ihs.com

Page 1 of 3© Copyright IHS and its affiliated and subsidiary companies, all rights reserved. Alltrademarks belong to IHS and its affiliated and subsidiary companies, all rights reserved.

BUSINESS, Cuba

Date Posted: 05-Nov-2015

Jane's Defence Weekly

Peruvian helicopter deliveries expected totake place by end of year

Charles ForresterLondon

Peru is expected to take delivery of 11 of its Mil Mi-171Sh 'Hip' by the end of the year, platformmanufacturer Russian Helicopters has revealed.

The 3 November announcement comes after deliveries of the helicopters were reportedly delayedin September, following concerns from the National Bank of Peru relating to the payments offunds to Russia. The concerns stemmed from the potential reach of US and European sanctionsagainst the Russian defence industry that had been implemented in 2014.

Peru is expected to take delivery of 11 Mil Mi-171Sh 'Hip' helicopters by the end of 2015. (Russian

ihs.com

Page 2 of 3© Copyright IHS and its affiliated and subsidiary companies, all rights reserved. Alltrademarks belong to IHS and its affiliated and subsidiary companies, all rights reserved.

Helicopters)1398563

The Bank's concerns prevented the transfer of USD200 million to Russia, causing a flurry ofnegotiations between Russian national exporter Rosoboronexport and the Peruvian Ministry ofDefence.

The Peruvian armed forces originally ordered 24 of the helicopters in late 2013 in a dealreportedly valued at USD400 million, with initial deliveries taking place in 2014. The remaining 16platforms were expected to be delivered in 2015, but were delayed by the payment crisis. Afurther eight were ordered in mid-2014, which will bring the total number operated by Peru to 38.

As part of the 2013 contract, Russia will also provide simulators, a training package in Russia, andthe establishment of a regional centre for helicopter maintenance and repair in Peru that will beopened in 2016.

Expanding regional presence

In addition to the creation of a regional service centre in Peru for the helicopters, RussianHelicopters announced on 2 November that it was in negotiations to establish a new regionalservice and support centre for Mil Mi-8/17/171 in Cuba.

Under the plans, the ARZ Yuri Gagarin (Cuba) works would receive upgrades to their capabilities,as well as certification, to undertake maintenance, repair, overhauls, and upgrades on civil andmilitary platforms being operated on in Latin America and the Caribbean.

The plan comes as Russian Helicopters is continuing to promote upgrades and modernisation tosystems such as avionics, flight control systems, self-defence suites, and engines to the widelyused platform.

COMMENT

The unblocking of the Peru deal, with the confirmation that deliveries are to take place in thecoming weeks of a number of helicopters, will come as a relief to both the Peruvians and theRussians.For Peru, the country is currently facing continued security concerns from threats such as theillegal trade in narcotics and domestic security. Furthermore, the country has highlighted that it isexpecting to face severe weather conditions in the coming months as the El Niño phenomenonhas shifted, bringing the prospect of severe rain, flooding, and landslides - natural disasters thatwill require additional rotary-wing lift for disaster relief operations. The country has, as a result ofthe expected changes in weather, cancelled its participation in the 2016 Dakar Rally, with thegovernment expecting to need to deploy its assets elsewhere in the country at short notice.For Russian Helicopters, the move to conclude the deal will mean that the company is able todraw a line under the outstanding financial balance at a time when Russia's defence industry isfacing increased competition and restrictions due to sanctions. The Peruvian deal represents afurther step for the company to consolidate its place in the region, which is highly competitive anddemanding from users and purchasers alike.Additionally, the establishment of the service centre in Cuba comes as the company has beenallowed to undertake foreign sales and service negotiations independently of Russian arms exportagency Rosoboronexport. The licence to undertake these activities, granted in 2014, allows thefirm to operate with greater flexibility to customer country requirements, and will also help todrive down costs, as there is no commission taken by the export agency.