Russian generals are driving armament makers out of the country

20.07.2011 — Analysis

The confrontation between the Russian Ministry of Defense and enterprises of the military-and-industrial complex resulted in thwarting of the government arms order for 2011. President Dmitry Medvedev hammered "the sword of Damocles" onto the heads of factory directors who, however, had anticipated that military officials were going to pin the blame for all their problems on them. Long before the failure of the program was brought to the public view the defense manufacturers had taken actions to hedge themselves. The RusBusinessNews reporter has found it out that in order to keep up production capacities Russian armament manufacturers aimed to secure markets of the former Soviet Union’s republics – seeking for contracts for repair of armored vehicles.

The tension in the relationships between the RF Ministry of Defense and manufacturers of military hardware started to mount back in 2010. At that time the defense manufacturers demanded that the military department should change its pricing policy regarding military products, due to which the profit reached 10-12% at maximum. However, the demand was not heard. Moreover, Anatoly Serdyukov, head of the ministry, trying to explain the wrecked defense order for 2011, stated that the military department did not sign contracts for more than 100 billion rubles due to the "runaway increase" in prices for some product items. For example, according to Alexander Postnikov, the Commander-in-Chief Land Forces of Russia, instead of one T-90C tank, which, in his opinion, costs 118 million rubles, it is possible to buy three German Leopards.  

In anticipation of the disposition of forces on the battlefield in the fight for the defense order, defense manufacturers started their search for the "emergency exit". In May 2011, defense enterprises of the Chelyabinsk Region made their first steps towards the CIS market, offering their services in repair of military hardware. The core equipment of the armies of the former Soviet republics is the Soviet equipment and machinery that remained after the dissolution of the Communist empire as well as armored vehicles and aircraft purchased from Russia. The hardware has worn out and needs to be repaired; however, not all Moscow’s neighbors have the adequate material and technical resources. According to Alexander Andriyanov, head of the Machine-Building and Defense Industry Department at the Chelyabinsk Regional Ministry of Industry, Russian enterprises are not allowed to supply tanks, infantry fighting vehicles or military motor vehicles in circumvention of the RF Ministry of Defense, but they may sell spare parts. Taking advantage of this permission, the Ural Automotive Plant, OJSC, Electromashina, OJSC, and ChTZ-Uraltrack, OJSC, negotiated and made arrangement for supplies to Kazakhstan in May 2011.

Following the example of Chelyabinsk enterprises, the Research and Production Corporation UralVagonZavod, OJSC entered into an agreement with Kazakhstan. The National Company Kazakhstan Engineering has become its partner in the new service center for repair and upgrading of military hardware. Oleg Sienko, General Director of UralVagonZavod, states that Kazakhstan’s army is equipped with armored fighting vehicles that need upgrading and stable maintenance to be ready for action. The number of equipment and machinery items justifies the opening of the service center.

Experts think that this solution is quite logical in the current situation. Many defense-related enterprises have the right to conduct independent foreign economic activities aimed at service provision and supplies of spare parts for military hardware that was previously shipped to foreign customers.

The cost required to maintain the life cycle of military products as well as to perform their repair and upgrading is equal to the amount comparable with the price of such products. Therefore, Russian defense manufacturers will be able to keep their manufacturing facilities viable with proper arrangements made with their CIS neighbors. The only difference is that they will work to ensure adequate functioning of equipment in armies of other countries rather than to strengthen the defense system of Russia.  

Defense equipment manufacturers are sure that this situation will remain unchanged until the Russian military department offers acceptable pricing policy and well-thought strategy of the army’s re-equipment and rearmament. The military community is not satisfied with the quality and prices for tanks; thus they are not going to buy them; however no one intends to invest in design development of new models. In the opinion of Vladislav Shurygin, the military expert, it means that the RF Ministry of Defense is not concerned about the pressing problems of the army and military industry. There is no argument that Russian armored vehicles can hardly be seen as the most advanced machines, but the army is satisfied with such tanks for the present-day warfare needs, with the existing armed and adversary forces. If purchases are discontinued, the production is shut down and the manufacturers plunge into five years of stand-by period, waiting for innovative products from designers, the whole sector will be destroyed. Within this five-year period, the armor production as well as manufacturing of weapons and tanks will fall apart.

His opinion is shared by Alexander Khramchikhin, an expert from the Institute for the Political and Military Analysis. According to him, tanks still play an essential part in the traditional warfare. In 2002, Americans used their tanks in Iraq, and Russia won the war with Georgia in 2008 thanks to its tanks.

In the meantime, the Research and Production Corporation UralVagonZavod, OJSC whose products was first to be criticized by the military is ready to introduce a new T-90AM tank. The tank-show is schedules for September 8-11, 2011 at the Russian Expo Arms Exhibition in Nizhny Tagil. Oleg Sienko is sure that this tank will be a decided step forward in the tank-building industry. It is equipped with an innovative automatic loader, vision devices, protection and a gun. Besides, UralVagonZavod is developing the Armata tank that will come into being in 2015. However, it is still not clear whether the Ministry of Defense is going to buy new Russian tanks.

Dmitry Vasiliev