Algeria spat shows challenge to Russian arms sales

By Lamine Chikhi - Analysis

ALGIERS (Reuters) - A spat between Russia and Algeria over fighter jets has given the West a chance to open up a new market and shows the challenge facing Russian arms sales to developing countries as they grow more prosperous.

Few expect a dramatic shift in arms purchases by OPEC member Algeria, the developing world's fifth largest market for weapons in 2006, following its unusual decision to return 15 MIG warplanes it says contained some substandard parts, experts say.

But the initial rebuff reflects a recognition that traditional Russian arms buyer Algeria and fellow north African oil exporter Libya, can afford to shop around with state finances boosted by oil near $100 a barrel.

That realization is part of a trend among increasingly wealthy developing nations such as India, which after decades of pro-Soviet ties has moved closer to Washington in recent years, with new arms sales and joint military exercises.

Algeria has increased its intake of U.S. arms since 2001, with Washington regarding the country among those on the "front line" in its efforts to thwart al Qaeda.

Malaysia is another country which now buys weapons from both sides.

"All the old certainties have gone," said Andrew Brookes, an aerospace expert at Britain's International Institute for Strategic Studies (IISS).

"The Algerians are learning, like everyone else, that if they've got money why should they get ... stuff that's inappropriate when they can get good stuff from French, Europeans, British, Americans and Chinese?"

BIG SHARE

The United States and Russia have the biggest shares of the market for conventional arms sales to the developing world, a market worth over $28 billion in 2006, according to a September 2007 report on arms sales by the U.S. Congressional Research Service.

Washington had the edge, with 35 percent of the market in 2006 compared to Russia's 28 percent, the report shows.

Germany, France and the United Kingdom are also major players.

But Russia has dominated arms sales agreements in North Africa selling equipment worth $3.2 billion between 1999 and 2006 compared to $600 million for Western European states and $100 million for the United States, U.S. government figures published in the report show.

U.S. restrictions which limit the transfer of defense technology to countries not seen as close friends or sufficiently trustworthy mean that U.S. defense firms cannot sell to certain states -- markets where Russia has traditionally done well.

Algeria and the United States had almost no defense trade before 2001, but that has changed, threatening not only Russia's dominance but the hopes of other sellers such as France.