Introduction
Why and how does Russia engage in the arms trade? International Relations and Security Studies scholars have mostly focused on the first question of why, while largely neglecting the second, how. However, this is a mistake because the two questions are deeply connected. Most importantly, explanations of how Russia engages in the arms trade inform explanations of why Russia does so. Most scholars have either emphasised economic or strategic motives for Russia’s arms sales abroad. The Soviet Union and then Russia would either sell arms to make money and sustain the defence industry,Footnote 1 or would do so to cast influence over buyer states and the surrounding regions.Footnote 2 Some scholars have rejected this economic–strategic dichotomy, believing instead the financial-economic benefits of the arms trade to be part and parcel of Moscow’s quest for influence.Footnote 3 Yet, while generally focusing on limited and often different time frames, none of these scholars has systematically explored the mechanisms Russia uses to promote arms sales and diplomatic influence, specifically defence counter-trade: an obscure trading mechanism, study of which is hindered by the topic’s strategic sensitivity. The aim of this paper, then, is to address this intellectual gap by adopting an eight-decade perspective, drawing on a broad array of data and specialised publications, and employing mini-case studies to ultimately reveal a more complex, nuanced, and articulated set of motives behind Russia’s arms trade.
Counter-trade consists of three key components: first, non-monetarised barter trade; second, counter-purchase obligations involving commercial purchases; and third, reciprocal or ‘offset’ industrial and technological investments. The offset arrangement provides buyer states with industrial and technological benefits beyond mere access to the weapons themselves, while barter and counter-purchase arrangements help ease payment terms. For centuries, foreign suppliers have used defence counter-trade to secure contracts and clients in the face of fierce competition.Footnote 4 Today, it remains an integral part of the global arms trade, with offsets alone accounting for about half of international military transactions.Footnote 5 While the Soviet Union historically engaged in barter and technological cooperation, Moscow has only recently begun to adopt offset practices in a more comprehensive and systematic manner. Contemporary Russia leverages defence counter-trade to out-compete Western suppliers, expand or restore its influence in various regions, bypass Western-imposed sanctions (such as those on international finance), secure access to minerals and other resources, and sustain its military operations, such as in Ukraine.
Russia has turned to defence counter-trade in an attempt to halt, and possibly reverse, the decline in its arms sales. Yet the West’s imposition of strategic trade sanctions following Russia’s annexation of Crimea in 2014, and again after the full-scale invasion of Ukraine in 2022, led to a dramatic drop in Russian arms exports, reaching levels not seen since the Soviet Union’s dissolution. Between 2014–18 and 2019–23, Russia’s arms exports fell by a striking 53 per cent.Footnote 6 This decline was exacerbated by several factors, including the poor performance of Russian equipment in combat, Moscow’s prioritisation of supplying its own forces in Ukraine, and the efforts of its two largest customers, China and India, to achieve self-sufficiency through import substitution.Footnote 7 Under such pressure, Russia’s counter-trade strategies continue to evolve. In fact, given its reluctance to transfer sensitive technology through offsets, Russia is expected to increasingly revert to Soviet-style counter-trade strategies, namely bartering weapons for critical resources and basing rights.
Following this introduction, the paper is structured as follows: the next section reviews the existing literature on why Russia engages in the arms trade, exploring in particular the mechanisms employed for participating in such trade. The third section examines Soviet defence counter-trade practices after the Second World War, while the fourth focuses on Russia’s post–Cold War pursuit of defence counter-trade. The penultimate section looks ahead by assessing the impact of the Ukraine war and the loss of export markets on Russia’s evolving counter-trade strategies. The concluding section discusses the findings and their broader theoretical and political implications.
Why (and how) Russia engages in the arms trade
Russian official documents – including the Military Doctrine (2014),Footnote 8 the National Security Strategy (2021),Footnote 9 and the Concept of the Foreign Policy of the Russian Federation (2023)Footnote 10 – do not explicitly state the reasons for Russia’s engagement in the arms trade. Nonetheless, they suggest the importance of both economic and strategic motives. Most importantly, according to the latest Russian Military Doctrine, ‘the main task of the military-industrial complex is ensuring its effective functioning as a high-tech multi-sector [branch] of the economy, able to meet the needs of the Armed Forces [while providing] strategic presence of the Russian Federation in the world markets high-tech products and services’.Footnote 11 Furthermore, Russia ‘carries out military-political and military-technical cooperation with foreign States … on the basis of foreign policy, economic advisability and in accordance with Federal legislation and international treaties of the Russian Federation’.Footnote 12
The literature exploring why and how Russia engages in the arms trade has aimed to shed light on these motives and can be categorised into five distinct strands. The first strand attributes Russia’s arms sales primarily to economic motivations.Footnote 13 In contrast, the second emphasises strategic drivers as the main force behind Russia’s arms trade.Footnote 14 A third approach suggests that the focus on financial-economic versus political-military factors varies depending on the historical period under review, although scholars within this group disagree on the specific timelines.Footnote 15 A fourth body of research shifts attention to the buyers, arguing that Moscow’s motivations fluctuate: with some buyers, Russia trades for strategic reasons, while for others, it seeks to generate revenue, maintain economies of scale, or expand production.Footnote 16 The fifth strand views the economic benefits of arms sales as inseparable from Russia’s broader geopolitical strategy, positioning the arms trade as a tool for enhancing its global influence.Footnote 17 Each of these strands offers valuable insights into Russia’s motivations for participating in the arms trade. While the primary focus is on why Russia engages in arms sales, these scholars occasionally touch on the how – such as the use of barter agreements to support either economic or strategic objectives. However, these discussions are typically brief, lacking empirical depth and often displaying a limited understanding of these trading arrangements.
