Yesterday’s Moscow Komsomolets carries an article (here translated by RIA Novosti) about the end of negotiations between the Russian and Chinese governments over the proposed sale of Sukhoi-33 naval fighter aircraft. Komersant reported back in 2005 that the sale would proceed in two phases: an initial two test aircraft for $100 million, followed by options for another 48 for a total contract value of $2.5 billion. (At least we know the going rate of a Sukhoi-33.)
The deal, Komsomolets reported, collapsed over fears that the Chinese were not interested in the aircraft themselves, but merely in reverse-engineering the design from the initial two articles. As the paper observed, that had happened once already:
In 1995, China secured a $2.5-billion production license from Russia to build 200 Su-27SKs, dubbed J-11A, at the Shenyang Aircraft Corp. The deal required the aircraft to be outfitted with Russian avionics, radars and engines. Russia cancelled the arrangement in 2006 after it discovered that China was developing an indigenous version, J-11B, with Chinese avionics and systems. The decision came after China had already produced 95 aircraft.
Note that the Sukhoi 33 is a derivative of the Sukhoi 27 (and thus, incidentally, an unusual example of a land-based fixed-wing aircraft successfully adapted for shipboard use). Even with this history, Sukhoi and Rosoboronexport were willing, it seems, to assume some risk of recurrent Chinese intellectual piracy: they had offered to sell, but only in a minimum quantity of 24 aircraft—an entire shipboard regiment. Despite its ultimate requirement for a full shipboard load, Beijing declined to take more than 14 at once, providing some further evidence that reverse-engineering was the real goal.
I have written at some length about how the leakiness of knowledge in military contracting has certain advantages. It permits dissimilar firms to work together closely, without the administrative burden of contracts and monitoring, while allowing them to maintain the flexibility that independent entities enjoy in uncertain markets. That sort of cooperation, however, requires a certain level of trust, a a governing incentive system for a counterparty’s actions, or an effective enforcement mechanism (whether legal, commercial, or otherwise). Much has been popularly made of the dependence on trust in the Chinese way of doing business. From this ongoing saga with Sukhoi, it’s fairly clear that the pattern does not extend to the business practices of the so-called People’s Liberation Army.
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