Maybe They Should Call It The Arms Bizarre

As director of the U.S. Defense Intelligence Agency in the late 1980s, Lieutenant General Leonard H. Perroots kept cordial but aloof relations with Soviet military leaders. So it was with some trepidation, in April, 1990, that he knocked on the door of the Soviet military attaches' building in Washington--to be greeted by some stunned hosts. Perroots, by then retired and the president of a private military-research company called Group Vector, was shopping for some Soviet missiles. "It was a bit of a shock on both sides," he recalls.

The offer wasn't as odd as it sounds. Among other pursuits, Vector, a $68 million company formed in 1984 by missile expert Donald G. Mayes, buys missiles, removes their warheads, adds test circuitry, and sells them to the U.S. Navy to use for target practice. Foreign missiles tend to be cheaper than U.S. systems, so Vector often shops abroad. After two years of bargaining, over dozens of shots of vodka, Vector is closing in on its deal: a five-year, $100 million-plus contract with the Russian Defense Ministry for more than 150 advanced sea-launched missiles now in stockpiles. Russian Deputy Prime Minister Yegor Gaidar has approved the sale, which awaits President Boris Yeltsin's signature.

SPARE PARTS. How did Vector get this far? The answer seems to be good connections and great timing. Perroots knew the Russian military brass. And Vector's international director, a Greek named Steve Stylianoudis, had, as an independent dealer, brokered sales of Russian spare parts to Arab buyers. The Soviet military's precarious financial position helped--as did the warming in superpower relations. "If I thought there was a chance our two countries would go to war, I would not be doing this," says former Russian Defense Attache Major General Grigoriy D. Yakovlev of his dealings with Perroots, whom he now calls Lenny.

Pentagon officials, who would have been rebuffed if they had approached Moscow directly, are delighted. "Demonstrating the capability of your combat system against the actual threat is of far greater value than simulated testing," says a Defense Dept. official, who worries that the weapons might someday be a danger once again. Vector will ready the missiles and their launchers so that the Navy can use them as clay pigeons on its test ranges off the Atlantic and Pacific coasts.The missile deal is opening other Russian doors, some of which will expand Vector's range of businesses. In its traditional arena, Vector recently got rights to market a combat helicopter built by Kamov Helicopter & Scientific Technology Co., a Russian armaments maker. Vector expects to sell some of the choppers to the Pentagon. But "sales will be modest," says founder Mayes, Vector's executive vice-president, because of concern about Kamov's ability to provide spare parts and service.

Moving beyond its role as an arms broker, Vector is discussing a nuclear-waste-cleanup project with officials in Moscow and negotiating a three-way joint venture with an Italian company to develop a global navigation system based on Russian and U.S. satellite technology. A Vector subsidiary is also helping the Russian government transform Archangelskoe Palace outside Moscow into a deluxe hotel. Vector will co-own the 35-acre estate and manage the renovation, which will include--get ready--a casino.

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