Jet Deal Boosts Moscow’s Arms Exports : Military: Sale of 18 MiGs to Malaysia is biggest in years. It shows Russia has learned to compete in world market.

Russian arms exports, pushing to break out of their post-Cold War slump, are expected to gain their biggest boost in years today when Moscow closes a $550-million deal to supply MiG-29 fighter jets to Malaysia.

The 25-year contract, to be signed in Kuala Lumpur, not only provides Russia with its first major new post-Soviet arms customer but indicates that its government weapons merchants are starting to get the hang of the rough world market, experts say.

“This is a breakthrough,” said Alexander Konovalov, a military policy analyst at Moscow’s USA-Canada Institute. “Russia has spoken about the necessity to appear in the civilized arms market. This is the first case where we practically reached this goal.”

The Russian victory after a grueling two-year battle for the contract portends new fights ahead for U.S. competitors, who have come to dominate the Third World arms market since the Soviet Union’s collapse.

Malaysia is also ordering eight F-18 fighters put out by the McDonnell Douglas Corp. and 28 British-made Hawk aircraft. But it was the request for 18 MiGs that broke ground, amounting to Russia’s first big incursion into the growing Southeast Asian arms market.

At Rosvooruzheniye, the new government-controlled company created in February to bring order to the export of Russian weaponry, marketers touted the Malaysian sale as a sign that they were learning the flexibility needed to compete.

“This shows that Rosvooruzheniye is perfecting its work, becoming more able to do complex deals to meet the interests of our customers . . . what other suppliers were already offering,” said Anatoly Tomashevich, head of advertising.

Malaysia will pay 20% to 25% of the cost of the 18 MiGs in supplies of palm oil, according to the Itar-Tass news agency, which said Moscow’s willingness to accept that payment-in-kind was what clinched the deal.

Palm oil is used largely in the manufacture of soap, cosmetics and margarine.

Moscow’s arms exports slumped in the early 1990s, in part because it gave up client-states that it had supplied with weapons for political reasons without getting much in payment.

But Russia’s arms income also dropped because it complied with international sanctions against Iraq, Libya and the former Yugoslav federation, losing what nationalists here say would have been billions of dollars in sales.

Despite those losses, China and India remain good customers, and Russia sold about $2 billion in arms altogether in 1993. But officials here also complained bitterly that they were being blocked from the international market by U.S. and other competitors.

Oleg N. Soskovets, the Russian vice premier who arrived in Malaysia on Monday to sign the MiG deal, griped just last month that “competitors of Russia are trying to drive us out of the world weapons market.”

Russian officials also acknowledge, however, that their poor sales were partly their own fault--they had gone from one extreme to another, from propping up allies with easy credit to demanding cash for every deal. Now, they say, they are learning to offer sweeteners such as “offset” deals, which allow buyers to do more of the production in their own countries.

For the United States, the Russian arms exports are good and bad. They may take business away from the U.S. arms industry, which could cost more jobs in factories already hurting from the drop in domestic demand. On the other hand, said Konovalov of the USA-Canada Institute, the world should hope Russia makes progress in legitimate arms exports--because otherwise it may resort to supplying pariah states.

“It’s a dangerous situation if Russia is pushed out of the civilized market,” he said. “These weapons will appear in some other place.”