Barter has been employed to support various conflicting arguments regarding Russia’s arms trade. Christopher Mark Davis highlights that ‘during the 1990s, the primary goal in the foreign trade of the [Russian] destitute defense industry was to obtain either convertible currency payments or attractive barter goods through exports of [weapons]’.Footnote 18 In contrast, Stephen Blank and Edward Levitzky argue that economic motives were not the main drivers of Russia’s arms sales during this period.Footnote 19 The authors assert, ‘the evidence actually refutes the contention that economic motives were primary motives for Russian arms sales to China in the 1990s because much of what China bought it paid for in barter’.Footnote 20 Paradorn Rangsimaporn initially claimed that Russia’s arms transfers and military technical cooperation with China in the late 1990s and early 2000s were primarily dictated by economic interests rather than a deliberate strategic calculus.Footnote 21 However, he later acknowledged that ‘the economic benefits to Russia from barter payments were particularly low and a focus of criticism’.Footnote 22 In fact, Russia’s Audit Chamber, which oversees state funding disbursement, revealed in 2003 that most bartered goods were not delivered to Russia but were instead resold to third countries during transactions. Despite this, Moscow chose to emphasise the strategic advantages of these arrangements.Footnote 23
Many scholars have noted that the debate between economic and strategic motives varies based on the historical context being analysed. However, they have often overlooked the role of defence counter-trade in clarifying when economic or strategic interests take precedence, frequently relying on weapons prices as a proxy. For example, David R. Stone highlights that in the 1920s, the Politburo permitted selling weapons below cost for political purposes.Footnote 24 Conversely, during the 1930s, the Soviets shifted their focus away from such sales as a tool of foreign policy.Footnote 25 Scholars such as Ian Anthony, who have emphasised the importance of buyers, instead examined counter-trade practices, including barter, clearing arrangements, and basing rights (i.e. weapons exchanged for the use of naval and land military facilities).Footnote 26 However, Anthony’s 1998 work, focused solely on the Soviet Union, is now outdated and lacks coverage of offsets, a significant development of the post-Soviet era.
Finally, scholars highlighting the coexistence of economic and strategic motives in Russia’s arms sales have noted the latter’s role in achieving military balance and gaining access to energy resources or critical minerals.Footnote 27 According to Stephen Blank and Younkyoo Kim, both the Soviet Union and contemporary Russia view the defence industrial sector as a catalyst for economic revitalisation and technological progress, as well as a marker of the country’s global prominence.Footnote 28 Arms exports not only secure essential foreign revenue and support the defence sector but also allow Russia to project its influence on the world stage.Footnote 29 Bechev et al. stress strategic motives but also observe how Russia’s arms sales bolster cooperation in oil and gas, nuclear energy, and commodity trade.Footnote 30 Although insightful, this strand of literature fails to frame such cooperation within Russia’s evolving counter-trade strategies. In fact, defence counter-trade, and especially offsets, are notably absent from these discussions. Yet only through such framing can we fully appreciate how and why Russia engages in the arms trade.
Soviet post–Second World War defence counter-trade
The Soviet legacy is an indispensable foundation of Russia’s military counter-trade. The supply of arms was a key tool of foreign policy for Moscow during the Cold War. Ideologically, Leninism preferred violent revolution for expanding the boundaries of the Communist world – thus, weapons were essential.Footnote 31 Post-revolution, the ‘turned’ states would likely demand further arms for internal security, against either civil war or armed resistance, and against external threats by capitalist powers. Soviet emphasis on military capability was forged by the devastating Second World War invasion by National Socialist Germany, requiring the Soviet Union to strengthen its defence as well as that of fellow Communist states. To enhance these countries’ survival against invasion, an autarkic economic system was established with Soviet assistance, and, within this system, scarce resources were prioritised for the development of indigenous defence industries.Footnote 32
The history of external invasions led to a continuous build-up of the Soviet Union’s armed forces, as well as those of friendly neighbours, strengthening strategic depth. The Soviet Union’s huge operational environment highlighted the strategic importance of arms production volume, as quantity was critical in overcoming Germany’s superior technologies. During the Cold War, weapons were more effective, compared to the politically unattractive commercial products, in strengthening relations with overseas allies and partners.Footnote 33 Subsequently, logistical needs, upgrades, and replacement, along with related operational doctrines, considerably projected and preserved Moscow’s geopolitical influence. Except for arms donations, all other forms of military hardware transfer and training, whether via loans or grants, provided financial leverage for exerting Soviet influence over beneficiary countries.Footnote 34
To manage the large number of Soviet arms transferred, counter-trade rather than conventional sales was a common Soviet practice, primarily for political purposes. Internally, the Soviet military industries were not driven by profit but rather by the demand for national security under the country’s planned economy system.Footnote 35 Therefore, manufacturers and planning authorities had little motive to secure commercial revenue. In the event, arms deals generated hard currency, but this was more related to national interest, such as foreign exchange preservation, than for generating direct income. Externally, the range of foreign customers for Soviet arms was under strict political guidance and control. Most customers, therefore, were either Communist or developing countries, and both had little recourse to hard currency to service such deals, making counter-trade the main solution.Footnote 36 Middle East countries were the principal early overseas customers possessing sufficient affordability to procure Soviet arms,Footnote 37 but they too had to rely on counter-trade for payment rather than hard currency.
