Bombardier’s Russian Deal Delayed

• Bombardier’s top executives told investors that a plan to build Q400 turboprop aircraft in Russia was being delayed. A letter of intent signed in August last year envisioned the sale of as many as 100 planes for more than $3B.

• Reuters: Vladimir Putin looks to Asia as West threatens to isolate Russia. Vasily Kashin from Centre for Analysis of Strategies and Technologies (CAST) is quoted as saying: “The worse Russia’s relations are with the West, the closer Russia will want to be to China. If China supports you, no one can say you’re isolated.” Putin and Xi Jinping’s meeting in May will be well worth paying attention to.

• Daily Beast: U.S. Eyes Russian Spies Infiltrating Ukraine.

• KyivPost: In addition to military, Russia rolls out usual economic attacks.

• What’s left of Ukraine signed the cooperation deal with the European Union whose cancellation precipitated the EuroMaidan protests last year. The EU is looking at rushing (by its speed standards) similar cooperation agreements with what’s left of Georgia and Moldova.

• The Russian flag is now officially flying at the Nakhimov Naval School in Sevastopol, as shown in the video of the handover.
  

How Much Is Russia Ready to Push Their Luck Beyond Crimea?

• President Obama is “standing up for principle” and by the Ukrainian people, though “obviously” there is no military option on the table.

• Ukraine is reportedly planning to withdraw its military personnel and their families from Crimea. Russia is also welcoming them in its warm embrace.

• According to the Ukrainian ministry of defense, 3 civilians of unknown origin were prevented from entering an air force facility in Melitopol, in the Zaporizhia oblast in southeastern Ukraine.

• After its courageous intervention to save Crimeans from Ukrainian oppression, Russia is now expressing concern for its ethnic minority similarly threatened in Estonia. Maybe another round of cyberattacks [PDF] will keep the oppressors in line?

• Peace-loving Russia would really like to support nuclear talks with Iran, but refusal from the Americans and Europeans to recognize its reunification with Crimea may force the Kremlin to reconsider.

• The Economist underlines how the West should stop thinking Russia is looking at events through the same lens:

“A game-theory approach to the Ukraine conflict needs to recognise that America, the EU and Russia are not quite symmetrical players who understand the terms “winning” and “losing” in the same fashion. Significantly, America and Russia don’t seem to attach the same value to conflict avoidance. […] The West might have preferred to play a non-zero-sum, multiplayer game with Mr Putin, but if he keeps playing [two-person zero-sum] chess, we will eventually have to start playing too.”

State of Ukrainian Deliveries

• Earlier this month an almost-finished Zurb hovercraft was towed out of the Feodosiya shipyard in Crimea, for delivery to China, where the next 2 ships (out of a total of 4) will be built.

• The Croatian ministry of defense announced they expect to soon get back their MiGs from repairs in Ukraine.

• The Indonesian Navy ordered the first 5 of 50 BTR-4 personnel carriers from Ukraine’s Spectechnoexport, but the plant is in Kharkiv, just 25 miles of the Russian border. Two Russian demonstrators died there last week in clashes with Ukrainians, as a pro-Russian crowd was making demands similar to those staged in Crimea.
  

Russian Crimea: Scrambling to Face Fait Accompli

• Russia didn’t wait to claim Crimea as its own and seize by force Ukrainian military assets on the peninsula. As these friendly videos from China-owned CCTV hint, you can bet China is watching how the Western reaction unfolds and taking notes. India is watching too.

• China’s Foreign Ministry statement on Crimea: blah blah blah (DID’s admittedly loose translation). It’s a balancing act as China has maintained a purposefully obfuscated non-posture on this issue since last month. Sources friendly to the US government continue to portray that as “China splitting with Russia.” Nice try from the same people who were peddling “End of History” post Cold War wishful thinking just months ago, which is turning out as prescient as “Al Qaeda is on the run.” They could start with Robert Kaplan’s lessons from geography (and history) for a crash course in reality.

• RIA Novosti: Russia could take command of half of Ukrainian fleet. That, and presumably the gas-for-lease deal signed with Ukraine in 2010 is also a moot point.

• ITAR-TASS: 24 Russian Su-27SM3 to be deployed in Belarus by end of 2014, adding to a Beriev A-50 early warning aircraft.

• WaPo: Ukraine government tries to defuse tension with Russia, pledges it won’t join NATO, while experts rethink NATO’s defense posture. A good synonym for “defusing tensions with your aggressor” is “cowering with your ears down.”

• National Interest: don’t just sanction Russia, deter it. The article is full of “shoulds” and “ought tos”, but so far it looks like the (Western) Europeans are not on board.

