Russian arms export sales inched up to their highest level since communism's collapse, $3.8 billion for last year, according to a Moscow-based think tank – but some outside analysts downplayed the result, saying Russia still faced several hurdles in its battle to remain a world-class military supplier.

"Clearly, there are problems ahead for Russian arms exports," said Bjorn Hagelin of the Arms Transfer Project, run out of the Stockholm International Peace Research Institute. "Basically, the country just doesn't have enough money to develop new weapons."

Compared with Soviet-era transactions, today's figure highlights just how dramatically the country's position as a global arms supplier has changed. In 1990 alone, the year before the Soviet Union dissolved, Moscow's arms sales amounted to $16 billion, and in 1987 to roughly $30 billion, according to statistics compiled by the U.S. Arms Control and Disarmament Agency.

Anthony Cordesman, a senior fellow at the Center for Strategic and International Studies in Washington, D.C., said that predictions in global weapons trading were difficult to make, but he noted that Russia emerged from its immediate post-Soviet paralysis onto a tight market – and not necessarily with a competitive edge.

"Russia does not provide the support and training network that others provide [along with their weapons]," he said, adding that with Chinese arms sales gaining ground and no major regional armed conflicts, the market was shrinking.

The $3.8 billion figure, calculated by the Moscow-based Center for Analysis of Strategies and Technologies (CAST), falls shy of predictions made in July by Deputy Prime Minister Ilya Klebanov, who estimated that Russian arms sales would pull in $4 billion by the year's end. That figure was meant as a step toward a more distant goal of $5.5 billion to $6 billion in annual sales.

Currently, Russia is No. 2 among the world's arms suppliers; but it is a distant second, according to Arms Transfer Project data. From 1995-99, Russia sold roughly $14.6 billion in arms, while the United States sold nearly $53.4 billion worth over the same period. France comes in a close third.

"The major challenges for Russian arms exports aren't external, but internal," said Ruslan Pukhov of CAST, who added that unless Russian arms companies restructure, and the government implements policies ensuring this will happen, in five years Russia will be selling weapons to only the poorest and most undiscriminating buyers.

Meanwhile, during his first year in office, President Vladmir Putin has worked to consolidate many of the government-run arms trading companies that operate as mandatory intermediaries between most Russian suppliers and foreign customers.

In April, Rossiskiye Tekhnology was collapsed into Promexport, which in turn merged with the country's largest arms-exporting operation, Rosvooruzheniye – forming a new company, Rosoboronexport. Only a handful of manufacturers, such as the maker of the MiG-29 aircraft, can sell their products on the world market independently of Rosoboronexport.

"We will see some positive effects of these changes in next year's figures," said Pukhov, who said he also expected short-term growth from "Russia's decision to withdraw from its gentleman's agreement with the United States," over arms sales to Iran. He added that it was likely that Russia would start selling arms to the Islamic republic, despite the political costs.

Currently, Russia has only two major customers, India and China – each purchasing more than $1 billion in Russian arms annually. However, here too, analysts were cautious about the lasting potential of these relationships.

"India pays for some of the research and development that Russia puts into the arms [India] buys," said Hagelin, "but China is hardly able to do that on a large scale."

Worse for Russia, Pukhov said, is that the two countries have been gradually developing their own weaponry. "[India and China] have been taking Russian technology, cloning it and then pushing it to the next level," he said, adding that Russian technology will have to improve.

According to CAST, Russia's export volumes were worth $3.4 billion in 1999, and the previous high was in 1996 when sales stood at $3.5 billion. Russia's main military exports are in the aircraft sector.