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AIRSHOW-Russia arms trade chief sees no big surge in arms sales

PARIS, June 20 (Reuters) - The Russian weapons industry remains competitive on a global scale despite Western sanctions, but the cyclical nature of the business and budget constraints are dampening prospects for a big surge in global arms sales, Russia's top arms trade official said on Tuesday.

Dmitry Shugaev, director of Russia's FSMTC agency, which oversees arms exports and imports, told reporters at the Paris Airshow that Russia saw continued demand for military aircraft, which account for 40 to 50 percent of its annual arms exports of around $15 billion.

He said he expected Russia to maintain its spot as the second largest arms seller in the world behind the United States.

"We are quite positive about the future," Shugaev told reporters, speaking through an interpreter, although he said his agency did not foresee any major increases in arms exports in the next two to five years.

Shugaev said Russia was focused on continuing to make its arms sales offerings more competitive by developing new technologies, adding more servicing and logistics contracts, and looking for opportunities for joint development projects.

He said Russia was watching developments on the global market, where its traditional customers like India and Vietnam have become increasingly open to dealing with the United States.

"We're living in the real world. We've witnessed the new trend," Shugaev said. "We're taking it all into account, but we don't think there is a substantial shift in those markets."

China, Vietnam and other countries remained key strategic partners, despite their increasing interest in partnerships with other regions, Shugaev said.

Asked if Russia's increased military presence in the Middle East opened up potential new markets there, Shugaev said Russia had long had business deals in the Middle East, including with the United Arab Emirates.

He said Russian industry had adapted to sanctions imposed after Moscow's annexation of the Crimea region of Ukraine in 2014 by, for instance, building an indigenous capacity to produce parts that had previously come from European firms.

But he said European partners had told him privately that they were "really tired" of sanctions and they believed "it's not in our common interest that sanctions continue."

Despite that, he said Russian industry was continuing to export at a high level. "We are optimistic. It was not we who burned the bridges. I believe our share in the defence market will remain as high as it is." (Reporting by Andrea Shalal; Editing by Mark Potter)