• The Visegrad 4 (V4) group of countries – the Czech Republic, Hungary, Poland and Slovakia – reaffirmed their commitment to form a joint combat unit by 2016.

Pentagon Contracting Slump Continued in February

• Bloomberg reports another month of weak contracting at the Pentagon, with February awards (of $6.5M+) down 48% Y/Y to $12B.

China Overtakes France as 4th Largest Major Weapons Exporter

• The Stockholm International Peace Research Institute (SIPRI) updated its database to include 2013 arms sales, and sees China’s share of international arms exports above France’s, as China gained the 4 percentage points that France lost from the 2004-2008 period to 2009-2013. The completion of a couple large French sales to India and the Middle East could still reverse that trend in the 4 years ahead. Trends in international arms transfers [PDF].

Ukraine/Russia: What to Watch Beyond Military Movements

• As Russia didn’t even pretend to massage the outcome of the Crimean referendum to make it look somewhat credible, the EU and the US have agreed to a new set of financial and travel sanctions targeting a few influential Ukrainians and Russians.

• As DID pointed out earlier this month, there’s no sign that London is ready to apply real state-to-state financial pressure, while Paris appears unwilling to cancel its Mistral contract with Russia. You know how the joke goes: in paradise the police are British and the cooks are French. In hell…

• The most likely explanation for a massive drop of custody holdings at the US Federal Reserve last week is that Russia moved some of its Treasuries to another central bank such as Belgium’s. Note that Russia didn’t sell these bonds, they presumably moved them out of direct US reach. An advisor to Putin recently made threats against the market for US Treasury market, were the US government to seize Russian assets.

• Lest you think Russians threats are empty, the BBC quotes former US Treasury Secretary Hank Paulson, talking about the 2008 financial crisis:

“Here I’m not going to name the senior person, but I was meeting with someone… This person told me that the Chinese had received a message from the Russians which was, ‘Hey let’s join together and sell Fanny and Freddie securities on the market.’ The Chinese weren’t going to do that but again, it just, it just drove home to me how vulnerable I felt until we had put Fanny and Freddie into conservatorship.”

• The (broke) Ukrainian government approved $600M in emergency military spending and mobilized its active and national guard troops. They are also saying they repelled Russian troops out of the Strilkove village in the Kherson oblast, just north of Crimea, though whether their effort was actually successful is disputed.

• Rostec’s Russian Helicopters grew their sales by 10% to RUB183B ($3.8B) in 2013.

Italy to Revisit JSF Buy

• Roberta Pinotti, appointed as Italy’s defense minister last month, said the country’s F-35 buy will be “rethought, reviewed, and reduced” as the new government is reviewing spending. A point of contention is whether parliament’s control of military spending will be overridden by the executive branch. Italy’s defense ministry is going to sell real estate, close facilities, and reduce its quantity of active troops. Pinotti is a former school teacher, but as a member of parliament she worked on defense matters and was for a few months a defense shadow minister (Italian governments have an short life expectancy). Sky TV interview [in Italian] | Il Fatto Quotidiano [in Italian] | Reuters.

Taking Care of Your Oil Tankers so You Don’t Have To

• Last week the Libyan government proved unable to prevent rebels from hijacking an oil tanker, leading to the sacking of the prime minister. Fear not, US Navy Seals took control of the tanker which will soon be returned to Libya.

Meanwhile in Pyongyang…

• While Ukraine and missing flight MH370 hog the headlines, North Korea fired 18 short-range missiles toward East Sea.

RHIBs from LCS

• Today’s video shows US marines launching and recovering rigid hull inflatable boats from USS Freedom (LCS 1):

Australia’s Hazard(ous) Frigate Upgrades: Done at Last

HMAS Adelaide

The FFG-7 Oliver Hazard Perry Class frigates make for a fascinating defense procurement case study. To this day, the ships are widely touted as a successful example of cost containment and avoidance of requirements creep – both of which have been major weaknesses in US Navy acquisition. On the other hand, compromises made to meet short-term cost targets resulted in short service lives and decisions to retire, sell, or downgrade the ships instead of upgrading them.

Australia’s 6 ships of this class have served alongside the RAN’s more modern ANZAC Class frigates, which are undergoing upgrades of their own to help them handle the reality of modern anti-ship missiles. With the SEA 4000 Hobart Class air warfare frigates still just a gleam in an admiral’s eye, the government looked for a way to upgrade their FFG-7 “Adelaide Class” to keep them in service until 2020 or so. The SEA 1390 project wasn’t what you’d call a success… but Australia accepted their last frigate in 2010, and the 4 remaining ships will serve until 2020.

