HIGHLIGHTS

• Ukrainian Government adopts procedure for offset agreements
• Ukrainian Armed Forces to continue force reductions
• Ukraine, Turkey, and NATO sign agreement on air situation data exchange
• Saudi defense delegation visits Ukraine
• Sperry Marine may provide navigational equipment to Ukrainian Navy
• Aviation firms Antonov and Motor Sich report growing revenues and profits
• Ukrainian APCs shipped to Iraq, Thailand, and Egypt
• Government rescue package to save Pivdenmash from insolvency

DEFENSE INDUSTRY NEWS
Ukraine’s Government adopted procedures for offset agreements with foreign suppliers of defense products. The procedures, contained in a 20 April decree, apply when the total value of a products purchased from a foreign supplier exceeds €5 mln.

NATIONAL SECURITY & DEFENSE POLICY
Ukraine’s Armed Forces will continue force reductions in 2011, to a level of 192,000 personnel, including 144,000 military personnel. A bill authorizing the reduction was registered in Parliament on behalf of Ukraine’s President on 26 April.

President Yanukovych has reaffirmed Ukraine's commitment to remove its 106 kg reserves of highly enriched uranium by April 2012. Commitment was made during the April 2010 nuclear security summit, held in Washington DC.

Ukraine’s Prime Minister proposed the creation of an international scientific center in Ukraine dedicated to addressing the technological risks associated with the use of nuclear energy. The proposal, made 21 April at an international conference dedicated to the 25th anniversary of the Chernobyl disaster, envisaged the center operating under the auspices of the UN and the IAEA.

INTERNATIONAL CONSULTATIONS AND AGREEMENTS
Ukraine, Turkey, and NATO signed an agreement establishing and maintaining air situation data exchange between Ukraine’s Air Command South in Odessa and the Control and Notification Center in Erzurum, Turkey. The agreement will allow Ukraine to obtain real-time information about the situation in the airspace above the Black Sea and Turkey. The necessary equipment has been purchased and is in place; personnel have received the additional required training, including language training.

A delegation of defense officials from Saudi Arabia visited Ukraine in mid-April, led by HRH Prince Khaled bin Sultan bin Abdulaziz Al-Saud. The Saudi delegation expressed interest in training its specialists in Ukrainian military educational institutions and getting acquainted with Ukrainian defense industrial capabilities. The two countries’ defense ministries agreed to create expert groups to explore further cooperation in these fields.

Ukraine and Russia have agreed an expert-level draft of an intergovernmental agreement governing notification of emergency situations on Ukrainian territory where Russia’s Black Sea Fleet (BSF) is based and cooperation in managing the response and clean-up.

Two prominent Russian military experts have underlined Russia’s intention to maintain the Black Sea Fleet’s long-term presence in Crimea. The editor of "National Defense" magazine, Igor Korotchenko, stated that Russia would seek to negotiate a hundred-year extension to the current basing agreement, following the Russian 2012 presidential election. Former BSF commander Admiral Igor Kasatonov stated that Russia would never give up its military base in Sevastopol, as BSF development is a priority in all Russian strategic military plans.

Russia’s Defense Minister has offered to have Ukrainian officer cadets attend Russian military universities at no charge.

The Ukrainian and Belarusian Defense Ministers met on 29 April to discuss defense cooperation. Belarus’s interests are cooperation in air defense, development of military equipment at Ukrainian enterprises, and the possibilities for its servicemen to train at the International Center for Peacekeeping and Security in Yavoriv (Lviv region). The Ukrainian side expressed interest in Belarus’s experience in reforming its Armed Forces.

OPERATIONS, EXERCISES, TRAINING, FORCE DEVELOPMENT
A delegation of U.S. defense officials and the Sperry Marine company visited Sevastopol to discuss the provision of navigational equipment to the Ukrainian Navy. The equipment, to be provided under the U.S. Foreign Military Financing (FMF) program, includes radar, radio-location equipment, and equipment for ship location, identification, and ship’s piloting.

Ukraine has established a center for coordinating maritime search and rescue operations, which will monitor all shipping in the Black and Azov Seas and Ukrainian-flag ships worldwide.

The lease payment for Russia’s use of Ukraine’s NITKA carrier aviation training complex will rise, with the extent depending on the growth in energy prices, according to Ukraine’s Defense Minister. The Minister also stated that while Russia will remain the main partner for the use of the NITKA training complex, India and China have also expressed interest. The annual cost to Russia for renting the NITKA training complex is currently about $ 700 thousand. Russian pilots will start training at NITKA beginning in mid-May.

