HIGHLIGHTS

1. Ukraine’s 2012 budget for security and defense will be $6 bln, with $2.13 bln for MoD
2. Ukraine won`t have missile defense system on its territory – MFA
3. Ukrainian maritime authorities stop Russian warship in Kerch Strait
4. Moscow city council stops $2.4 mln in budget funds for Black Sea Fleet
5. Ukrainian joint exercise Adequate Response 2011 tests new concepts for Armed Forces
6. Iridium Communications will launch 12 satellites with Ukrainian Dnipro carrier rocket
7. Thailand has contracted to buy 49 Ukrainian Oplot battle tanks for $240 mln

DEFENSE INDUSTRY NEWS
The UkrOboronProm state defense industry conglomerate presented a variety of products at the DSEi–2011 exhibition in London, held 13-16 September. These included the Skif and Corsair anti-tank guided missiles, the Barsuk ground surveillance radar, the Adros KT-01AV infrared countermeasure station, and the Oplot tank, as well as BTR-4 and BTR-3E1 APC`s.

Ukraine’s Defense Minister has stated his intention to have the country host an international defense exhibition to showcase its modern defense industry.

NATIONAL SECURITY & DEFENSE POLICY
Ukraine’s National Security and Defense Council will discuss reform of the country’s Armed Forces in late September 2011. Updates of several major policy and planning documents are still pending: the Military Doctrine, the Concept of Reforming the Armed Forces, and the Program for Development of Armaments and Military Equipment.

The draft state budget for 2012 increases funding for security and defense by 5.9 bln UAH ($738 mln) to 47.9 bln UAH ($6 bln).

Funding for the Defense Ministry in 2012 will be 17 bln UAH ($2.13 bln): 15 bln UAH ($1.9 bln) from the general budget fund 2 bln UAH ($250 mln) from the special fund [which must be self-funded through MoD business activities –Ed.]. About 5 bln UAH ($625 mln) will be allocated for development and purchase of new and upgraded weapons. Funding for specific projects will include:

• 196 mln UAH ($24.5 mln) for development of the Sapsan multifunctional missile complex;
• 285.7 mln UAH ($35.7 mln) for development of the Armed Forces C2 system;
• 454 million UAH ($56.8 mln) for the An-70 aircraft project;
• 433 mln UAH ($54.1 mln) for the construction of new corvettes for the Navy;
• 510 mln UAH ($63.8 mln) for the purchase of new weapons.

For comparison, the 2011 defense budget is 13.6 bln UAH ($1.7 bln) of which 11.4 bln UAH ($1.43 bln) comes from general fund and 2.2 bln UAH ($275 mln) from the special fund.   [The 2012 draft budget thus represents a 31% increase in the general fund and a 25% increase in the overall defense budget. Growth in spending on procurement and modernization has increased at an even greater rate. This follows a 20% increase in 2011 over 2010, underlining the government’s commitment to increasing defense budgets and modernization. –Ed.]

INTERNATIONAL CONSULTATIONS AND AGREEMENTS
The United States underscored its interest in the future development of its strategic partnership with Ukraine, according to statements by U.S. Assistant Secretary of Defense for International Security Affairs Alexander Vershbow during his visit to Kyiv on 8 September. Mr. Vershbow discussed defense cooperation and met with President Yanukovych, who underscored Ukraine’s interest in the strategic partnership with the U.S.

Ukraine has expressed interest in cooperation on missile defense, according to the NATO Assistant Secretary General for political affairs and security policy, Mr. Dirk Brengelmann. However, NATO will only understand the scope of possible work with Ukraine when it has better defined the framework of its cooperation with Russia. Ukraine’s Foreign Minister clarified that Ukraine is not considering deploying elements of the missile defense system on its territory.

Mr. Brengelmann also noted that NATO will assess its cooperation program with Ukraine in October. Following that assessment, Ukraine can adopt its Program for 2012.

Ukraine and Poland have opportunities to further develop their military-technical cooperation, according to Ukrainian Defense Minister Yezhel. These include the possibility for Ukrainian engines to be used on Polish Мі-8 helicopters and Tarantula-class patrol boats.

The Russian Black Sea Fleet’s large landing ship Azov transited to the Russian port of Azov on 8 September through the shallow waters of the Temryuk Bay to avoid paying for a Ukrainian pilot. Ukrainian maritime authorities demanded from the Azov commander to take a pilot on board and pay for his services in guiding them through the Kerch strait.

The Moscow city council (Duma) adopted changes to city budget for 2011 that annulled financing for the Black Sea Fleet totaling 70.6 mln RUB ($2.4 mln). The former mayor of Moscow, Yuri Luzhkov, had provided assistance to the Black Sea Fleet since 1994, when he established the fund "Moscow-Sevastopol".

OPERATIONS, EXERCISES, TRAINING, FORCE DEVELOPMENT
The large-scale national joint research exercise Adequate Response 2011is being held by Ukraine from 12-30 September. The exercise aims to explore practical issues related to Armed Forces’ development, including optimization of the command and control system and creation of a smaller, more mobile force. The results of the research will influence the Concept for the Further Development and Reform of Armed Forces through 2017, which is currently being developed by the MoD and General Staff. The exercise will include participation by military staffs at all level, as well as 42 distinct training events on 15 training grounds using all 3 services. Nearly 9,500 personnel will participate, as well as 40 aircraft, 31 helicopters, and 33 ships. The budget for the exercises is 100 mln UAH ($12,5 mln).

The Ukrainian-Polish exercise Cossack Steppe - 2011 was held at the Shyroky Lan (Wide Field) military training ground in Mykolayiv from 31 August to 8 September. The exercise aimed to organize peacekeeping operations in a conflict area. 70 paratroopers participated from the Ukrainian and Polish side, making 320 parachute jumps from the Mi-8MT helicopter.

