The government awards the $1.5 billion order to the Siberian enterprise in a move that may reduce fears that the industry's restructuring will be at the expense of the regions (460 words)

Published: 11/26/2001

The Russian government has officially allocated China's $1.5 billion order for 40 additional Su-30MKKs to KnAAPO, as the “head industrial enterprise". The order was signed back in the spring, but it has apparently taken the government some time to decide whether AVPK Sukhoi or KnAAPO should have the role of lead contractor. However, the announcement seems to have been something of a formality as KnAAPO officials were reported in September to be in Beijing discussing the order. The decision finally went to KnAAPO as the previous providers of Su-30MKK and Su-27SKs, the former being the first order for Su-30MKKs awarded in 1999, with 20 already delivered. The Su-27 is being produced under licence in China, under a contract signed in 1996 for 200 aircraft, with Russian avionics supplied in part by Aerokosmicheskoye, which recently opened an office in the north eastern Chinese city of Shenyang, in order to support the contract believed to be worth $200m. According to reports, AVPK Sukhoi 's failure to get the contract was down to a legal problem related to the new structure within the industry, under which AVPK Sukhoi will disappear and be absorbed by Sukhoi Holdings. Sukhoi Holdings will then inherit the state's 74.5% stake in newly decreed joint stock companies, KnAAPO and NAPO, with a 14.7% stake in IAPO. The exact nature of the legal problem has not been specified and it is difficult to imagine what this might have been, but the decision may have been driven by the desire to give the contract to an entity that was relatively well insulated from a likely period of tense industry consolidation and - importantly - to appease the concerns of the regional authorities that the restructuring of the industry is little more than a scheme to milk revenue from the regions. The spring order brings the Chinese Su-30MKK tally to 80 aircraft, with a further 20 anticipated by Rosoboronexport. The newly ordered fighters are likely to be fitted with Phazotron-NIIR Zhuk-MS multi-mode radars, in contrast to the first batch's N-001 radar originally fitted to the Su-27, with limited capability against ground targets, although with certain improvements in look-down modes. China is also believed to be considering buying further two seat Su-30s for its naval aviation , although it is unclear at this point whether it is to be a variant of the Su-30MKK manufactured by KnAAPO, or an export version of the Su-30KN in produced at IAPO. Reports from China have suggested that the aircraft will be deployed on China's first carrier which, given that the start date is understood to be some time in the next five year, implies substantial development. China has also signed an agreement to supply 300 Al-31Fs engines - as used in the Su-27 - for its F-10 fighter, which is flying in prototype with Al-31F engines and is expected to be in production in 2003, with reported demand for 300 aircraft.

Article ID: 2922