Soviet defence-related counter-trade can be categorised into four flows, comprising European members of the Council for Mutual Economic Assistance (CMEA), China, India, and the rest. Under the CMEA, arms transfers were structured according to member states’ nuanced socialist economic systems. For non-CMEA countries, bilateral clearing arrangements were usually applicable. For all other recipients of Soviet arms, delivery was conducted on a more direct basis, including against hard currency payments, delivery of commodities, and non-economic forms of payment, ranging from political to strategic assistance, with the latter including naval basing rights and shore support.Footnote 38 The European CMEA members and the Soviet Union constituted a complex ‘international division of labour’ mosaic rather than a conventional set of arms deal practices. Due to the tense strategic environment during the initial stages of the Cold War, especially the Korean War, Moscow established a comprehensive collective autarkic system among Warsaw Pact member states. This regional production and trading network lasted about four decades, during which time several generations of arms were produced.Footnote 39
Rather than usual counter-trade, the exchange pattern reflected several elements, including war preparations, a regional industrial division of labour, multilateral transfers, and conventional export. War-preparation measures amplified the quantity of forces, particularly weapons, by expanding defence industries in most European CMEA member states, as well as standardising their military logistics. The Soviet Union provided credits to the European beneficiary states to assist their recovery from Second World War infrastructural damage. In the process, local defence-related industries were rebuilt to service the growth of national armed forces.Footnote 40 The Communist model allowed payments through an interstate barter system.Footnote 41 Supply was based on individual conditions and accommodated industrial division of labour/production among and within certain European CMEA states. Czechoslovakia and Poland, for example, possessed superior industrial foundations and were thus allowed to produce broader ranges of weapon systems based on indigenous systems design, such as L-39 jet trainers, which achieved sales across the Communist bloc. Other Warsaw Pact member states produced fewer types of arms, and these local models were mostly for domestic purposes. This remarkable defence industrial division of labour continued throughout and even beyond the Cold War.Footnote 42
Such bilateral and multilateral arms transfers were important for maintaining trade balances among the Communist countries and ensuring each European CMEA member state’s defence industry was relatively efficient through a production focus on specific models.Footnote 43 Supply was also characterised by achieving product standardisation among different geographical locations to ensure military integration within the Warsaw Pact. For examples, BMP-1 infantry fighting vehicles produced in Czechoslovakia were not only for its own needs but also for export to Hungary and the Soviet Union.Footnote 44 Finally, the European CMEA states also sought to export arms to countries in the Middle East, South Asia, and other areas under Moscow’s sphere of geopolitical influence.Footnote 45 For instance, Poland exported Project-771 landing ships to India and Iraq.Footnote 46 Therefore, the defence industries of these CMEA countries considerably enlarged Soviet military capacity. The possibility of further expansion of Soviet influence through arms transfers collaboration was constrained by the competing attraction of arms from NATO states, the low level of demand in the global arms market, and individual countries’ domestic conditions, such as the lack of funding.
China was another major destination of Soviet arms that was invariably tied to counter-trade, and principally offset, but trading patterns were uneven and unpredictable. Based on its territory and population, China was a significant Communist regime that had required Soviet support since 1949. Geostrategically, trade between the Soviet Union and China was limited to a few land routes, adjacent to the Pacific Ocean where the US had established dominance since the Second World War. The threat from Washington and its allies was highlighted by Beijing’s involvement in the Korean War. The Chinese volunteer army fighting on the side of North Korea demanded a plentiful supply of arms, which were eventually paid through barter, justifying the strategic need to build up Chinese defence industries.Footnote 47
The condition of China’s defence industries, compared with its East European Communist counterparts, was poor due to the relative lack of industrialisation. Thus, the Soviet Union provided a comprehensive range of projects to develop China’s defence industries, including supporting ancillary sectors, such as mining and education, mainly through credits paid by barter.Footnote 48 The Chinese defence industries proved so successful that even after Moscow cut all its support in the early 1960s, Beijing was still able to continue producing and exporting Soviet arms at an acceptable level of quality to increasing numbers of developing countries. Some of these systems, such as J-6 fighters based on the Soviet MiG-19 design, were initially produced under licence. Local production continued even after the licence became invalid, and following the Sino-Soviet break in relations, China further upgraded the design into the domestic Q-5 attacker aircraft.Footnote 49 Some Soviet arms, such as the HQ-2 surface-to-air missile, based on the Soviet S-75 design, were totally reverse engineered without Moscow’s consent.Footnote 50 This Soviet-fed industrial and technological infusion paved the way for China’s subsequent rise as a military power. After the Sino-Soviet rapprochement in the late 1980s, several arms transfer deals were signed between Moscow and Beijing, most following the Soviet collapse.Footnote 51