The Dutch JSS Multi-Purpose Support Ship

MvD’s JSS concept

In January 2010, Damen Schelde announced a contract from the Dutch Defence Materiel Organisation to build a 28,000t “Joint Logistic Support Ship” (JSS), which will become the HNLMS Karel Doorman. The vessel is scheduled to launch in 2014, and will replace the retired 16,900t HNLMS Zuiderkruis.

The Dutch wanted a very versatile ship that can resupply other warships, transport significant loads of army equipment and vehicles, act as a floating headquarters, take on hospital duties, and embark up to 6 helicopters. That level of versatility will come with costs. Canada’s ill-fated JSS program had similar or larger ambitions, but the 3-ship, C$ 2.9 billion program was ultimately suspended when contractors couldn’t supply what Canada wanted at the prices demanded. Can the Netherlands be more successful? So far, the answer is “yes”.

US Air Force Can’t Seem to Decide Which Programs It’s Funding and Pursuing

• The Undecided States Air Force (USAF) is organizing an industry day on April 2-3 at Hill AFB, UT, to discuss high resolution display systems for A-10 aircraft… that the service say they’re going to retire. But then the Air Force had a last-minute change of heart on the CRH announced right during the FY15 budget rollout, and there’s support for maintaining A-10s in the Senate. Caveat venditor: “the Government will not reimburse any costs associated with this Industry Day.”

• Congress is pushing back against the administration’s wobbly budget submission, in the words of congressman Peter Visclosky [D-IN] “I think it’s impossible for us to go to the floor with a placeholder for $79 billion.”
  

Dassault Reports Strong Growth, Still Pursues Rafale Leads in Canada, Qatar, Malaysia

• Dassault Aviation reported 16.4% Y/Y growth with 2013 sales at 4.59 billion euros ($6.4B). Defense accounts for 31% of total revenue, though 87% of that comes from just France. The recent workshare deal with HAL in India, confirmed by Dassault CEO Eric Trappier, should change this dramatically in years to come. In the meantime and in stark contrast, Falcon business jets – the remaining 69% of the company’s revenue – are mostly an export story. PDF | Video.

US Business

• Lockheed Martin continues its push into the energy market with the acquisition of Industrial Defender, a provider of cyber security solutions used in the petrochemical and utility world.

• If you’re still wondering why US defense programs tend to be so expensive, the number and complexity of contract clauses and regulatory references in this amendment [PDF] to the US Navy’s solicitation for LCS planning yard design services should set things straight.

US Ponders NDN Alternatives, New Silk Road, Future of Maritime Transportation

• US Air Force General Paul J. Selva testified yesterday in front of the Senate Armed Services Committee for his nomination as commander of USTRANSCOM. He’s currently heading Air Mobility Command, TRANSCOM’s biggest component by far. He seemed confident that other options to move cargo in and out of Afghanistan are available were Russia to stop access to its chuck of the Northern Distribution Network (NDN). There have been talks of a “new silk road” to be put together in Asia geared towards commercial ends, but if Russia becomes as uncooperative as Afghanistan, the final months of the drawdown may prove even more expensive than planned.

• Another issue on Selva’s radar is the steady decline in the number of US-flag civilian vessels, down to less than 200 from a peak of more than 1,200 in the 1950s. This is a potential bottleneck to the maritime logistics capacity available to the US military via the Voluntary Tanker Agreement (VTA) and Maritime Security Program (MSP).

• Bloomberg: Pentagon’s Disposal of $15 Billion in Items Questioned.

Ukraine

• Leaders of the US, the UK, Canada, France, Germany, Italy, and Japan (G7) released a statement denouncing the Russian-backed referendum scheduled next Sunday in Crimea and announcing it would not recognize its outcome. It is rich that France is a signatory to this statement of moral outrage, when it annexed Savoy in 1860 after a rigged referendum and never looked back.

Israel

• The US has provided another $429M to fund Israel’s Iron Dome tactical air defense system, according to the Jerusalem Post.

• The Knesset parliament passed a new draft law that includes the conscription of orthodox Haredis who were until recently exempted for religious reasons. That is proving rather controversial.

Libya Unraveling

• Libya’s parliament sacked the Prime Minister after an oil tanker escaped a rebel-held port. Meanwhile a new UN report documents the “transfers of Libyan MANPADs and other short range surface to air missiles in … Chad, Mali, Tunisia, Lebanon and potentially Central African Republic.”

CIA v. US Congress

• CIA director John O. Brennan was hosted by the Council of Foreign Relations to discuss challenges to the intelligence community. His latest battle: addressing allegations by Senate Intelligence Committee chairman Dianne Feinstein [D-CA] that the CIA had interfered with congressional investigators and tampered with computers used by the committee. CFR Video below: