"State contracts must take the lead, because one cannot live off exports forever, as we have been doing for the past 10 years," said Konstantin Makiyenko of the Center for Analysis of Strategies and Technologies (ACT).

The research center released its annual list of Russia's top 20 defense firms on Monday, with aviation companies taking the lion's share of business, reaping 75 percent of their revenue from exports, ACT director Ruslan Pukhov said.

Russian defense firms set an export record last year, selling 4.8 billion dollars worth of goods abroad. Meanwhile, the Russian government has set aside 110 billion rubles (3.6 billion dollars, three billion euros) in its 2003 budget for state defense contracts.

"Most of this sum will be devoted to modernizing strategic forces," Makiyenko noted.

Four of the top five firms ranked by ACT in terms of revenue belong to the aviation sector, led by Sukhoi with 1.04 billion dollars (884 million euros).

That firm exports some 90 percent of its products, while number two ranked MiG exports nearly 95 percent.

Makiyenko warned that such heavy reliance on markets like India and China is dangerous, since they "risk being saturated by 2004."

Sukhoi shipped 19 aircraft to China in 2002, 30 in 2001 and in January signed a new contract for 24 fighter jets.

India also buys Russian-made jets and tanks, but Pukhov warned that "the problem of the Indian market is that the competition there is growing with France and Israel."

And Russia's traditional trading partners in the formerly Soviet countries of central Europe are turning away from the Russian market as they integrate closer with the European Union and NATO.

"This remains a good market for the modernization of Soviet-era equipment, but it is probable that they will buy new craft from European and US manufacturers," Pukhov said.

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