By contrast, the Soviet Union’s arms transfers to India were far more complicated, but at their heart were elements of barter. The Indian rupee was not a hard currency suitable for interstate trade, and additionally New Delhi’s low foreign exchange reserves restricted its payment capacity. However, India’s South Asian location, large population, and huge territory ensured that the Moscow was willing to accept rupee payments for its arms at low interest rates.Footnote 52 Since the rupee was restricted in the international market, Moscow had to accept Indian products, mainly agricultural ones, as the means of payment.Footnote 53 In other words, Indo-Soviet arms trade was principally undertaken via counter-trade. Compared to arms deals with Western countries based almost totally on hard currency, the Soviet Union’s more attractive financing arrangements meant that it monopolised Indian arms procurement. Moreover, due to India’s huge armed forces, and its two fronts with Pakistan and China, New Delhi for strategic reasons requested licence production and technological transfer rather than simply off-the-shelf sales. Moscow reluctantly agreed, though with restrictions, such as banning exports. Building production lines and related capacity for offset deals as the assembly of MiG-23/27 combat aircraft and T-72 tanks, contributed to the development of India’s defence industries.Footnote 54
Moscow’s supply of arms to other beneficiary states has also been conducted principally through counter-trade, but in a less balanced way. Communist countries, such as North Korea and Vietnam, and non-Communist states, such as Egypt, Indonesia, Somalia, Tanzania, and Zambia, obtained arms during the Cold War under a Soviet credit system that primarily incorporated barter arrangements. Yet most of this accumulated debt was not fully paid back on the 1991 dissolution of the Soviet Union, with considerable outstanding liabilities subsequently owed to Russia. Moscow used these debts as leverage in pursuing geopolitical objectives with the indebted states.Footnote 55 Among these states, Communist countries usually managed to obtain licence production and/or logistic systems, which in the case of Pyongyang afforded continuous production of Soviet arms, and in the case of Hanoi allowed maintenance of Cold War arms in an operable condition.Footnote 56 Non-Communist countries, by contrast, were allowed to procure eye-catching sophisticated weapon systems, such as Tu-16 bombers to Egypt and Project-68bis cruiser to Indonesia, but logistical capability was negatively affected when relations with the Soviet Union soured. Moscow’s arms supply was also often tied to obtaining rights for logistical support, particularly the use of customer-country naval bases. For example, the Soviet navy’s access to the Berbera naval base in Somalia was linked to arms transfers, mostly patrol craft and landing ships.Footnote 57 A similar approach was followed to secure the Soviet (and until recently Russian) navy’s access to the Tartus naval base in Syria, among several others.Footnote 58
The Soviet Union was often portrayed as an immense military industrial complex,Footnote 59 and thus arms supply unsurprisingly played an indispensable role in its diplomacy/statecraft. From securing ‘satellite’ countries to expanding geopolitical influence, counter-trade proved a foundational factor accommodating most arms transfers, leaving a rich trading inheritance to Moscow beyond the Cold War.
Russian post–Cold War defence counter-trade
Defence counter-trade as an instrument of economic and foreign policy
Before the dissolution of the Soviet Union, Moscow was the sole owner of local weapons production. A period of ‘market romanticism’, however, began in the latter years of President Mikhail Gorbachev’s administration.Footnote 60 Around 1990, the priority was selling to anybody who paid. In 1992–4, under President Boris Yeltsin, Russian defence manufacturers enjoyed maximum freedom, treating arms export in the same way as other goods and services, often in competition with each other. At the same time, companies heavily engaged in arms production were privatised by auction without the consent of the State Committee on Defence Industries or the Ministry of Defence.Footnote 61 While sometimes transferring sophisticated weaponry for almost nothing, these companies refused to deal in barter, insisting on hard currency payments and placing military technical cooperation (MTC) on a firm business footing.Footnote 62
The lack of a more systematic trade policy was deeply harmful at both the strategic and economic levels, jeopardising export markets and endangering Russia’s military potential. These same Russian arms manufacturers recognised that to be internationally competitive in non-traditional markets, they needed new types of assistance from the state.Footnote 63 Thus, in the 1990s, Russia’s MTC system underwent significant changes, and:
By the end of the decade, the country had two state-controlled intermediaries in the military trade sector, namely Rosvooruzhenie, a state-owned company and a federal state unitary enterprise (FSUE), and Promexport, also a federal state unitary enterprise (FSUE). In addition, there were a few other entities involved in MTC, in particular military-industrial enterprises.Footnote 64 In order to enhance efficiency of their operations in the external market, establishment of the ‘presidential vertical’Footnote 65 for the management of MTC by the federal government was required, which helped reinforce coordination and control over arms exports and eliminated competition among Russian entities involved in MTC.Footnote 66
Nevertheless, Russian suppliers remained dissatisfied with the lack of support provided by Moscow to compete overseas, and especially in the offset market, which was increasingly recognised as crucial for export success.Footnote 67
Then in late 2000, Vladimir Putin, the new president of the Russian Federation, issued Decree No. 1834 to merge the two state-controlled intermediaries and establish a single state-controlled special exporter named Rosoboronexport.Footnote 68 This entity immediately launched a raft of supportive export policies, such as issuing guarantees to Russian banks for manufacturing enterprises on behalf of the state, executing contract obligations, and ensuring receipt by foreign customers of guarantees for advance payments and the proper execution of contracts by manufacturers.Footnote 69 Celebrating its first anniversary, the state-controlled agency Rosoboronexport invited buyers to pay in kind, exchanging ‘oil for arms’,Footnote 70 even though barter as a trading mechanism was steadily declining across Russian civil sectors.Footnote 71 To mark its second anniversary, the agency announced that ‘innovative co-operation techniques and flexible financial engineering’ had resulted in an increase of book orders of $2 billion.Footnote 72
