal with adversaries that will be able to obtain more sophisticated weapons because of this.
Brazil continued to be the top destination of exports, with $316 mm, followed by Mexico ($153 mm), Venezuela ($74 mm), Colombia ($71 mm), Peru ($62 mm), Chile ($60 mm), Argentina ($44 mm), Guatemala ($31 mm), Dominican Republic ($27 mm) and Ecuador ($24m). In these days of austerity and budget cuts in the region, affordable Indian generic medicines are preferred by Latin American consumers as well as their governments. In recent years, Mexico has become the chief beneficiary of relations with India.
In 2016 Mexico became the top destination of India’s exports to Latin America and the leading destination in the world of India’s car exports. Exports to Mexico were $2.865 bn in 2015-16. Mexico, the second-largest economy in the region, has been growing and India’s exports to that country have also been steadily increasing. Mexico’s share of India’s vehicle exports was $1.03 bn out of the total Indian exports of $5.6 bn. Even more interesting is that vehicle exports to Mexico have shown an impressive 31% growth from 2014-15 (thewire.in/43577).
In June 2016 Indian Prime Minister Narendra Modi visited Mexico City for a working visit at which time he agreed with Mexican President Enrique Pena Nieto to raise the level of bilateral relations between the two countries from 'privileged' to 'strategic partnership'. The two leaders agreed to “Seek ways to deepen our cooperation in aerospace issues, in science and in technology as well. We will also launch concrete projects in areas such as agriculture, agricultural research, biotechnology and waste management, management of natural disasters and solar energy.” (sandiegouniontribune.com/). Bilateral trade has grown rapidly in recent years, at double-digit rates consistently.
A well-diversified basket, comprising, inter alia, chemicals & petrochemicals, engineering goods, automobiles & auto parts, pharmaceuticals, diamonds, textiles & garments, and gasoline round out the array of trading goods. Crude oil is still the major Mexican export to India, besides fertilizers, iron & steel, and engineering goods. The areas assessed to have maximum growth potential are mining (projects in Mexico), food processing and infrastructure (projects in India), automobiles & auto parts, textiles & garments, software and IT, pharmaceuticals, engineering, renewable energy, and biotechnology.
Indian investments in Mexico are estimated (to be) several hundred million dollars, and Mexico is now in a catching-up phase. Most major Indian IT companies, several pharmaceutical companies, and engineering companies in tires, packaging, and electrical equipment have a growing Indian presence in Mexico, whereas Mexican investments in India are in multiplexes, housing & infrastructure, auto parts, cement, and food processing. (Arcelor Mittal made one of its early major takeovers in Mexico).
Investments from India in Mexico are estimated significantly above US$ 1 billion. Most of the leading Indian companies in IT/software (TCS, Infosys, Wipro, NIIT, BirlaSoft, HCL, Aptech, Hexaware, Patni, Tech Mahindra etc.) and pharmaceutical (Claris Life Sciences, Wockhardt, Sun Pharma, Dr. Reddy’s Laboratories, Torrent Pharmaceuticals, Lupin Pharma, Zydus Pharma etc.) sector have set up joint ventures in Mexico taking advantage of its strategic location, large market and investment-friendly policies. In 2008, JK Tyres of India bought Mexican tire company Tornel. Leading Mexican companies like Homex, Cinepolis Cemex, and Mexichem have likewise invested in India in recent times. Major investments in the steel and mining sector have also been made by the Arcelor Mittal Group.
Through Mexico’s own sizable market and investment-friendly policies, it is eminently placed to offer the strategic advantage of the world’s largest NAFTA market, already drawing large FDIs from the USA and elsewhere. Indian cinema Bollywood’s estimated the immense potential for Mexico and Latin America yet remains to be explored. Apex chambers from both sides have several cooperation MOUs, and Indian business delegations regularly participate in several major trade fairs in Mexico (indembassy.org/).
However, India's vibrant, growing diverse democratic culture has caught Mexico's fancy. Indian Government Programs such as 'Make in India', 'Digital India’, etc. are key initiatives to attract investment, and many Mexican companies are interested in sectors such as food processing, IT and telecom, auto components, Infrastructure (affordable housing) among others and are keen to take advantage of these programs. Mexico is India’s ninth supplier with around $1.8 billion in 2015. Overall, the value of Indian crude oil imports has gone down by an average -40% from all supplying countries, since 2011, when crude oil purchases were valued at $122.1 billion. But, Mexico is one of the countries that upped the value of their crude oil supplies to Indian importers by 31%.
The ‘MakeinIndia’ programme is of interest to the Mexican companies. Over the last several decades, Mexico had a similar program “Made in Mexico”, that evolved from a simple low-tech, high-volume, low-mix assembly-based manufacturing model into an emerging industrial powerhouse with in-country capabilities to produce a gamut of sophisticated items, ranging from high-tolerance, precision machine components that are incorporated into modern jetliners to delicate and highly calibrated devices that are used in life saving medical procedures.
