Strategic Analysis: Russian Business Activity in Kenya (Abstract)

 

Strategic Analysis: Russian Business Activity in Kenya (Abstract)

Posted Tuesday, May 17, 2016 at 11:25am

Like many other African countries, Kenya purchases a significant amount of Russian arms and has a passed a number of its security professionals through Russian-sponsored training programs and scholarships. Kenyas purchase of Russian arms has grown considerably in recent years, although Russia is still just one of a number of procurement sources for the country. Kenya still receives a great deal of its military equipment from Spain, the U.S., Germany, Jordan and Israel.

Trade between the two countries, however, is relatively limited, totaling around $200 million per year. The discovery of significant amounts of oil in Uganda and Kenya in recent years, however, could be a temptation for Moscow to engage Kenya more fulsomely in the period ahead. It has already done so in neighboring Uganda, with RT Global Resources (a wholly-owned subsidiary of Russias arms conglomerate, Rostec) winning a $4 billion award to build the countrys new oil refinery. That deal, however, was recently overturned due to inaction.

Despite limited economic and financial activity between the two countries, Russia demonstrated renewed interest in Kenya following the election of President Uhuru Kenyatta in 2013. Soon after being elected, President Kenyattas first overseas visit was to Moscow and then Beijing, calling for closer trade relations. In this connection, Russia launched a new institution in 2015, called the Russian-African Forum, which was founded to nurture new business ties between the two countries. It had its first meeting in Kenyas capital, Nairobi, from January 27 to 31, 2015. Priority energy and infrastructure projectswere discussed. The next gathering was in April 2016 (in neighboring Tanzania). Companies sponsoring these gatherings included the following leading Russian industrial and defense contractors

• Sukhoj Civil Aircraft
• Irkut
• United Wagon Company
• Kamaz
• Rostselmash
• Chelyabinsk Tractor Plant
• Melinvest
• Avgust
• Edagum
• Power Machines
• Rotek
• Inter RAO
• Metprom
• Morton
• Veya Investments
• VEB
• Farex

Excerpted Deals and Transactions

• In 2011, Kenya received 88 BRDM‑3 armored reconnaissance vehicles from Rosoboronexport at a cost of $101 million, while offsetting the cost through Rosoboronexport purchasing back the Kenyan military vehicles they will be replacing.

• In 2013, Nairobi spent $20 million acquiring military equipment from Russia, including five Mi-28 attack helicopters, with another 11 on order.

• In 2013, Kenya also purchased $29 million in arms from Serbia, including artillery systems and armored personnel carriers.These are produced at a factory in the town of Velika Plana, which operates in cooperation with Russias leading arms exporter, Rosoboronexport. The Russian company produces the chassis and bodies for military vehicles made at the Serbian factory.

• In June 2014, Russia offered training to officers in the Kenyan military to improve their anti-terror capability.

• Fertilizer is often prohibitively expensive for Kenyan farmers as well as industrial growers. In 2015, the Kenyan government subsidized the import of significant quantities of Russian fertilizer for the tea industry, bringing in the product at a significantly cheaper price than could be purchased on the local market. Given the important role of the agriculture/horticulture industry to Kenya, these imports carry outsized importance as a dimension of the bilateral relationship.