Rosoboronexport, however, did not hide its preference for ‘real’ money. In 2004, Russia’s state arms exporter was reportedly focusing on counter-trade and offset to remain internationally competitive.Footnote 73 In 2005, a statement by the federal agency emphasised that in order to retain their share of the arms market, Russian exporters needed to pay special attention to offset proposals, programmes for technology transfer and licence transfer, the organisation of technical maintenance centres, and upgrades of previously sold hardware.Footnote 74 In fact, in 2008, Rosoboronexport general director Anatoliy Isaykin blamed Western competition for Russia’s requirement to offer industrial benefits to India.Footnote 75 The US and leading European countries’ efforts to penetrate the Indian market by offering packages including offset inducements obliged Rosoboronexport to compete by offering similar joint development and licensed production opportunities. An advisor to the Russian defence contractor tendered the more understanding comment that ‘offset always is a headache for the supplier, but we also understand the client’s [need to develop] his industry’.Footnote 76 Finally, in 2014, Putin advised a meeting of the Commission for Military Technology Cooperation with Foreign States that if Russia was to boost exports, counter-trade was the way:
If we want to continue our [programs] and promote our goods on foreign markets effectively, we need to learn how to use modern financial and marketing instruments, such as state and commercial loans for longstanding and reliable partners, supplies as payment of foreign debt, exports based on various types of offset deals, and [high-quality] service and maintenance.Footnote 77
Rosoboronexport thus continued to leverage arms sales through the use of barter and offset, employing a distinctive comprehensive approach.Footnote 78 Servicing dozens of Russian manufacturing entities and accounting for over 80 per cent of Russian exports of armaments and military hardware, the federal agency identifies potential offset projects encompassing the full spectrum of Russian economic sectors (e.g., defence, energy, and banking) and stores these projects in an ‘innovative bank’, before then offering them to potential buyer states.Footnote 79
According to the agency’s website, ‘Rosoboronexport’s activities are aimed at the consolidation of Russia’s military and political foothold in various regions across the globe, [to ensure the] preservation of the country’s position among global exporters of [defence equipment]’.Footnote 80 This approach aligns with Russia’s trade in other strategic goods – including oil and gas, nuclear energy, and grain – which Moscow also leverages to extend its economic and political influence globally.Footnote 81
Russia’s global counter-trade tentacles
The following examples of barter and offset arrangements buttress the argument that Moscow has utilised defence counter-trade as a mechanism to promote arms sales and diplomatic influence. At the same time, Russia consistently avoids transferring its most advanced military technology – or demands a high price for it – in a deliberate effort to protect both the commercial interests and strategic priorities of its defence industry.
Gaining access to minerals and other resources
In July 2012, only a few months after Putin was re-elected president of the Russian federation,Footnote 82 Russia was reported to have been in negotiation with Zimbabwe to barter arms for platinum.Footnote 83 The following year, the Russian firm, CBC Russia, which had the rights for chrome mining in Darwendale, Zimbabwe, reportedly entered a joint venture with the Zimbabwe Mining Development Corporation (ZMDC) to extract platinum. In exchange for platinum mining rights, Russia agreed to supply helicopter gunships to Zimbabwe.Footnote 84 According to a 2024 European Parliament report, Moscow has leveraged the supply of defence equipment to secure access to gold and diamonds in the Central African Republic, cobalt in the Congo, uranium in Namibia, gold and oil in Sudan, and chromite in Madagascar.Footnote 85
Circumventing Western-imposed restrictions
In 2015, Russia reportedly planned to offer Argentina a lease/lend deal for 12 Sukhoi Su-24 long-range bombers in exchange for beef and wheat – commodities Moscow had stopped importing from European Union countries following Western sanctions.Footnote 86 Three years later, Argentina expressed interest in purchasing three additional Russian helicopters (to add to the two Mi-171Es acquired in 2011) but lacked the funds for immediate payment.Footnote 87 In response, Moscow was reportedly considering payment options involving local currency and defence-related barter deals. Around the same time, Russia’s state nuclear corporation, Rosatom, was exploring ways to localise Russian technology for uranium extraction in Argentina. Similarly, in 2015, Russia and Thailand worked on finalising a barter agreement involving $160 million worth of weapons in exchange for 80,000 tons of rubber.Footnote 88 The Russian tank and train manufacturer, Uralvagonzavod, also appeared willing to trade both civilian and military equipment to Thailand in return for fruit and vegetables.Footnote 89 By the following year, Moscow and Bangkok were exploring broader opportunities for Thailand to export food and agricultural products in exchange for Russian military equipment.Footnote 90
Elsewhere in Asia, a 2017 deal involving Indonesian procurement of 11 Russian Sukhoi Su-35 fighter jets, partly in exchange for rubber, crude palm oil, coffee, tea, furniture, and spices, was called off by Jakarta after the US threatened to impose the Countering America’s Adversaries through Sanctions Act, or CAATSA,Footnote 91 which applies to Russia, among others.Footnote 92 In response, Moscow stopped using the US dollar with its partners in military contracts, opting for other national currencies or barter.Footnote 93 ‘We abandoned dollar payments two or three years ago. So, for the most part, we have different paying options’, said Sergey Chemezov, Rostec’s CEO, in 2019, adding that payment terms for weapon deliveries to China and India had been resolved.Footnote 94
‘Out-competing’ Western suppliers