The “Made in Mexico” program has come to embody quality, as well as to represent one of the world’s most competitive total landed cost manufacturing locations. This program has translated to low or exempted MFN import tariffs for more than 70% of the 12,119 tariff codes. This has positioned the country among the most open in the world (Free Trade Agreements with more than 45 countries) and has generated a trade-to-GDP ratio of more than 61% (more than United States, Brazil, and even China), etc. (thedollarbusiness.com/).
India’s involvement in South America goes back to the early 21st century with Brazil. In the 21st century, Brazil focused on the idea of reciprocal multilateralism, i.e. the rules of multilateral orders should benefit all nations, and not merely be dictated by the superpowers for their benefit. The President maintained the tradition of formulating and programming foreign policy as a state policy. Lula, in his entire tenure, is stated to have visited around 80 countries. India, too, shared similar views on reciprocal multilateralism like Brazil. The essence of this idea was rightly projected when both the countries led the developing world during the trade negotiations over agricultural subsidies in 2003 in Cancun. The unified stance of resistance marked the beginning of a new era in international relations and hinted at non-accommodation of North-South relations.
The two countries pursued their stance of negotiating on their terms--not just by what is prescribed by the major powers—and came together again to form the G4 group.
Along with Germany and Japan, the two emerging nations supported each other in order to bid for a permanent seat in United Nations Security Council (UNSC).
Brazilian investments in India comprise sectors like automobiles, IT, mining, energy, biofuels, and footwear. On the other hand, Indian companies have invested in areas of IT, pharmaceuticals, energy, agri-business, mining and engineering/auto sectors. The Indian companies that have marked their presence in Brazil are Tata Consultancy Services (TCS), Wipro, Infosys, Cadilla, Mahindra, L&T, Renuka Sugars, United Phosphorus, and Polaris are present in Brazil.
Indian pharmaceutical laboratories, such as Dr. Reddy’s Laboratories and Ranbaxy, which are big exporters of generic medicines, have formed joint ventures and installed factories in Brazil as well. The Brazilian companies gaining a foothold in India include Marco Polo (automobiles), Vale (biggest mining company), Stefanini (IT), Gerdau (Steel) (idsa.in/backgrounder/). Much of the recent push toward India is due in part to the current political climate emanating from the United States.
The tactics employed by U.S. President Trump toward Latin American countries have been seen as bullying and remarks seen as racist. Specifically, in the case of Mexico, the situation between the U.S. has been greatly jeopardized. Current U.S. policies have cornered Mexicans and jeopardized their economy. Mexico depends on the U.S. for 81% of its exports and nearly 50% of its imports. Statistics show that U.S. and Mexico trade is at least 1.5 billion a day. The recent H-1B announcements by President Donald Trump have prompted Ambassador Madam Melba Pria to invite Indian professionals to Mexico.
India is a part of SAARC, ASEAN, and other organizations just as Mexico is part of NAFTA and TPP amongst others. Indian companies are doing business on the entire American continent taking advantage of the regional collaboration agreements Mexico holds with its neighbors. A couple of examples; through NAFTA, India has access to the entire North American region and through the Pacific Alliance, they can do business as any other Mexican company in South American countries such as Chile, Colombia and Peru (thedollarbusiness.com/).
At a time when the developing world is experiencing frustrations with the traditional major power partners and are suspicious of their overall motives, India is taking advantage of this situation and offering itself up as an alternative to the major powers. Several possibilities have the potential to arise from this. If trends continue as they are, in the next ten years India’s position as an economic trading partner will grow considerably; to the point of overtaking the U.S, E.U. and China as the chief economic power in the Latin American region.
This presents several considerations for how it will impact the geopolitical landscape. As countries such as Mexico develop greater economic ties to India, they will become less dependent on North American business to sustain their economy. In the long run, this will greatly erode the power of U.S. influence in the region. At the same time, this situation is also working to erode the growing influence of China, who has likewise been using its economic prowess to strengthen its power in the region. This development is likely to heighten hostilities between India and China who, as this reporting site has discussed in previous reports, are in the developing stages of a modern-day global cold-war.
What must be understood by the nations of the developed world is that India presents a new sphere of influence.
Where many nations in the developing world have come to see traditional global powers such as the E.U, North America, and China as domineering and racist in their dealings, India is a country that still is recognized as part of the developing world and has endured similar discrimination from the same institutions. This has made it easier for India to be seen as a comrade state rather than as a potential exploiter. India is capitalizing on this strategy as a means to build global relations with trading partners. So far, in the years that India has been involved in Latin America, it has shown little interest in pursuing much beyond the means of economic interests. Nor is it a real possibility that India would do so in the immediate future. However, if circumstances should change, India could viably become another means Latin American countries can turn to for military support and possibly more.
The U.S. needs to understand that in the coming years India will be a serious power in the Western Hemisphere, one that will have interest in the direction of the region and serious influence to impact what happens. In response, the U.S. needs to begin developing a strategy for how it intends to address this issue in the future. India will be a powerful ally in several matters. It could also be a powerful means to marginalize the U.S. power base and thereby present a new balance of power that Latin American countries will be able to turn to as an alternative if they do not wish to be reliant or succumb to U.S. pressures.