The new T-14 Armata ("Армата") main battle tank is a massive 55-ton beast of a weapon boasting multilayered armor and an independent crew capsule, and topped with a fully automated 125 mm main gun firing both cannon rounds and laser-guided missiles. The T-14 Armata isn't expected to be revealed to the public until Moscow's Victory Day parade next month. Then, alongside the latest and greatest toys in President Putin's collection, it will trundle across Red Square in a parade of post-Soviet military might.
But already today, we have a good idea of what it will look like.
Conception meets reality
Last week, a new video surfaced on YouTube purporting to show a dress rehearsal for the upcoming May 9 Victory Day parade, which will celebrate the 70th anniversary of Russia's prevailing over Nazi Germany in World War II. There, alongside columns of current-generation tanks, mechanized bridge-layers, BTRs, and missile launchers, multiple versions of a new weapons systems ran back and forth across the Alabino training grounds southwest of Moscow, as a voice in the background sonorously extolled each weapon by name and function.
Among the military hardware on display, we saw Koalitsiya self-propelled howitzers...
...a new form of wheeled armored car, almost entirely shrouded in tarp, but vaguely resembling a BTR in form...
...and an entire phalanx of new Kurganets infantry fighting vehicles:
Finally, outside the grounds and apparently not part of the parade rehearsal proper, a single, solitary shrouded tank rolled by -- apparently the elusive T-14 Armata:
What it means to investors
So... impressive stuff. But here at The Motley Fool, as much as we love Kremlin-watching and Cold War-punditing, what we're really interested in is finding out whether all of this fancy new Russian hardware means anything to our portfolios.
On one hand, Russia's new investment in modernized military weapons could well inspire the Pentagon to accelerate development of its new M1A3 variant Abrams main battle tank, currently expected to be operational by 2019. Budgets permitting, the Pentagon might even try to revive parts of its Future Combat Systems concept, a $160 billion project to develop a whole new family of armored vehicles for the 21st-century Army.
After all, Russia is spending an estimated $9.2 billion to build its 2,300 T-14 Armata tanks. From what we see in the video, Russia's also developing other armored vehicles derived from the Armata, and additional weapons (Koalitsiya, and that wheeled armored car) as well -- all of which suggest additional defense spending. It's only logical that the Pentagon will see this as requiring a response. That could mean additional revenue dollars for BAE Systems (NASDAQOTH:BAESY), Textron (NYSE:TXT), and General Dynamics (NYSE:GD), which together build most of America's armored vehicles. Revenues which, according to S&P Capital IQ, translate into operating profit margins of anywhere from 5% (BAE) to 15% (General D).
It's not all good news for these defense contractors, however. This year, Russia is expected to sell as much as $15 billion worth of weapons in international markets. According to Reuters, Putin has publicly proclaimed his intention to "expand" Russia's sales of "high-tech military products" to customers in "the Asia-Pacific region, Africa, Latin America and the Caribbean."
Crucially, Russian tank manufacturer UralVagonZavod (UVZ) says its T-14 Armata will sell for "half the cost of its rivals." Assuming the other weapons being demoed on Red Square next month sell for similar discounts, this threatens to drastically underprice U.S. arms manufacturers in international markets -- potentially siphoning away sales.
So the moral of this story? Even after Crimea, and even after Ukraine, the real struggle between the U.S. and Russia these days may be the struggle for global dominance... of market share.
Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 353 out of more than 75,000 rated members.
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