In the tender for India’s Medium Multirole Combat Aircraft (later renamed the Medium-Role Fighter Aircraft), Russia put forward the MiG-35, a 4.5-generation fighter jet developed by Mikoyan and exclusively used by the Russian armed forces.Footnote 95 In 2017, aiming to strengthen the MiG-35’s position against American and European competitors, Rosoboronexport permitted Russian defence companies to establish direct partnerships with Indian defence manufacturers.Footnote 96 At Aero India 2019, a leading defence and aerospace exhibition, Russia’s minister of industry and trade, Denis Manturov, highlighted that MiG offered Indian partners ‘broad industrial cooperation’, signalling opportunities for deeper collaboration.Footnote 97
In a dramatic move in 2018, Russia attempted to bypass India’s competitive tender for six diesel-electric submarines – ultimately awarded to Germany’s Thyssenkrupp Marine Systems – by proposing joint development and construction of a Lada-class submarine, based on the Russian Amur-class design.Footnote 98 Vladimir Drozhzhov, deputy director of the Russian Federal Service of Military-Technical Cooperation, defended the offer, stating:
We are not putting forward [the] usual licensed production of [a] submarine, we are proposing to jointly devise a project with our Indian partners and jointly build the first pilot model on the basis of the Amur-1650 diesel-electric submarine project, equipped with an air-independent propulsion system.Footnote 99
However, observers have noted that the Russian manufacturer, Rubin Central Design Bureau, responsible for the air-independent propulsion system, had made limited progress in developing the prototype.Footnote 100 These observers argued that Russia’s offer was less about generous technology transfer and more an invitation for India to shoulder the research and development (R&D) costs. A similar proposal was made to China,Footnote 101 but collaboration on these terms has yet to materialise.Footnote 102
In 2019, Malaysia’s New Straits Times reported that Russia had proposed a significant increase in its palm oil imports from Malaysia as part of an offset deal for new Su-35 and Su-57E jets for the Malaysian air force.Footnote 103 Viktor Kladov, Rostec State Corporation’sFootnote 104 regional policy director, remarked: ‘At present, 90 percent of Russian palm oil is imported from Indonesia, and we intend to change that [in Malaysia’s favour]’. This barter proposal came at a critical moment, as the European Parliament was in the process of banning palm oil in biofuels, causing concern in Kuala Lumpur. At the time, Malaysia’s defence minister, Mohamad Sabu, stated:
We are disappointed with the European Union, especially France, because Malaysia has purchased a lot of planes from the country, such as Air Asia’s fleet of aircraft and military assets such as the Scorpene submarines. However, if they continue their anti-palm oil campaign, Malaysia can buy from other countries.Footnote 105
Expanding or recovering influence
In late 2012, Rosoboronexport proposed a remarkable 400 per cent offset to Croatia in exchange for a squadron of second-hand HungarianFootnote 106 MiG-29s.Footnote 107, Footnote 108 In exchange for a €120 million package that included aircraft modernisation, Russia offered to reciprocate by procuring Croatian transformers and trams, triggering orders from the Croatian shipbuilding industry and energy sector, and investing in Croatia’s ZTC Aeronautical Technical Centre to transform it into a regional centre for Russian aircraft and helicopter maintenance.Footnote 109 Similarly, in late 2013, Moscow facilitated the sale of 24 Mi-171Sh military transport helicopters to Peru by offering local assembly for 8 of the helicopters, along with establishing a centre for their servicing and repair within the country.Footnote 110
Russia has strategically utilised offset opportunities to enhance military helicopter sales to India and China.Footnote 111 In December 2015, during a meeting at the Kremlin, President Putin and Indian prime minister Narendra Modi signed 16 agreements encompassing significant Russian defence and civil investment projects, including a $1 billion deal for the joint manufacture of Kamov-226 T lightweight multi-role military helicopters.Footnote 112 Two years later, Putin approved the establishment of an Indo-Russian joint venture for the production of these helicopters.Footnote 113 Indo-Russian Helicopters Ltd, with 50.5 per cent ownership by Hindustan Aeronautics Limited (HAL), 42 per cent by Rosoboronexport, and 7.5 per cent by Russian Helicopters, was set to manufacture 200 Kamov-226 T helicopters, 60 of which would be produced in Russia, while the remaining 140 were to be assembled in India with increasing levels of local content and technology transfer.Footnote 114 However, the implementation of this plan diverged from policy, as Russia struggled – if not outright refused – to meet New Delhi’s requirement for 70 per cent local content, which stalled Kamov co-production activities. A 2021 decision to acquire 12 Kamov-226 Ts as a stopgap measure was subsequently halted a year later in favuor of pursuing an indigenous solution.Footnote 115
China was similarly interested in procuring Russian helicopters, as evidenced by a May 2015 deal between Russian Helicopters and Aviation Industry Corporation of China (AVIC) to co-develop and -produce an advanced heavy helicopter.Footnote 116 While primarily intended for civil missions, such as transporting heavy equipment for the energy sector, observers believe it is highly likely that the helicopter will also be utilised by the People’s Liberation Army (PLA) for transporting equipment, including amphibious armoured personnel carriers and mobile ballistic missiles, to remote areas.Footnote 117 Moscow’s decision to collaborate with China appears to be driven by both economic and political factors. Russian trade and industry minister Denis Manturov emphasised the importance of industrial cooperation within the frameworks of APEC, ASEAN, and BRICS, particularly during times of political instability.Footnote 118 Concurrently, Russian Helicopters and Chinese Avicopter (a subsidiary of AVIC) finalised a 2021 offset agreement that included Russian technology transfer for the serial production of the 40-ton class AC332 AHL helicopter in China.Footnote 119
