HIGHLIGHTS

1. Ukraine’s Parliament considers law to cancel $225 mln in defense industry debt
2. Ukraine to use An-26 aircraft in EU’s Atalanta antipiracy operation next year
3. Planning conference for U.S.-Ukrainian Sea Breeze 2012 exercise took place in Odessa
4. Ukrspecexport delivers  four Il-78 refueling tankers to Pakistan
5. Antonov negotiating An-158 contract with Iran for total value of $2.4 bln
6. Antonov to spend $300 mln on technical re-equipment by 2016
7. Antonov to deliver four An-32 military transport aircrafts to Iraq by the end of 2011
8. Motor Sich signs $1.2 bln deal; also to acquire stake in Belarusian repair plant
9. Ukrainian Government adopts $2.1 bln corvette program with French & Italian participation

DEFENSE INDUSTRY NEWS
Ukraine’s Parliament has registered a draft law that would cancel the debts of state-owned defense industry enterprises, including those of UkrOboronProm, the state-owned defense industry conglomerate. The total amount of the debts is 1.8 bln UAH ($225 mln), as of the beginning of October. In addition, the bill proposes a three-year moratorium on bankruptcy of defense industry companies.

NATIONAL SECURITY & DEFENSE POLICY
Ukraine’s Foreign Minister has stated that basing elements of the U.S. missile defense systems in Romania should not create tensions between these neighboring countries, during his meeting with his Romanian counterpart on 10 November. The Ministry noted that Ukraine closely follows the development of the European missile defense system.

INTERNATIONAL CONSULTATIONS AND AGREEMENTS
Ukraine and Serbia have signed an agreement on defense cooperation. Under the agreement the two countries will cooperate in areas of national security, minimizing the environmental impact of military operations, military training, communications, and information and other scientific technologies.
Lithuanian and Ukrainian military officials have discussed cooperation on the International Security Assistance Force in Afghanistan. The discussions also addressed the development of the Lithuanian-Polish-Ukrainian peacekeeping brigade and joint participation in multinational exercises and military training.

OPERATIONS, EXERCISES, TRAINING, FORCE DEVELOPMENT
The Ukrainian Armed Forces announced that about 90 military exercises have been held this year to date within a variety of command and control structures. The strategic exercise Adequate Response-2011 and large-scale territorial defense exercise Assistance-2011 were the main events.

The Ukrainian Armed Forces has introduced 10 new types of armament and military equipment so far in 2011. These have included an automated command and control station, the Stugna-P portable anti-tank guided missile system, and the KrAZ military truck.

A Ukrainian Mi-8helicopter has found the Liberian cargo ship St.Paul River, which had been missing for more than a day, according to the Liberian Maritime Administration. The ship had 18 sailors on board. The Ukrainian helicopter, from the Ukrainian 56th Separate Helicopter Detachment of the UN Mission in Liberia, found the vessel in coastal waters at a distance of about 40 km after a 15-minute search.

The planning conference for the U.S.-Ukrainian Sea Breeze 2012 multinational maritime exercise has taken place in Odessa. Delegations from Azerbaijan, Georgia, Canada, Macedonia, Moldova, Norway, Turkey and Sweden participated. The main focus of Sea Breeze 2012 will be sea security operations.
Ukraine plans to participation in the EU’s Atalanta antipiracy operation in 2012 with An-26 military transport aircraft.

Ukraine and Russia agreed to hold expert meetings on the development of a new mechanism for registering Russian military personnel from the Black Sea Fleet in Ukraine.

AIRCRAFT
Ukraine’s Defense Ministry and the National Academy of Sciences have created a Joint Coordination Committee on use, repair and modernization of aviation equipment.

Ukrspecexport delivered the last of four Il-78 refueling tankers to Pakistan in accordance with a contract signed in 2006. The last Il-78 was tested at Mykolaiv’s NARP aircraft repair plant in September 2011 prior to shipping. The first aircraft delivery under the 2006 contract took place in 2009, the second in 2010, and this year Pakistan has received last two Il-78s.

Antonov is seeking to sign a $2.4 bln contract with Iran by the end of the year on the purchase and joint production of An-158 regional aircraft. The contract would call for Antonov to supply 16 An-158 to Iran and support the production of an additional 64 aircrafts in Iran over a period of 20 years.

Antonov plans to allocate $300 mln for capital investment in equipment by 2016. The technical re-equipment program will be financed by a mix of self-funding and international investments. Antonov estimates that its research programs during this time will require an additional $500 mln in funding.
Antonov and Russia’s Voronezh Aircraft Production Association are currently negotiating the creation of a joint enterprise for producing Аn-148/158 regional aircraft. The companies are planning to use external financing for the new venture.

