A reader recently asked:
What’s the cost of one division of the S-400 for Russia and for foreign customers?
Let’s call it a battalion (дивизион). We’ll start with exports (for which there is actually data). And we proceed from what was paid for the S-300.
Russia’s planned sale of the S-300PMU1 to Iran reportedly involved the transfer of five “battalion sets” for $800 million. Some sources said as much as $1-1.2 billion.
Let’s guess the “battalion set” has three firing batteries, with two launchers per, for a total of 30 TELs, 120+ missiles, and all associated radars, fire control systems, and vehicles.
If $800 million is accurate, the price for one battalion was $160 million. The price for one S-400 system, four missiles on a TEL, was roughly $27 million.
This isn’t unlike what the Chinese paid for the S-300 in the 1990s and 2000s. According to Sinodefence.com, they bought battalions for between $25 and $60 million at different times under different contracts.
That done, we make the leap from the S-300 price to the S-400 price.
A couple years ago, Vedomosti drew the scarcely precise conclusion that the price of the S-400 will double the S-300’s price (and the S-500 double the S-400’s).
So perhaps a “battalion set” or a battalion of the S-400 will go for $320 million. That would be one full-up launch vehicle for $40-50 million.
The only other shred of information is the widely-reported Financial Times story saying, if the Russians added the S-400 to a $2 billion arms deal with Saudi Arabia, the price of the sale would climb to $7 billion. But lots of Russian reports say Moscow won’t be selling the S-400 abroad soon. The military obviously hopes that’s true, so it can get first.
But not every customer is Iranian, not every one will have to pay a premium price, and not every customer is foreign.
Which brings the trickier question of what Russia’s Defense Ministry has to pay. It’s simply impossible to guess.
Certainly a lot less than buyers abroad. The military’s bought some S-400 systems so there is a going price. OAO Concern PVO Almaz-Antey’s costs are a big question as is the level of profit the government is willing to tolerate.
The government owns Almaz-Antey, so one part of government is selling to another. It’s a prime example of angst over GOZ “price formation” in recent years. There was a similar big-ticket dustup over submarine prices with Sevmash. It’s something of a Mexican standoff. The buyer doesn’t have other supplier alternatives. And the seller may not be allowed to sell elsewhere.
The Defense Ministry, the government don’t want to pay a lot and have the power to refuse and yet still receive goods. The question is how many. That’s ECON 101, friends.
If those buyers set their price below equilibrium, Almaz-Antey will provide a lower than desired quantity more slowly than the buyers want. And Almaz might have other buyers as an option, an advantage Sevmash lacks. So “price formation” for the S-400 is all about agreement on Almaz’s costs and an acceptable level of profit. That agreement is apparently not smoothly worked out yet.
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