Moscow has also offered its advanced Su-35 fighter jets, possibly including offsets as part of the sales package, to several countries, including China, Turkey, the United Arab Emirates (UAE), Iran, Malaysia, and Indonesia.Footnote 120 China’s 2015 order for 24 Su-35s marked the first instance of a foreign contract for the aircraft. However, Moscow did not allow any significant offsets in this procurement, apart from the possibility of joint development and production of military engines.Footnote 121 Russia had previously declined to sell the AL-117S turbofan engine that powers the Su-35 due to concerns about reverse engineering.Footnote 122 Indonesia was offered the Su-35 in a $3 billion deal that included a loan facility, technology transfer, and other defence equipment.Footnote 123 The proposed technology transfer would have allowed Indonesia to produce components for the Su-35 and establish a maintenance, repair, and overhaul (MRO) facility for the aircraft.Footnote 124 Beyond these markets, Russia sought to challenge US military sales dominance in the Middle East by offering high-technology defence systems. For instance, Rostec extended an invitation to the UAE to co-develop and produce Russia’s newest fifth-generation aircraft, the Su-75 Checkmate,Footnote 125 along with its subsystems.Footnote 126 However, following Russia’s invasion of Ukraine in 2022, the UAE chose to withdraw from this agreement.Footnote 127 In a different context, Tehran received Moscow’s approval to co-produce Su-35s.Footnote 128 Additionally, in 2018, Putin proposed to Turkish president Recep Erdoğan, joint manufacture of the Su-35 and collaboration on the development of the Su-57 fighter.Footnote 129
Neither of these projects advanced, but NATO member Turkey went ahead with its procurement of Russian S-400 air defence systems, receiving the first two turnkey S-400 batteries in 2018 and subsequently producing two additional batteries through Russian technology transfer. Ankara financed 55 per cent of the total cost with a Russian loan.Footnote 130 However, Moscow soon became apprehensive about the risk of its air defence technology falling into NATO (and US) hands.Footnote 131 After completing the delivery of the first batteries in September 2019, negotiations over technology transfer for the second batch stalled. While Rosoboronexport expressed a willingness to localise some production in Turkey, it refused to provide the software codes for the Identification Friend or Foe (IFF) systems.Footnote 132 Furthermore, Turkey’s decision to procure S-400 missile systems had significant repercussions, prompting Washington to exclude Ankara from the F-35 programme and its supply chain.Footnote 133
Turkey was not the only country that Moscow sought to draw away from Washington’s sphere of influence by offering S-400 technology transfer. In late 2017, Saudi Arabia announced its intention to join Turkey in purchasing the Russian air defence system, contingent on receiving technology transfer and localisation benefits.Footnote 134 Unlike Ankara, however, Riyadh firmly insisted on the transfer of S-400 technology as part of the procurement package.Footnote 135 This deal ultimately fell through, as Moscow was unable to meet this demand. In 2018, India agreed to procure Russian S-400 systems without offsets – an approach designed to expedite the deal – despite Washington’s threats to impose CAATSA sanctions. New Delhi committed to spending $5.5 billion for five S-400 air defence systems and approximately 1,000 missiles.Footnote 136 Currently, Russia and India are finalising an agreement to establish a joint venture for the maintenance and repair of S-400 systems within India.Footnote 137 Three of the systems have been delivered, but the ongoing Russo-Ukrainian war has delayed the expected delivery of the remaining two S-400 batteries from 2024 to 2026.Footnote 138
India did not forgo offsets in its 2019 procurement of 464 Russian-made T-90 main battle tanks.Footnote 139 These tanks are to be produced in India, with domestic content reaching 80 per cent.Footnote 140 India paid $1.2 billion upfront for the technology transfer associated with the $3.12 billion contract.Footnote 141 Similarly, India requested offsets for the procurement of four Admiral Grigorovich-class guided-missile frigates.Footnote 142 Following an intergovernmental agreement signed in October 2016, New Delhi and Moscow finalised a follow-on contract in January 2019 to assemble two of the frigates at India’s state-owned Goa shipyard, with technical support from Russia’s United Shipbuilding Corporation (USC). These frigates will be armed with supersonic cruise missiles produced by the India–Russia joint venture BrahMos. Meanwhile, Russia continued to supply India with Su-30s, Sukhoi’s fourth-generation fighter aircraft. Since 1996, India has acquired 272 of these jets, 222 of which have been built under licence by HAL.Footnote 143 Currently, Russia and India are exploring the possibility of jointly producing Su-30 fighter aircraft, which would allow India to export them to other countries.Footnote 144 The jets are expected to be manufactured at the HAL plant in Nashik, Maharashtra, which could also serve as a regional MRO centre for neighbouring users.Footnote 145 However, while New Delhi regards Russia as a ‘most accommodating’ offset partner,Footnote 146 it has expressed frustration over Moscow’s reluctance to share its most advanced jet technology.Footnote 147 In fact, little to no technology has been transferred by Sukhoi regarding the Su-30s assembled by HAL from imported kits.Footnote 148 In 2018, New Delhi withdrew from an 11-year collaborative project to develop a fifth-generation fighter aircraft, a more advanced derivative of the Sukhoi T-50.Footnote 149 Throughout this period, India voiced concerns over Russia’s unwillingness to agree to a favourable workshare arrangement, including the transfer of sensitive technology such as the aircraft’s source codes.Footnote 150
Sustaining the military campaign in Ukraine
In late 2022, Ukrainian president Volodymyr Zelenskyy disclosed that Iran was exporting as many as 2,400 Shahed loitering munitions – often referred to as suicide or kamikaze drones – to Russia, seemingly in exchange for 24 Russian Su-35 jets, with plans for a second batch to be produced locally.Footnote 151 By mid-2024, a video circulating on Russia’s military Telegram channels showcased Iran’s offset investment to support the mass production of Shahed drones within Russia.Footnote 152
Looking to the future: Barter – what goes around, comes around?
