Rosoboronexport general director Sergei Chemezov at the Verkhne-Saldinsky Metallurgical Plant on November 7, 2006.
Photo: Sergey Bykhovez
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Rosoboronexport Creates Another State Holding Company
Rosoboronexport, the company that holds a government monopoly on the export of Russian arms and military technology and that also produces automobiles, titanium, and weapons-grade steel, has decided to conquer yet another market: electronics used in the production of weapons. Kommersant has obtained a copy of an executive order concerning the reorganization of the company Oboronprom, a subsidiary of Rosoboronexport. Oboronprom will serve as the basis for a new company, to be called Electrical Systems. The project, which was personally lobbied for by Rosoboronoexport head Sergei Chemezov, involves the consolidation under Rosoboronoexport's control of two dozen enterprises, several of which are already part of other state-owned ventures.
The materials obtained by Kommersant include a letter dated January 22, 2007 from Rosoboronoexport director Sergei Chemezov to Russian Defense Minister Sergei Ivanov. In the letter, Mr. Chemezov proposes consolidating "national developers and producers of military and special electronics in a single center." The letter also points out that "currently the share of imported electronic components in the production of modern weapons systems stands at 90%, which creates a potential threat to the interests of national security."
Mr. Chemezov's solution is an "integration of producers of super-high-frequency-, optic-, photo-, and quantum electronics, as well as specialized microelectronics" on the basis of Rosoboronexport and Oboronprom. The new company, which will be called Electrical Systems, will encompass developers and producers of solid and vacuum UHF electronics, infrared and laser technology, military and dual-use optoelectronics, specialized microelectronics, software, and a series of specialized integrator systems for communications electronics. The new government holding will include several previously-privatized and private enterprises that are "essential for the creation of a single specialized scientific-production complex on the basis of a partnership between the government and the private sector."
The majority of officials polled by Kommersant were inclined to believe that Sergei Chemezov will have no trouble realizing the project. According to an official in Rosimushchestvo, the project is already "at an advanced stage of preparation." He indicated that the Electrical Systems project is under the personal supervision of Vladimir Simonov, a consultant to the head of Oboronprom.
The executive order, which was signed by Mr. Ivanov on January 31, was sent to the Ministry of Industry and Energy, the Ministry of Economic Development and Trade, Rosprom, and Rosimushchestvo. These federal entities now have until March 31, 2007 to make a joint recommendation concerning the project, with input from Rosoboronexport.
Several experts have mentioned that the enterprises that Rosoboronexport hopes to take under its wing do not all lie in a single sector of technology. "The list is a mess. It is unclear what governed the choice of companies," said the head of one of the companies on Rosoboronexport's list. He also pointed out that several of the companies are either already part of a government holding or are due to be incorporated into one soon. For example, Schyotmash, Argon, and an computational electronics research and development venture will soon join the concern Computer Technology.
Nevertheless, Yury Borisov, the chief of the department of the communications industry and control systems at the Federal Industry Agency (Rosprom), believes that it is not necessary for all of the companies in the holding to belong to a single technology sector. "They can be united by a common customer. The main question that needs to be decided within the framework of the preparations for the project is the market in which the holding will work, including questions of monopolies and the competitive environment."
"Rosoboronexport is gradually turning into a shadow ministry of the defense industry, since it includes not only export-oriented enterprises but also those that are less visible in terms of bringing in quick profits. The state-owned corporation is thus filling orders for the authorities," believes Ruslan Pukhov, the director of the Center for Strategy and Technology Analysis. "True, the question arises as to who will run this new holding: after all, it's not really drawing top management from Rosoboronexport. With VSMPO-Avisma, a similar experiment was successful; with Oboronprom it succeeded only partially; and with AvtoVaz it was not entirely successful."
Elena Kiseleva and Alexandra Gritskova
All the Article in Russian as of Feb. 13, 2007
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