Putin may mean a better outlook for the aerospace industry

Published: 1/3/2000

With then dramatic changes within Russia over the New Year period the impact on the aerospace sector generally, is as always in Russia, difficult to assess. Putin is an unusual creature within the Russian scene straddling in terms both the left and the right of the Russian political spectrum. A bureaucrat, he is however, politically identified with the group of young liberal Russian politicians who played such an important role in Russian politics for much of the middle 90s and he does owe them a great deal for his current position. As a former intelligence officer who had run the KGB in Germany, as well as being involved in the highly successful Russian technology espionage operation in California, he was transferred to work in St Petersburg under Sobchak in the early nineties where he became exposed to the group of young reformers including Anatoly Chubais who were running privatisation in the city. His responsibilities in the privatisation team included liasing between the city authorities and foreign investors, which Putin is reported to have undertaken with some skill and led to him being moved to the Presidential Secretariat reportedly on the recommendation of Chubais. His subsequent meteoric rise to head of the FSB and Prime Minister is now a matter of public record. According to Boris Nemtsov, one of Russia"s leading economic liberals and another graduate of the St Petersburg privatisation programme, Putin is an economic liberal, or more specifically he is no economist and the people who advise him are economic liberals. He is however, also reportedly supported by both the military and the oligarch Boris Berezovsky, who has given him considerable support through his TV stations. What this means for policy will only become clear over time, there is however, a direction emerging for the aerospace industry. Early signs of active government action in the sector, with Putin"s support, have recently appeared in terms of restructuring and in the provision of financing. Putin is also widely viewed as a planner, who has already embarked upon the development of a ten-year economic plan. It seems likely therefore, that the industry will move closer to the centre stage in terms of industrial policy, spurred by the military"s newly won importance and demands onthe military industrial base, as well as stimulating an industry at the heart of any Russian industrial recovery, in terms of innovation and production, and in the provision of a viable transport infrastructure for Russia. It seems that despite his liberal credentials, Putin may take a fairly direct role in turning the industry around, which is likely to manifest in the execution of the consolidation plan currently laid out for the industry, involving the streamlining of participants into viable aerospace enterprises. The state remains a major shareholder in most of the enterprises and continues to be a major provider of finance and is therefore motivated to see the plan succeed particularly as it is less beholden to the various vested interest groups blocking reform in the past. His successful election in three months will also provide the continuity in the administration of the industry, allowing change to occur rather than be ignored pending another change at the top and a new policy. Whether the state will remain directly involved in the long term is difficult to anticipate, but for the present there appears to be no other route available. In the medium term for the industry the change at the top appearto be at the very least, favourable, but the achievement of significant change with any speed or order is never easy. Recent reports from Russia suggest that opinion on restructuring of the industry remains divided and it still may require Putin"s ‘strong hand ‘ to put the ship in order.

Article ID: 1260