Nearly 100 Ukrainian marines participated in the multinational exercise Rotation of Forces in the Black Sea – 2011 in Romania. The Ukrainian company was selected as the best unit of the exercise. Marines from the USA, Romania, Azerbaijan and Macedonia took part in event.

A Ukrainian company will participate in the Russia-Belarus Union Shield 2011 military exercise, being held 16-22 September at Russia’s Ashuluk training range. Nearly 12,000 personnel (7,000 from Russia and 5,000 from Belarus) will participate, as well as 50 aircraft and helicopters, 200 armor vehicles and 100 tanks.

A meeting of leaders of anti-terrorist units and intelligence services from CIS countries will take place at the joint anti-terrorism training Donbass Antiterror 2011. The event will be held 27-30 September in Donetsk.

Ukraine’s Defense Ministry has prepared proposals for the usage of the NITKA carrier aviation training complex in Crimea. Two principal options are transfer of the base to a Russian lease or transfer to the Yevpatoria aircraft repair plant. [As we wrote in July, Russia has proposed to rent the NITKA training complex and Ukraine’s Defense Minister has said that Ukraine is not interested in using the NITKA complex itself, as it does not have aircraft carriers. However, 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. ]

AIRCRAFT
The Ukrainian government plans to purchase 10 Ukrainian production aircraft in 2012 and transfer them to state aviation companies.

Antonov announced substantial news:

• A plan to sell 440 An-148 regional jet aircraft and 240 An-158 regional jet aircraft by 2024. Principal customers are expected to be from Russia, Ukraine, Kazakhstan, Cuba, Myanmar and Bolivia. Currently contracts are already signed to supply 47 An-148 regional jet aircraft and 20 An-158 aircraft;
• Antonov projects that it will build 24 aircraft per year (mostly An-148 regional jet aircraft and An-158 regional jet aircraft) for the next several years, and has taken a $300 mln loan to expand aircraft production;
• The Ukrainian Aviation Group alliance (Aerosvit, Donbassaero, and Dniproaero) is ready to purchase An-158 regional jet passenger aircraft with General Electric engines in order to unify the servicing of its new aircraft with its existing Boeing fleet.
• Russian’s Nauka (Science) joint stock company signed a contract with Antonov worth of $1.5 mln for the modernization the air conditioning and automatic pressure regulation systems on An-70 military transport aircraft.

Motor Sich will supply spare parts to the 410th Kyiv Civil Aviation State Plant for repair of D-36 engines worth 54 mln UAH ($6.75 mln). 

Motor Sich has certified the ТV3-117VМА-СBМ1V helicopter engine, allowing serial production of the Мі-8Т helicopter. Production will be at the Vinnytsa Aviation Plant.

Russia’s Polet Airlines will soon start to use new generation An-148 regional jet aircraft. The first flight of the Аn-148-100Е was on 9 September. Russian aviation companies are now exploring purchase of up to 8 An-148 aircraft, 6 of them to the JSC Rossiya Airlines.

SATELLITES & LAUNCH VEHICLES
Iridium Communications (USA) has signed a contract with Kosmotras (Russia, Ukraine, Kazakhstan) to use the Dnipro launch vehicle to deliver 12 satellites into orbit. The satellites are to delivered in 2014-2015 by six launches with the Dnipro carrier rocket (manufactured by Pivdenmash).

The Ukrainian Sich-2 remote sensing satellite launched on 17 August has passed the initial tests of its scientific equipment, with all systems working normally.

Ukraine plans to make 7 launches with nationally-produced launch vehicles in 2011. Three launches have been fulfilled already and four more are planned by the end of the year:

• On 22 September a Zenit-3SL will put the Atlantic Bird-7 satellite into orbit within the Sea Launch program;
• In October a Zenit-3SLB carrier rocket will launch the Intelsat-18 satellite within the Land Launch program;
• In November a Zenit-2FG rocket will place Russia's Phobos-Grunt space vehicle into orbit within the Land Launch program;
• In December a Dnipro rocket will launch a South-Korean KOMPSAT-2 satellite.

A Zenit-3SLB carrier rocket will launch the Intelsat-19 satellite within the Sea Launch program in 2012. This will be the first of five launches under a contract between Sea Launch and Intelsat LLC.

ARMOR
Ukrspecexport has signed a contract to supply the Defense Ministry of Thailand with 49 new Oplot battle tanks. The unofficial value of the contract is $240 mln. The Thailand Royal Army’s Procurement Committee chose the Oplot in March 2011, in competition with the South Korean Hyundai Rotem K1A1 and the Russian T-90. Delivery will begin in 2013.

UkrOboronProm presented Ukrainian defense industry at the 8th International “Russian Expo Arms” exhibition, which took place from 8-11 September in Nizhny Tagil, Sverdlovsk region. The Ukrainian stand displayed the BMP-1M with the Squall combat module and the newly-modernized Т-72B tank. The Kharkiv Engine Design Bureau presented its new 5TDFM tank engine.

DISPOSAL OF MUNITIONS AND HAZARDOUS MATERIALS
In 2012 Ukraine and the United States will put a joint facility for disposal of solid propellant from RS-22 intercontinental ballistic missiles into service at the SE Pavlograd Chemical Plant. Under the agreement, the American side will supply equipment and provide financing.

All mélange liquid rocket fuel will be removed from Ukrainian territory by the end of 2012. According to Ukraine’s Defense Minister, 3 garrisons have already been cleared in 2011. The collapse of the Soviet Union left Ukraine with nearly 16,700 tons of mélange, a highly toxic liquid used as a rocket fuel oxidizer in liquid-fuel rocket engines.