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June 20, 2007
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High Tech
// Rosoboronexport CEO Orchestrates a Promotion for Himself
Soon Russian President Vladimir Putin will sign a decree authorizing the creation of the government corporation Russian Technology before the end of 2007. The new company will be headed by Rosoboronexport CEO Sergei Chemezov, while Rosoboronexport itself will be reincorporated as a joint-stock company and absorbed into the structure of Russian Technology along with all of its daughter companies. Russian Technology's distinct status as a state-owned company created by a special law will allow it to escape from the direct control of the government.
Sergei Chemezov himself informed Kommersant of the completion of the text of the presidential decree transforming Rosoboronexport into the state-owned company Russian Technology. Mr. Chemezov will become the CEO of the new company and will head the board of directors of the joint-stock company Rosoboronexport, which will be formed from the existing arms-exporting monopoly of the same name. All daughter companies and affiliated structures of the Rosoboronexport group, including Oboronprom, Russpetsstal, Rosoboronexpor, AvtoVAZ, and VSMPO-Avisma, will be incorporated into the new corporation.

According to the law that is being prepared, the president will appoint the head of the new corporation. "A board of supervisors will be created for the state-owned corporation. We came up with the suggestion of appointing First Deputy Prime Minister Sergei Ivanov as its head," explains Mr. Chemezov. "The positions of head of the state-owned corporation and head of Rosoboronexport will not be overlap; it is possible that the chairman of the board of directors of the joint-stock company Rosoboronexport will become the head of the state-owned corporation. I hope that all of the issues will be reviewed and the government corporation created before the end of the year," he said. According to Mr. Chemezov, the decree will be signed by Vladimir Putin "within the next few days," and the State Duma will pass the corresponding law before the end of the year.

The leadership of Rosoboronexport has been lobbying for the creation of Russian Technology since 2005, but is the last of several planned government corporations for which the decision to go ahead was made. "The objections were not because of any fundamental differences of opinion with the ministries and agencies, but because of a lack of understanding. Now we have met with representatives of these agencies, explained all the issues to them, and they have all consented," said Mr. Chemezov.

The creation of the corporation by a special law means that it is not under the direct control of the Russian government (the government will only have a quota for its representatives on the board of supervisors), that its profits cannot be distributed, that fair disclosure rules apply less strictly that for a joint-stock company, and that it can own its own assets and transfer them freely to other entities. In essence, such a state-owned corporation is a holding company with special status, and its daughter companies are free to do whatever they like on the market, including launching an IPO.

The current incarnation of Rosoboronexport has long been a key player in several fields, including the manufacture of helicopters, cars, titanium, and weapons-grade steel. Among its other activities, in 2006, the company bought a 66% share in the titanium manufacturer VSMPO-Avisma; in the beginning of 2007, Russpetsstal acquired the Krasny Okyabr factory and began to build a government monopoly on the production of weapons-grade steel. Recently Rosoboronexport has begun forming another two holdings, one in electronics and another in composite materials.

Yesterday the Russian Industry and Energy Ministry and Rosprom declined to comment on the creation of the government corporation, but Defense Ministry consultant Ruslan Pukhov called the news a huge political victory for Sergei Chemezov and predicted that Russian Technology's political and economic clout will rival that of Gazprom. According to Mr. Pukhov, he wouldn't be surprised if "after the parliamentary or presidential elections Sergei Chemezov becomes a deputy prime minister."
Konstantin Lantratov (Paris), Elena Kiseleva, Olga Pleshanova, and Dmitry Butrin

All the Article in Russian as of June 20, 2007

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