Moscow’s reluctance to offer high-end offsets, coupled with Western sanctions limiting dollar transactions and heightened geopolitical competition for resources, including critical minerals, suggests that Russia will likely return to barter trade to sustain its arms sales. While Russian arms exports have decreased sharply across all regions, Moscow remains the most important supplier of defence equipment for African countries,Footnote 153 and here barter remains the obvious trading solution for effecting arms transfer to low-income states. Coincidentally, many of these impoverished African states possessing non-convertible currencies, also happen to be rich in strategically important critical minerals.Footnote 154 At the same time, Russian barter arrangements, wherever feasible, will likely include basing rights, as per Soviet-era antecedents. In late 2023, Russia established a military base in Burkina Faso and in April 2024 used the Libyan port of Tobruk to funnel weapons throughout Africa.Footnote 155 Significantly, in June 2024, Sudan agreed to allow Moscow to build a naval logistics base on the Red Sea in exchange for weapons, ammunition, and spare parts for its Russian-made planes.Footnote 156 Further, a Russian military base to train local soldiers might soon open in the Central African Republic.Footnote 157
Conclusions
Western sanctions imposed on Russia after its 2014 annexation of Crimea, and again following its 2022 full-scale invasion of Ukraine, among other factors, have caused Russian arms export to fall to levels not seen since the dissolution of the Soviet Union. To arrest and possibly reverse this trend, Russia has resorted to defence counter-trade. Leveraging arms transfers to project power and influence, Moscow has paired them with geoeconomic instruments, including aid, diplomacy, investment, and trade. However, Russia has largely been unsuccessful in this endeavour.
While developing states in Asia and Africa are keen to exploit barter and counter-trade opportunities, richer Middle Eastern states seek technology transfer, and so do China and India. Hence, unless Russia agrees to transfer its most sensitive technologies, buyer states, including major markets such as India, China, and Saudi Arabia, will be tempted to either look elsewhere or double down on indigenisation strategies. Due to these constraints, Russia’s future defence counter-trade ‘model’ can be expected to focus on barter arrangements, including arms-for-basing rights, targeting especially resource-rich developing states.
Here, however, Russia will increasingly face competition from China. While Western countries do not traditionally engage in barter,Footnote 158 China has long done so.Footnote 159 Between 2004 and 2006, China provided approximately 90 per cent of Sudan’s small arms and light weapons imports, securing access to Sudanese oil in return. In 2009, the Zimbabwe Ministry of Defence procured 12 K-8 jet trainer aircraft, paying with minerals worth $240 million. Additionally, Zimbabwe reportedly granted the Chinese defence firm Norinco mining rights to extract platinum, gold, copper, and diamonds from several sites in exchange for military equipment. In early 2014, Bolivia successfully launched its first telecommunications satellite, Tupac Katari (TKSat-1), into geostationary orbit aboard a Chinese Long March 3B rocket. The satellite’s $295 million cost was 85 per cent financed by a 15-year loan from the China Development Bank. Repayment terms included a mix of 40 per cent in cash and 60 per cent through steel production from Bolivia’s El Mutun iron ore facility, with interest set at LIBOR plus 2.7 per cent. Additionally, long-range FD-2000 air defence missile systems were transferred to Uzbekistan and Turkmenistan in return for natural gas.
Continuously evolving in response to a changing geopolitical and geoeconomic landscape, Russia’s defence counter-trade strategies have a significant bearing on scholarly debates regarding the motives underpinning Moscow’s arms trade. While International Relations and Security Studies scholars often portray the Russian arms trade as either economically or strategically motivated, focusing on limited time frames that stifle systematic analysis, this paper has sought to offer fresh theoretical and empirical perspectives by examining Russian defence counter-trade processes over eight decades to reveal a far more complex and nuanced set of motives. To further enhance our understanding of the Russian arms trade—its motives, strengths, and limitations—future research could compare Russia’s countertrade model with those of China and the United States—the latter emerging and currently exemplified by the recent US-Ukraine arms-for-minerals deal.Footnote 160
Acknowledgements
For extremely helpful feedback on earlier drafts of this article, the authors would like to thank the organisers, discussants, and participants of panels held in the summers of 2024 and 2025 at the Italian Standing Group on International Relations (SGRI), the European International Studies Association (EISA), the Società Italiana di Scienza Politica (SISP), and the European Initiative for Security Studies (EISS) – especially Stefano Costalli, Marc DeVore, Nicolò Fasola, Kristen Harkness, Julia Costa López, Francesco Niccolò Moro, and Manuela Moschella. The authors are also grateful to the two anonymous reviewers whose comments and insights helped strengthen earlier versions of this article. Finally, the authors wish to express their gratitude to CounterTrade and Offset (CTO) for generously granting access to its extensive and unique database. Jonata Anicetti has worked as a freelance analyst for CTO, one of several sources used in this study. CTO was not involved in the design, analysis, or publication of this research.
Funding
Jonata Anicetti acknowledges funding from the European Union through a European Research Council grant for the project Competition in the Digital Era: Geopolitics and Technology in the Twenty-First Century (CODE), under grant number 101116328.
Jonata Anicetti is a postdoctoral fellow at Vrije Universiteit Brussel and is also affiliated with Princeton University and Metropolitan University Prague. He serves as Head of Research at Countertrade & Offset, a publication for defence professionals. His research focuses on arms collaboration, defence counter-trade, the arms trade involving China and Russia, Italy’s foreign and defence policy, and EU strategic autonomy, with a recent emphasis on critical raw materials.
Shang-Su Wu is an assistant professor and research coordinator at the Homeland Security Program. He was previously a research fellow at RSIS, Nanyang Technological University, Singapore. He is the author of books on small state defence and military modernisation in Southeast Asia. His research focuses on military modernisation, Taiwan, railways and international relations, and his work has appeared in journals such as Asian Survey, Defence Studies, and the Pacific Review.
Ron Matthews is a visiting professor of defence economics at Cranfield University at the Defence Academy of the UK, having previously held the Chair in Defence Economics at this institution from 2000. Between 2022 and 2024, he held the Tawazun Chair in Defence and Security Capability at Rabdan Academy, Abu Dhabi, UAE, and across 2007 to 2024 was Professor of Defence Economics at the S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore.
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