Russian Army’s Squeaky Wheels

26.10.2009 — Analysis

The autumn 2009 in the Urals is marching under the banner of struggle for the state defence contract. The RusBusinessNews observer has found out that at many plants people still do not know what state contract they are going to get next year and there is not enough working capital to complete the current year's contracts. 

On 14 October2008 the RF Defence Minister had declared the beginning of the establishment of a "new image" of the country's Armed Forces. In precisely a year's time this statement in the Urals resulted in a considerable cut down of the financing of the state defence contracts at the MIC enterprises. For the period 2009-2011 the Defence Administration is planning to cut the number of servicepersons from the current 1 million 130 thousand down to a million. The ground troops of the "new Russian" army will have just 172 formations and forces. This means that the infantry will be "squeezed down" to the size 11 times smaller. It would be logical to assume that the Defence Ministry is planning to cut down the spending on the provisioning of the armed forces with various equipment.

As a result of this one of the leading suppliers of heavy duty trucks, the Ural Automobile Plant, has found itself in a highly stressful situation in the autumn of 2009. The RF Defence Ministry has notified the company about the termination of the three year (2008-2010) contract and the cut down of financing for the current year. The regional authorities, however, managed to defend the interests of the Ural Plant.

According to Valery Panov, Member of the State Duma of the RF, the President of the PROMASS Association, after several addresses to the Minister Anatoly Serdyukov, the Defence Administration decided to keep the number of the Ural trucks shipped to the Armed Forces in 2010. It is worth pointing out that the initiative of the Ministry of Defence contradicted its previously adopted principle of the parity supplies of automobiles to the Armed Forced by various domestic suppliers on competitive basis. Stripping the Ural Automobile Plant of the state defence contract which amounts to 50% of the production could have caused a social catastrophe in the town of Miass where the Automobile Plant is the economic mainstay and the largest tax payer. Hundreds of suppliers of the company and several tens of manufacturers of specialised machines based on the Ural truck chassis have also found their survival in jeopardy.

The Ministry of Defence justifies the aborted sequestration by the very same concept of the "new military image". The plans of the Administration include the liquidation of 9 reduced staff automobile brigades. 20 constant alert automobile squadrons for the delivery of material supplies to the troops will be formed on the basis of these former brigades. Each military district would have just 2 constant alert automobile squadrons, operational commands of ground forces will have a squadron each.

According to experts, however, the real reason for the attempt of dissolution of the state contract between the Ministry of Defence and the Ural Plant is in the active lobbyist activities of KamAZ management. Allegedly it is for their benefit that the rear colonels were going to reconsider the contracts already signed with the Urals plant.

The question whether the Russian army moves and fights more effectively on the Ural or on the KamAZ wheels is no more than purely philosophical. The Chelyabinsk Military Automobile Institute clarified for RusBusinessNews that both Ural trucks and KamAZ trucks have advantages and disadvantages when used in the Armed Forces. Ural trucks are better adapted for achieving military goals in the field tactical applications, undemanding and easy to use. KamAZ trucks are better on the road, they are faster and more agile when travelling long distances on good roads.

In the meantime the troop units unofficially give preference to the Ural workhorse. One anonymous source pointed out that should a war break out today, it will be won with the use of the Ural trucks currently in storage. KamAZ truck will be transporting humanitarian aid along tarmac roads, like in the South Ossetia.

Ulyanovsk Automobile Plant (UAZ) had better luck this year than the Ural Plant. The company told RusBusinessNews that the Ministry of Defence commissioned the development of a unitary cross country vehicle based on the UAZ Hunter offroader.

The multipurpose command vehicle is fitted with a diesel engine made by PJSC "Zavolzhskiy Motor Plant" (ZMZ). This is the new 2.2 litre 106 bhp turbocharged intercooled diesel. The military UAZ Hunter will be fitted with the Korean 5 speed gearbox Dymos which would significantly improve the vehicle's offroad capabilities and reliability. Before it is sent off to the service it will be fitted with the starting preheater and additional cab heater.

Ulyanovsk Automobile Plant has started working on this commission in early September. The company does not publicise the value of this state contract.

OJSC Kurganmashzavod, another supplier of the Armed Forces, is not expecting reductions in the state defence contract in 2010 either. In accordance with the state programme of armaments for the period until 2015 the Kurgan will be making BMP-3 personnel carriers and modifications. The Kurgan company is developing the multipurpose assault force armoured vehicle BTR-MD and modernising the assault force armoured vehicle BMD-4 where the original power unit and chassis will be replaced by the mass produced items used for BMP-3. This will seriously reduce maintenance costs of the assault force vehicles in the military.

Mikhail Chemeza, a representative of Kurganmashzavod, pointed out that the current state defence contract cannot be compared what it was in the soviet times, but it is something nonetheless. The situation is lamentable at quite a few defence industry companies.

For instance, the Chelyabinsk plant Stankomash which is the only developer and manufacturer of military mine trawls has been declared bankrupt this September. The plant is now under external monitoring for 18 months. The total debt of the company exceeds 2 billion roubles.

The Chelyabinsk defence industry is looking for salvation not from the Russian Ministry of Defence which virtually ceased the state defence contract but from the Latin America. In October the former regional Minister for Industry and Natural Resources Evgheniy Teftelev announced the information on the contract being prepared for the supply of defence products of Stankomash to Venezuela worth about 300 million roubles. In the official's opinion the "custom of comrade Chavez" would fully load the company's capacities for 7 months. The press service of Rostechnologii (Russian Technologies State Corporation), of which Stankomash is a part, and the company itself are refusing to comment this information.

At Zlatoust Machine-Building Plant, the leading manufacturer of strategic guided missile systems for the navy, people are also concerned with the financing of the state defence contract. According to Serghey Lemeshevskiy, the Director General of Zlatmash, the President of the Association of MIC Companies of the Chelyabinsk Oblast, the state defence contract should be minimum 3 to 6 years long and the notice given to companies must be no shorter than 6 months prior to the planned period.

"Moreover, the Ministry of Defence has still not developed a standard contract form acceptable by the banking system. This would give us the opportunity to get unsecured loans to carry out work fulfilling the state defence contract" Mr Lemeshevskiy pointed out.

We would know in 2010 whether these suggestions have been heard by the high ranking officials in the Ministry of Defence. Recently the issues of raising efficiency of the functioning and development of MIC companies and organisations have been discussed in Chelyabinsk under the aegis of the Secretary of Russian Security Council Nikolai Patrushev. The Head of the Security Council promised not to leave the Urals MIC companies without due attention.

Mikhail Bendyak