The long freeze in Russia's enormously lucrative arms trade with China may be coming to an end as the Kremlin has agreed to sell Mi-171 transport helicopter assembly kits to Beijing.

On May 12, Russia's official RIA Novosti news agency cited a report in the Moscow business newspaper Vedomosti that a manufacturing plant in southwest China had begun work on integrating Russian-designed Mi-171 transport helicopters.

According to the Vedomosti/RIA Novosti report, China has bought assembly kits for the Mi-171s from a Russian factory in Ulan-Ude and it intends to make 20 of the copters per year, eventually boosting its production capacity to 80 per year.

"We consider this project as the beginning of a trend to assemble Russian helicopters in China," Vedomosti cited an official as saying in the Oboronprom Corp., which runs Russian Helicopters, a helicopter manufacturing group.

RIA Novosti described the Mi-171 as "an export version of the Mi-8 Hip helicopter." The venerable but durable and reliable Mi-8 was the Red Army's workhorse transport helicopter for military operations in the eight-year Afghan War from 1979 to 1987. It is still being built in two factories in Kazan and Ulan-Ude, having been upgraded with more powerful turbo-shaft engines, the Russian news agency said.

Vedomosti reported that China's Lantian Helicopter Co., located in Sichuan province, had already won orders worth $42.8 million to sell some of the Mi-171s it produced to other countries.

"The Chinese are planning to export (Mi-171) helicopters to Pakistan and Africa, which may hurt Russian exports," the Oboronprom official told the newspaper. "In addition, the successful implementation of the project could leave Russian manufacturers short of component parts."

China has vastly greater general industrial capacity than Russia, even though its armaments industries are far less advanced. As we have repeatedly documented in these columns, Russia under President Vladimir Putin, over the past eight years, has consistently proved reluctant to make the kind of weapons co-production deals with China that it has freely done with India, especially for the manufacture of advanced ground combat and tactical ground support aircraft and helicopters.

The Russians recognize China's immense industrial potential and do not want to give Beijing the capability to supersede Russia as the most militarily powerful and advanced land power in Asia.

The new Mi-171 helicopter agreement between Oboronprom and the Lantian Helicopter Co. at first glance appears to contradict this established Russian policy. After all, the Chinese have wasted no time in leveraging their anticipated acquisition of Mi-171 technology into muscling in on Russia's own lucrative exports for the helicopter.

Also, Lantian looks likely to prove a formidable rival to Russian helicopters in terms of its production capabilities. They are already anticipating a rapid expansion that could produce 80 M1-171s a year, whereas the Russians have maxed out currently at a production level of 120 a year in 2007, though they wanted to fulfill orders they had won for 150 of the helicopters that year.

RIA Novosti said the reason for the Russian production shortfall last year was "a shortage of transmissions and rotors," and the news agency also said that particular bottleneck was likely to continue.

However, this continuing production blockage provides an important clue as to why the Russian government allowed Russian Helicopters to make the deal with Lantian in the first place.

Next: Why Russia made the deal