Due to fall in exchange rate of ruble, Russia has to make changes in its export contracts in the area of military-technical cooperation. Vnesheconombank (VEB) increased the sovereign risk limit for Indonesia to 16.3 billion rubles (+2.3 billion) in the network of a contract for delivery of Su-30MK2 heavy fighters signed in 2011, Kommersant reports.
A source close to VEB told Kommersant that the sovereign risk limit for Indonesia was increased to 16.3 billion rubles. The supervisory board of VEB approved this decision last week. “This refers to implementation of the contract for delivery of 6 Su-30MK2 fighters to this country. In February VEB set the limit of 14 billion rubles for Indonesia. This limit included contract obligations of Indonesian Ministry of Finance. Due to increase of exchange rate of US dollar to Russian ruble this limit may be insufficient in case of extensive use of the credit line”, — the source said. We remind you that over the first three quarters of 2014 exchange rate of US dollar to Russian ruble increased by more than 20%. According to the source the limits for Indonesia were readjusted for the following exchange rate: $1 = 40 rubles. VEB declined to comment on the matter.
The parties have agreed on delivery of six Su-30MK2 heavy fighters to Indonesia at LIMA-2011 exhibition held in Malaysia. The contract signed in December 2011 also includes deliveries of additional engines and other equipment. However, the contract’s terms and conditions have not been unveiled. According to the sources, in 2012 VEB opened a $399,5 million line of credit for a period of seven years at six months LIBOR plus 0,75% per annum in order to finance the deal. “This refers to a line of credit granted to Indonesian Ministry of Finance in order to assure performance of obligations by the country’s Ministry of Defense in the network of a sum not more than 85% of the total value of contract with Rosoboronexport”, — a source explained.
Thus the value of this contract is around $470 million. As of the date of signing the contract the sovereign risk limit was not set by VEB, because the procedure for assessment of country and sovereign risks was introduced only in 2013, the source added. We remind you that sovereign risk limit set for Indonesia is one of the highest ones in VEB’s portfolio. Only Kazakhstan has higher limit – 17 billion rubles. Sources close to Rosoboronexport say that Russia implemented this contract in 2013; all the aircraft and equipment have been delivered to the customer and put into service. “Russian party plans to continue cooperation with Indonesia in terms of deliveries of aircraft, first of all this refers to military-technical cooperation”, — one of the sources said.
Indonesia purchased 10 “Su” fighters earlier. In the network of a contract signed in September 2003 Indonesian air forces took delivery of two Su-30MK and two Su-27SKM fighters. In 2007 the country purchased six more jets: three Su-27SKMs and Su-30MK2s (the contract was implemented in September 2010). Indonesian Minister of Defense Purnomo Yusgiantoro said in 2011 that “in order to protect the country’s sovereignty” Indonesia “is going to purchase 180 Sukhoi fighters and form 10 squadrons” by 2024.
