Sunday, March 23, 2014

Russian Navy Takes Over Ukrainian Sub In Crimea

SEVASTOPOL, Ukraine -- The Russian Navy said Saturday that it took over Ukraine’s only submarine, based in Sevastopol, Crimea.


Ukraine's Zaporizhzhia submarine

It is now part of Russia’s historic Black Sea Fleet and brings the number of Russian subs stationed in the Crimean peninsula to four.

But this ship is barely sea-worthy, so it’s far from a steal for the Russian defense department.

The St.Andrew’s flag of the Russian Navy was raised on the Zaporizhzhia submarine today, which was commissioned back in 1970 and is considered outdated.

Captain Anatoly Varochkin, the commander of Russia’s Black Sea Fleet’s submarine unit, told RIA Novosti that half of the Zaporizhzhia’s crew, including the sub’s captain, left for Ukraine while the remainder of the vessel’s crew will reportedly serve the Russian navy.

Law enforcement authorities in Crimea have released from duties Serhei Haiduk, the commander of the Ukrainian navy, along with seven others detained Wednesday in the Crimean city of Sevastopol, the KrymInform news agency reported Thursday. 

Crimea is made up primarily of ethnic Russians.

The peninsula, once an autonomous region of Ukraine, voted to secede on March 16. 

With the annexation agreed upon by Moscow on Tuesday, Ukraine loses a key military base in the Black Sea.

Tensions remained high between Kiev and Moscow this week.

The U.S. and Europe have joined forces to punish Russia with sanctions and serve as a lifeline to Ukraine’s ailing economy.

Ukraine Finance Ministry said the government needs at least $30 billion to make ends meet over the next two years.

Russia and Ukraine have been economic and defense partners since the days of the Soviet Union.

Russia is Ukraine’s key supplier of natural gas.

And both countries had a generally harmonious relationship in Crimea until Feb. 22, when pro-Russian leader Viktor Yanukovych was ousted by extra legal means and replaced by a decisively pro-Western technocrat named Arseniy Yatsenyuk.

Russia’s Deputy Defense Minister said this week that Ukraine would be hurting its economy further if it breaks off the ongoing cooperation with Russia’s defense industry, but Ukraine seems willing to tilt West.

“If the Ukrainian leaders who recently came to power choose the path of destructive engagement with Russia, I think they will be punishing themselves, punishing the Ukrainian people, who are happy to work with our businesses,” Deputy Defense Minister Yuri Borisov reportedly said.

Russia’s defense industry employs between 2.5 million and 3 million workers and accounts for nearly 20% of the country’s manufacturing base.

In 2012, Russia’s defense industry exported a record $15 billion worth of military equipment, most of it aircraft.

6Russia is the world’s No. 2 arms dealer after the U.S. India and Venezuela are Russia’s biggest defense contracts.

The biggest windfall in all of this may be for U.S. and European defense contractors. 

Russia can have the old submarine.

Yatsenyuk said he set aside $697 million to re-arm, re-train, and upgrade its defense systems.

“Today we are talking about protecting our country,” Yatsenyuk said.”

All other expenses are not worth anything if the Ukrainian Army, the Ukrainian Armed Forces are not able to protect the state.”

Ukrainian border guards closed the exit from Crimea today, according to RIA Novosti, in a further show of official disdain for Russia.

The imbroglio had France saying this week that it will likely cancel a major defense contract for two helicopter carriers made by both Russia and France.

The deal is worth around $1.65 billion for Russia.

Part of the bulky helicopter carrier was being made at the Baltiysky Zavod shipyard of United Shipbuilding Corporation in St. Petersburg.

USC and Russia’s largest defense contractor, Almaz-Antey, are not openly traded. 

But Russia’s United Aircraft Corporation is.

The makers of the Sukhoi super flanker is trading above the Micex Index and the Micex Industrials Average.

UAC shares fell sharply following the ouster of Yanukovych, when the market sold out of Russian assets in general.

UAC was ranked as the 20th largest defense contractor in the world by the Stockholm International Peace Research Institute (SIPRI) based on 2012 market cap of $4.44 billion.

Missile systems firm Almaz was No. 15 with a market cap of around $5.5 billion. 

Russia’s defense industry still lags the U.S. by far.

The latest acquisition of an 40 year old Ukrainian submarine is more politics than anything else.

“Russia’s arms industry is gradually re-emerging from the ruins of the Soviet industrial era,” Sam Perlo-Freeman of SIPRI’s Military Expenditure Program said in last year’s report on global defense spending.

“The (Russian defense) industry is still plagued by outdated equipment, inefficient organization and widespread corruption, which will continue to limit Russia’s ability to compete technologically with the West.”

Source: Forbes

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