Antonov plans to deliver four An-32 military transport aircraft to Iraq by the end of 2011. Iraq has already signed acceptance paperwork and paid for 2 aircraft; 2 additional aircraft are expected to be delivered by the end of the year. The deliveries are part of a contract signed in 2009 to supply Iraq with 400 APC BTR-4 and 6 An-32 military transport aircraft. 

The first An-70 medium transport aircraft is expected to be assembled in Ukraine in 2012, with production in Russia beginning in 2014. Ukraine and Russia are working on digitizing the technical documentation for the An-70 project for its promotion on international markets. Antonov may need to start assembling the An-70 wing at its own plant, however, to compensate for problems with production at Uzbekistan’s Tashkent Aviation Industrial Enterprise.

Ukraine's Motor Sich has signed a $1.2 bln, five-year contract with Russian Helicopters for the supply of Ukrainian engines for Russian commercial helicopters. The contract was signed on 13 November at the Dubai 2011 Airshow.

Motor Sich plans to buy a 57% stake in Belarus’s Orsha Aircraft Repair Plant for a price of $1,1 mln. The Orsha Aircraft Repair Plant is scheduled to repair Mi-8 helicopters based in Belarus and assemble new Мі-8 МSB helicopters. Motor Sich estimates that total orders for the Orsha Plant could exceed 100 helicopters. The purchase of the Orsha Aircraft Repair Plant is apart of the project for creating a Belarusian aviation repair holding company. In addition to modernizing the Orsha Aircraft Repair Plant, the project foresees the creation of an international multimodal logistics center in Orsha that will cooperate with Hong Kong’s CBT Development Limited logistics company. Motor Sich is the main investor for the project.

Flight tests by Russia’s Defense Ministry of the Мі-8МТВ helicopter equipped with Ukrainian ТV3-117 VМА-SBМ1V engines will start at the end of 2011. The ministry has already equipped a helicopter with Ukrainian engines for the tests.

SATELLITES & LAUNCH VEHICLES
Ukraine earned about $4 bln from participation in international space projects for the period 1999-2010, with Ukrainian space industry enterprises participating in 400-450 international contracts per year. Ukraine currently has a 9-11% share in international launch services and has good market perspectives in a number of international programs, including Taurus, Sea Launch, Cyclone-4, Dnipro, and Vega.

Ratification of a Ukraine-EU agreement on the Galileo global navigation system will be finalized by the end of the year. The Galileo project, scheduled to begin service in 2014, will build and launch more than 30 satellites with the total project cost of €5 bln.

Ukraine’s “Sumy Frunze Machine-Building Science and Production Association” has provided substantial equipment for the upcoming launch of a Russian Soyuz-ST rocket from the Guiana Space Center in Kourou. The launch is part of the French-Russian Soyuz project.

The launch of a Zenit-3SL carrier rocket with the Intelsat 19 satellite is scheduled for March or April 2012 within the Sea Launch program. The launch was initially scheduled for December 2011 but postponed because the scheduled Zenit-3SL carrier rocket was used in October to launch the Intelsat 18 satellite into orbit from Kazakhstan’s Baikonur spaceport.

Ukraine plans to launch a satellite to the Moon by 2017 under the Selena project. SDO Pivdenne (Dnipropetrovsk) will develop the Moon satellite, equipping it with the Krechet booster block. The launch is planned with the Dnipro carrier rocket.

SHIPBUILDING
Ukraine’s government adopted the new National Corvette Program on 9 November. The program aims to build four ships by 2021, at a total cost of 16.2 bln UAH ($2.1 bln). The Chornomorskiy shipyard in Mykolayiv started building the first ship in May 2011, with completion expected in 2016. The ships will be equipped with weapons and systems produced by leading European companies from France and Italy. Russian armament will not be used. Of the hardware used for the corvette 72% is Ukrainian and 28% foreign.

Ukraine’s Zorya-Mashproekt factory (Mykolayiv) is currently negotiating with Petroleo Brasileiro SA on the possibility to supply 200 gas turbine generators with 25 MW capacity each to Brazil by 2020.

ARMOR
Mykola Belov was recently appointed as the new Director-General of the Malyshev Plant (Kharkiv). He had previously worked as the plant’s Deputy Director-General.

NUCLEAR
Ukraine plans to sign an agreement on associate membership in the European Council for Nuclear Research. This will create the legal basis for maximizing participation by Ukrainian scientific institutions in European nuclear programs and will promote the comprehensive development of grid technologies in Ukraine. This membership should also improve the training of young scientists in the field of theoretical and applied physics.

RADAR
JSC Topaz (Donetsk) will receive an interest-free loan of 40 mln UAH ($5 mln) as direct financial support from the state budget. Topaz produces the Kolchuga radar.

MISSILES
The state-owned Artem Holding Company  (Kyiv) has reported an increase in net income of 273.647 mln UAH ($34.2 mln) in the third quarter of 2011 – 2.43 times higher than the comparative period in 2010.
© 2011 Effective Engagement Strategies, LLC