HONG KONG, June 12 (UPI) -- For some time, military cooperation between China and Russia has been stalled over a failed deal involving China's import of Russian Ilyushin Il-76 transport aircraft. China claims that Russia violated the terms of an agreement involving the sale of 38 aircraft. But Russia says this claim is unfair.
Negotiations on the aircraft deal began seven years ago. By the time the contract was signed in 2005, China had agreed to purchase 30 Ilyushin Il-76 transport aircraft and eight Ilyushin Il-78 air-to-air refueling tankers at an extremely low price. According to a source in the Russian military industry, China initially offered only $18 million for each plane. The Russian side proposed $22 million, and eventually the two sides settled on a price tag of $20 million per aircraft.
Such a low price was unprecedented in the international transport aircraft market. By comparison, around the same time Jordan had contracted for a variant of the Ilyushin Il-76 at a price of about $50 million per aircraft.
For this reason, the deal was controversial from the outset. The discussions began in 2001, the contract was signed in 2005, but by 2008, not a single Ilyushin Il-76 transport had been delivered.
The aircraft were to be assembled from Russian parts at the Tashkent Aircraft Production Corp. in Tashkent, the capital of Uzbekistan, a former Soviet republic in Central Asia. Out of the 38 Ilyushin Il-76 transports contracted, 15 were already half finished. The other Ilyushin Il-76s were to be newly manufactured.
The Tashkent-based company was facing serious financial difficulties, however, and was unable to produce the aircraft according to schedule. This was made worse by the dramatic fluctuation in the value of the U.S. dollar and escalating inflation in Russia -- making the cost of producing the transport aircraft much higher than when the deal was originally signed.
According to the Russian side, the Chinese have been unreasonable in refusing to renegotiate the deal in light of changing circumstances.
The Russian source compared the situation with a similar one faced with India over a 2004 deal involving the refurbishing of the aging Admiral Gorshkov aircraft carrier for use by the Indian navy. The Russian side was able to hold frank discussions with the Indian side, the source said, and acknowledged that it had made errors in the initial assessment.
The task was to refit the old aircraft carrier, but after dismantling the vessel, Russian engineers realized that the project was practically equivalent to building a brand-new aircraft carrier.
"The Indian experts saw the same situation we did, and as a result the two sides could look at the issue with mutual understanding and find a satisfactory solution to the problem," the source explained.
But the Chinese have been less understanding and less accommodating in their negotiations with the Kremlin over the Ilyushin Il-76 deal, the Russians claim. The Chinese also insist they will not sign any major military procurement agreement with Russia until this problem is solved to their satisfaction.
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Next: Why China still needs Russian aircraft
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(Andrei Chang is editor in chief of Kanwa Defense Review Monthly, registered in Toronto.)
