Ambitious efforts to modernize Russia’s defense and industrial base undertaken during the Putin administration have been paying off—at least, in some cases. The Russian leadership uses arms sales for economic gain, but also as a tool of influence in the recipient countries.

The Russian military-industrial complex, one of the few national industries that maintain some competitive advantage in comparison with the West, is a source of the Kremlin’s cash and prestige. Leftover stockpiles from the Soviet military past were large enough to keep Russia active in arms sales in the post-Soviet years. To capture and maintain market share, Russia sells equipment at deep discounts or fosters joint weapons development.

The recent instability in the Middle East, however, is likely to have a negative impact on the country’s arms sales, because in the past decade this region has been one of the most significant recipients of weapons “Made in Russia.”

The government of Russia is actively engaged in assisting the export efforts of the country’s domestic arms industries in the competitive international arms market. Russia is the world’s second-largest arms exporter after the U.S. and was one of the main suppliers of weapons to Libya. To facilitate exports, in 2008, Russia forgave $4.5 billion in Libya’s Soviet-era debt.

In January 2010, Libyan Defense Minister Yunis Jaber signed a number of arms sale agreements with Russia. These contracts were aimed at delivering combat planes, modernizing Soviet-made tanks, and launching a plant producing Kalashnikov automatic rifles in Libya. The Libyan army currently has some 4,000 units of Soviet-era armored vehicles, a large number of surface-to-air systems, and ships. Since 2005, Russia negotiated numerous contracts with the Libyan government on modernization of its tactical ballistic missile force, tanks, infantry vehicles, training aircraft, and fighter jets.

Following the United Nations Security Council resolution from March 17, 2010, which Prime Minister Vladimir Putin criticized ex post facto (though Russia abstained from the vote), Moscow has suspended its arms contracts with the government of Colonel Muammar Qadhafi. According to estimates by the Russian state arms exporter Rosoboronexport, it lost close to $4 billion in Libya alone.

Russia has been actively proliferating its weapons in other Middle Eastern countries as well, especially Syria. Russia is likely to lose revenues from these contracts should Qadhafi and/or President Bashar Assad be replaced.

Libya is not the only country in the Middle East where Russian arms exporters have been active. Russia’s weapons sales to Iran and Syria have improved these two terror sponsors’ air defense capabilities. Russia (and China) also voted against a U.N. Security Council resolution to impose sanctions on Syria, among other things, because Moscow resents losing another weapons market.

And there is more. Russia’s arms contracts with Algeria, yet to be fulfilled, are worth more than $17 billion. Despite EU and U.S. weapons embargoes on Sudan and Zimbabwe, Russia continues to provide these unstable regimes with weaponry. Importantly, some of the customers, e.g. Algeria, chose not to expand their weapons acquisitions in Russia, citing the lower quality of the Russian arms, especially the aircraft, compared to the West.

As the “Arab Spring” unfolds, through meaningful carrots and weighty sticks Washington should initiate consultations with Moscow, seeking to ensure that the government of Russia avoids supplying arms to conflict zones and helps prevent destabilization in the already volatile Middle East.

This blog was co-authored by Andriy Tsintsiruk