HIGHLIGHTS

1. Parliament registers draft law on trade preferences for Ukrainian machinery industry
2. NATO intends to invite Ukrainian President to NATO Summit in Chicago
3. Ukraine moves ahead in space cooperation with Brazil, South Korea, and Saudi Arabia
4. U.S.S. Philippine Sea, Aegis-equipped missile cruiser, visits Sevastopol
5. Ukraine and Russia fail to agree on use of NITKA aviation training complex
6. Antonov increases net profit 2.8 times in first three quarters of 2011
7. Russian Defense Ministry opposes continuation of Dnipro space launch vehicle project
8. SDO Pivdenne to develop Sapsan multifunctional missile complex by 2015

DEFENSE INDUSTRY NEWS
Ukraine’s Parliament (Verkhovna Rada) has registered a draft law that would grant preferential trade treatment for the country’s industrial machinery sector, as part of a wider effort to eliminate trade barriers and increase exports in the manufacturing sector. In particular, the proposed bill will cancel some tax payments for the period 2012-2020, (e.g. import tariffs), that machinery plants and manufacturing enterprises now pay on imports of raw materials, components and other goods used for production destined for export. The proposed regulations, if enacted, would effectively half the tax rate for such enterprises through 2020.
According to a recent report by the Russian Centre for Analysis of World Arms Trade (CAWAT), Ukraine took first place among arms exporting countries during the years 2003-2010 in terms of exports as a percentage of national defense spending. Sweden took second place and Russia took third. The total value of Ukraine’s arms exports to post-Soviet countries during this period was $848 million; Russia exported $917 million in this region and third-place Israel exported $533 million.

NATIONAL SECURITY & DEFENSE POLICY
NATO Deputy Assistant Secretary General James Appathurai visited Kyiv on 27 October to discuss ongoing NATO-Ukraine cooperation. During his trip, he confirmed that NATO intends to invite President Viktor Yanukovych to participate in the NATO Summit that will take place May 2012 in Chicago.

Kyiv’s Central Hospital will provide medical treatment to 11 wounded Libyan citizens as a part of the Ukrainian government’s humanitarian aid to that country. More than 20 Ukrainian citizens are currently detained in Libya under accusations that they served as mercenaries for the Gaddafi regime. Ukraine’s Ministry of Foreign Affairs has denied the accusations, claiming that the detained Ukrainian citizens are civilian employees and contract engineers working for an oil company.

INTERNATIONAL CONSULTATIONS AND AGREEMENTS
Ukraine and the United Kingdom are discussing cooperation in the area of integrated border and migration management issues, and have signed an agreement on future cooperation in border issues under the framework of Ukraine-EU dialogue on visa and migration issues.

The Presidents of Ukraine and Brazil reviewed progress on the Alcântara Cyclone-4 launch system project and pledged to continue cooperation on the joint project during an official visit by Ukraine’s president to Brazil on 23-26 October. The first launch of the Cyclone-4 carrier rocket is scheduled for 2013, with the presidents of both countries expected to attend. Ukraine and Brazil also signed agreements on military-technical cooperation and on a visit by Brazilian experts to Ukrainian missile production facilities.

The Ukrainian Cabinet of Ministers has approved a recently-signed memorandum on defense cooperation between Ukraine and Brunei.  Under the framework of the cooperation program Ukraine will supply An-148 regional jet aircraft, small arms (e.g. Fort-12 pistols), and provide educational exchange programs for Bruneian military personnel in Ukrainian military higher education institutions. 

Ukraine and South Korea have agreed to create a joint committee on cooperation in the space sector. The committee will be responsible for oversight of priority bilateral issues and projects in the space industrial sector, as well as for identifying new areas of potential cooperation.

Ukraine’s parliament has ratified a recently-signed agreement with Saudi Arabia on cooperation in the space sector. Under the agreement, the two countries will cooperate in areas like space telecommunications and transportation systems, meteorology, remote sensing, geophysics, biotechnology space, ionosphere and space plasmas, micro-satellites and mini-satellites (including for commercial usage), and ground infrastructure including launch sites.

OPERATIONS, EXERCISES, TRAINING, FORCE DEVELOPMENT
The guided-missile cruiser USS Philippine Sea (CG-58) arrived in Sevastopol on 21 October for a regularly scheduled port visit. The Philippine Sea's crew did train and interact with their Ukrainian counterparts during the visit and volunteered on local humanitarian projects. The USS Philippine Sea is equipped with the Aegis air defense combat system and is deployed to the Mediterranean as a part of the phased adaptive approach to the European segment of U.S. efforts to build a global missile defense network.
Ukrainian military personnel have participated in exercise Combined Endeavor 2011 in Germany. The exercise tested tactical-level digital telecommunications equipment and information systems that Ukraine’s armed forces has received from the U.S. as part of the FMF program. Ukrainian units had a chance to test military equipment that could potentially be used during Ukraine’s future participation in international operations, including the Harris RF-5800H-MP used by Ukrainian Navy forces deployed in Sevastopol.
Experts on airspace management from the Norwegian Air Force have visited Ukraine recently for talks and exchange of experience on issues including airspace surveillance, air control, and Ukraine’s progress in using the NATO Air Situation Data Exchange (ASDE) program.

