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Urals Tank Not Allowed Out To Battlefield

Urals Tank Not Allowed Out To Battlefield

03.03.2010 — Analysis

Russian Government is changing rules for awarding state defence contracts. The funding of some enterprises of the sector is increased while the funding of the others has been cut down by almost a half. The Defence Ministry is insisting on the reduction of purchase prices for arms. Industrialists blame the customer in the breakdown of the research and development work. The disagreements between the parties cannot be overcome entirely within the military industrial complex of Russia, as the RusBusinessNews observer has established.  

The Union of Defence Industry Enterprises of the Sverdlovsk Oblast discussed the prospects of the arms production in 2010. Vitaliy Smirnov, the Director General of the Union, said that the state defence contract has not been formed yet. The only information available is that in absolute figures it will be smaller than in the last year since the Defence Ministry by a directive is reducing products prices by 15%. Also a redistribution of resources has occurred, in 10 out of 40 key enterprises the orders increased by 30% and in 11 - reduced by 40%. What was sequestered more than anything else were the budgets of enterprises making munitions.

The state contract for the only tank factory in Russia, OAO NPK Uralvagonzavod (Ural Railway Car Plant) has not been finalised yet, contrary to the statement made by Aleksandr Postnikov, the Supreme Commander of the Ground Forces, regarding the purchase of 261 tanks by the Russian Army. Industrialists have not confirmed this figure having said that so far the old contract with the Defence Ministry on purchasing 63 tanks annually is in force. When the new contract is going to be signed is unknown as Uralvagonzavod is not happy with the price for the goods offered by the military. Vitaliy Smirnov assumes that the contract will either remain as it was last year or be increased due to political reasons, that is for the sake of preserving the manufacturing facilities.

Experts are convinced that the political decision has already been made which does not make certain officials too happy. General Postnikov made a statement that the Army has twice more tanks than it needs. The Defence Ministry is planning to scrap the outdated models and replace them with new. It is not clear so far where to get them from as the T-90S made by Uralvagonzavod is unsatisfactory for the military not only in terms of the price by also in terms of quality. General Vladimir Goncharov, a representative of the Defence Ministry, made a statement at a meeting of the Sverdlovsk Union of Defence Industries that the Russian tank is a machine of the day past and that the plant, in order not to be left without orders tomorrow, has to develop, urgently, a new generation tank.

Vladimir Volkov, a former manager of the representation of FSUE Rosoboronexport, does not think that T-90S are not needed anywhere. According to him, there is a number of countries queuing up to get large batches of these machines. Some countries have been denied the contracts as Uralvagonzavod would not have been capable to fulfil them. The Russian Government did not allow the plant to be loaded by export contracts exclusively, having made it to supply a half of the tanks made to the Russian military. Uralvagonzavod is incapable of increasing the production capacity twice or three times due to the lack of components and money in the Russian budget.

Directors of the Urals factories reckon that money for the sector can be found, arms export in 2009 has grown and, according to the data provided by Anatoliy Isaykin, the Director General of Rosoboronexport, by 10% and the order portfolio has grown by 10 billion dollars. Exports have been growing for a number of years and the prospect for supplying Russian arms abroad are rather good as queues for certain types of arms are going to last as long as until 2017. The orders, however, cannot be fulfilled by both the tank builders and the manufacturers of missile complexes S-300 PMU и S-300 V as there is no money. Most likely this just proves that the money from the growing arms exports simply does not get back to the factories.

Vitaliy Smirnov claims that factory managers are in such tough financial situation that all they can do is modernizing old machines. They have no money for research and development. This is why we still have no S-400 complex in Russia, no new tank or other armaments. Within the constructed holdings directors of plants which have to ensure the research and development progress in the defence industry sector have essentially turned into shop floor managers. Producing goods worth billions of roubles plant managers have only millions at their disposal and this if far form enough for the development of a new katyusha.

The excessive concentration of factories and design bureaus within corporations and holdings causes, according to people involved in the manufacturing side, only chaos in management and financial clots. The defence industry sector was at its best, according to Mr Smirnov, at the end of the Soviet times when the Antaeus company was established. Veniamin Yefremov, its manager, having received freedom in financial management, first of all channelled the money into research and development planning to be in the market for a long time. The State took away the money six months later.

Officials, denying the enterprise its freedom, were explaining it by the specifics of the armaments market, saying that centralisation is needed in order not to allow prices to drop. Now we have the centralisation and no R&D. State shareholders taking profits from the factories, do not only forget to fund scientific work but sometimes put the defence industry sector in a very difficult financial situation. For instance last autumn shareholders tried taking out the profits of the Ekaterinburg OJSC Radio Equipment Plant which during the crisis has lost a large non-military customer in JCS AvtoVAZ and now has to invest in the development of new products.

Claims of the Defence Ministry against the T-90S tank are of the same kind. The customer in shoulder-straps does not care that plants are working in the conditions of the market, that Uralvagonzavod was designed for the production of 1200 tanks annually and not 63 and that the State during the last 15 years financed only the development of the fifth generation plane and nothing else. A state of the art tank could not possibly have been conceived in these conditions.

Experts think that current Russian Government has to make a decision regarding what it wants - new generation arms or quick money from exports. Practice demonstrates that even having money it is not that easy to push it into the promising machines as for that you need creative staff, responsible managers, optimal production structure etc. In Russia today, according to defence industry specialists, the creation of conditions for the production of new generation arms would take at least ten years. This is subject to the condition that governmental structures present a consensus regarding the direction of development.

According to certain signs issued from the depths of authorities the consensus is very far at the moment. The Prime Minister Vladimir Putin says that the new Federal Programme for the development of the defence industry complex will enable the modernisation of enterprises for them to master the qualitatively new products. Defence industry enterprises' managers, however, are discussing the pen-pusher made decision of the liquidation of military quality control at the enterprises and the Law on State Secrets which obscures the accountability for the dissemination of secrets and does not promote export of Russian arms.

Decisions like that, experts reckon, are seriously damaging for the future of the modernization of Russian MIC.

Vladimir Terletski

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