On 22 April Ukraine’s President approved participation of foreign military units in multinational military exercises on Ukrainian territory in 2011. The presidential decision has been forwarded to the parliament for its approval.

Ukraine will join the Russia-Belarus exerciseUnion Shield 2011, to be held in September. Nearly 12,000 personnel, over 50 aircraft, and 200 armored vehicles are expected to participate in the exercise.

AIRCRAFT
Ukraine’s Parliamentary Committee on Industrial and Entrepreneurial Policy is considering a law that would allow Ukrainian aircraft companies to avoid mandatory tender procedures. The committee’s leadership is also encouraging the Government to designate a state body responsible for oversight of the aviation industry and preparation of a state program for developing Ukraine’s aircraft industry through 2020. This state program will likely include measures to promote exports and to help the aviation industry receive low-cost financing.

Russia’s Defense Minister announced plans to purchase An-70 medium transport aircraft and modernized An-124 “Ruslan” heavy transport aircraft from Ukraine beginning in 2015-2016. The total purchase is expected to be 60 aircraft. According to the minister, the An-70 program has been already included in Russia’s State Armaments Program through 2020.

Ukraine’s ТV3-117 VМА-СBМ1V modernized helicopter engine was successfully tested at the Russian Defense Ministry’s 218 Aircraft Repair Plant (Gatchina, Leningrad region).

Antonov finished the first quarter of 2011 with net profits of 15.9 mln UAH ($2 mln) on revenues of 344.3 mln UAH ($43 mln), as reported by Ukraine’s Agency for Stock Market Infrastructure Development.

The Motor Sich Chairman of the Board announced that 2011 first quarter profit was 224 mln UAH ($28 mln), a 9% increase over the same period last year, with revenues of 1.7 bln UAH ($213 mln), a 10,5% increase over last year. Motor Sich’s turnover in 2010 was about $700 mln, and share value rose 45%.
The Defense-ministry owned Odessa Aircraft Repair Plant has finished development of new Delfin light training aircraft, according to the plant’s director.

ARMOR
The Malyshev Plant shipped a first installment of 26 new BTR-4 armored personnel carriers (APCs) to Iraq on 20 April and begun work on a second installment, according to the plant’s acting CEO. The terms of delivery for an additional 62 BTR will be specified during future negotiations. The Plant also announced that it will deliver the first installment of modernized BTR OT-62 TopazAPCs for Egypt in first half of May. The contract, signed in January 2010, calls for the main portion of the vehicles to be modernized in Egypt based on equipment produced in Ukraine.

The Kyiv Armor Repair Plant shipped 12 new BTR-3E1 APCs to Thailand on 19 April. The next installment of 12 vehicles is scheduled for May.

SHIPBUILDING
On 19 April, during a visit to Ukraine, Russia’s Defense Minister stated that his country is not interested in purchasing the Ukrayina missile cruiser, and that no resources have been allocated for such a purchase in the Russian State Armaments Program through 2020. [This can be considered a definitive answer to the Ukrainian Prime Minister’s request to his Russian counterpart on 13 April, reported in the 22 April Digest, for clarification on Russia’s interest in purchasing the partially-completed cruiser. –Ed.]

The General Director of the Chernomorsky Shipbuilding Yard has declared an interest in building and repairing ships for the Ukrainian Navy and Russian Black Sea Fleet, highlighting the ability of the shipyard torepair the missile cruiser Moskva and modernize the missile cruiser Admiral Lobov (the former Ukrayina).

MISSILES
The Defense Ministry has accepted the new Stuga-P anti-tank missile into service. The missile, designed at the Ministry’s request by the state-owned Luch Design Bureau (Kyiv), is capable of attacking tanks, other armored vehicles, and fortified positions at a distance from 100 to 4000 meters.

The General Designer/General Director of the Yuzhnoye Design Bureau has stated that Ukraine continues with the development of the new Sapsan multifunctional missile complex. The Defense Ministry has stated that it expects the state program for the Sapsan project to be adopted this summer.

SATELLITES & LAUNCH VEHICLES
Ukraine’s government is planning a financial rescue package for the state-owned Pivdenny Machine-Building Plant (PIVDENMASH) to prevent its insolvency due to a lack of working capital.

SENSORS & COMMUNICATIONS
Ukraine’s Defense Ministry has accepted a new software-based communications system into service. The system includes stationary telecommunications nodes and remote terminals capable of video-conferencing. The Ministry is looking for the system to increase the automatization and efficiency of administrative, managerial, command and control functions.