Ukraine and Russia have failed to reach a final agreement on the use of the NITKA training complex, and the Ukrainian Government has refused to lease the complex to the Russian Defense Ministry, according to Russia’s Ambassador in Kyiv. The Ambassador did report, however, that the two countries had almost agreed the terms for the use of Ukrainian hydrographic objects by Russia’s Black Sea Fleet – with final details yet to be negotiated. [The NITKA training complex is used for training of carrier aviators on a land environment that simulates a shipboard landing system. The relative lack of interest that Russia has shown in the base may be due to uncertainty concerning the future of Russia’s carrier- based aviation. Ukrainian independent experts have noted that the NITKA could be profitable for Ukraine if it were to be used by a variety of different users – Russia, India and China. – Eds.]

The inventorization of civilian infrastructure used by the Russian Black Sea Fleet in Sevastopol should be finished next year (2012).

AIRCRAFT
Antonov reported an increase in net profit of 500.6 mln UAH ($62.6 mln) for the first three quarters of 2011, a figure 2.8 times  higher than Antonov’s 171.8 mln UAH ($21.5 mln) in profit for the comparable period in 2010. Antonov’s gross income for the first three quarters of 2011 grew by 28%.

SE Vinnytsya Aviation Plant is now providing maintenance services for Mi-2 helicopters. The plant recently serviced two Mi-2 helicopters, receiving nearly 4 mln UAH ($0.5 mln), and plans to service five more by the end of this year. Maintenance on ten helicopters is scheduled for 2012. The SE Vinnytsya Aviation Plant, now a subsidiary of Motor Sich, has plans to start production of helicopters and An-3 aircraft, as well as to develop its own line of helicopters. These would transport 15-16 passengers with a cargo load limit of 6 tons. Production is anticipated to begin in 2013-2014.

Motor Sich has received a contract to extend the service life of D-36, АІ-24VТ and АІ-20М aviation engines for Аn-12 military transport aircraft, An-26 transport aircraft and Аn-74Т transport aircraft. The total value of contract is 1 mln UAH ($125,000).

SE Kyiv Civil Aviation Plant 410 has signed a contract to purchase coat and paint materials from PLC Khimresurs (Rubizhne, Luhansk region) for 1 mln UAH ($125,000).

Equipment providers for the An-70 medium transport aircraft modernization have been selected.  Bi Pitron Cherkasy PLC (Cherkasy) has won two tenders totaling 2.61 mln UAH ($0.33 mln), and JSC NPO Promavtomatika (Kharkiv) has won a 1.7 mln UAH ($0.21 mln) tender.

The SE Odesa Aircraft Repair Plant “OdesaViaRemService” has developed two new models of light civil aircraft: Farmer and Dolphin. The Farmer is intended for use in agriculture; and aircraft Dolphin is designed for pilot training and geophysical monitoring. Both aircraft are currently undergoing certification. Odesaviaremservice plans to produce 50 aircrafts a year.

SATELLITES & LAUNCH VEHICLES
On 9 November a Zenit-2SB launch vehicle will place the Russian automatic launching interplanetary station Phobos-Grunt and Chinese microsatellite YH-1 into orbit.

Prime Minister Mykola Azarov has assured SDO Pivdenne(Dnipropetrovsk) that the plant will receive substantial state orders for space equipment technology.

The Ukrainian and Russian Federation National Space Agencies have formed a special joint commission to review the operations and future prospects for the Dnipro launch vehicle program, which is based on the use of technologies from decommissioned RS-20 –ICBMs (NATO designation: SS-18 Satan). The continuation of the project was recently thrown into question by Russia’s Defense Ministry, which claims that it is unprofitable. SDO Pivdenne (Dnipropetrovsk) designs and assembles the launch vehicle and its control system is developed and produced by the JSC Khartron ( Kharkiv).

MISSILE
SDO Pivdenne (Dnipropetrovsk) will develop the Sapsan multifunctional missile complex by 2015. Technical design with documentation and principle parameters of the complex is expected to be complete by 2012. Serial production is scheduled to start in 2016.

EXHIBITIONS
A Ukraine delegation consisting of representatives from the Ministry of Defense, Ministry of Internal Affairs, and private business visited the 17th MILIPOL exhibition in Paris, France. The delegation focused on identifying new technologies that could be used in the design and application of advanced integrated security systems for the Ukrainian market. The Ukrainian delegation reportedly advanced cooperation between TS (Ukraine) and the Belgian company FN Herstal, and is in discussions with regarding the production of sniper rifles and submachine guns using technology from the B&T Swiss company.

Ukraine’s state-owned Scientific-Industrial Association “Fort” (Vinnytsya) presented  a line of security equipment currently produced in Ukraine at the INTERPOLITEX 2011 exhibition held in Moscow on 25-28 October. SIA “Fort” works under the auspices Ministry of Internal Affairs.