Reports that leadership of Russian Aerospace Agency could change as restructuring plans emerge (1000 words)

Published: 1/22/2001

Moscow's Moskovsky Komsomolets reports that Yury Koptev (rumoured to have been under threat for some time, in his position as chief of the Russian Aerospace Agency), may soon be replaced by Alexander Dundukov, the Deputy Minister of Science and Industry/Yakolev Director General, as part of a Putin administration restructure of Ministries and Agencies. For Dondukov, it appears that it is business as usual; making the announcement on the 15th of January that his Ministry plans to present a programme for an industry restructure, at a government meeting set for 1st March 2001. Dondukov is already talking publicly about dramatic changes for the industry, in which respect he has taken on the mantle of Koptev. He has made it clear in a number of public statements, that he believes the country needs one company for the production of military aircraft. To that end, he has suggested that it be built around AVPK Sukhoi; with a similar role being taken by AK Ilyushin, for the civilian aircraft industry. More generally he believes, as does the Ministry of Industry and Technology, that the industry should be restructured into seven state-owned holding companies: - 2 aircraft producers - 1 engine holding company - 1 helicopter holding company - 1 missile holding company - 2 avionics holding companies Apparently, these structures would then be privatised over the succeeding 3-7 years. Koptev (already at retirement age) has been under pressure for some time, regarding the role of the Agency itself and his own personal business dealings; with allegations of impropriety over medical contracts awarded to a company, controlled by his son. Some regard the Agency's role as being diminished under the Putin administration; through the removal of much of the industry's strategic planning function to the Ministry of Science and Industry (following a short period when the unified Space and Aviation Agency had gained the responsibility from the Ministry of Economics). It has also found itself at odds with the major producers, whilst endeavouring to force mergers between the industry's constituent parts. There has been little difference between the Agency's line and that of the Ministry/Dundukov; with the focus being on the merger of Sukhoi, MiG and Yakolev into a single military entity, capable of reflecting the demand for aircraft and the necessity to consolidate the industry. Koptev particularly emphasises that a failure to take radical action will result in Russia not having a fifth generation product, with which to compete in the international fighter market. Currently MiG and Sukhoi have demonstrator aircraft - the S-37 and Article 1.44 - but are reported to be uncooperative in developing their role as systems testers for a future fifth generation fighter. They are aggressively competing for the limited resources of the MoD. Their efforts have also been criticised by the Chief of the Air Force, Anatoly Kornukov, for not producing the aircraft required by the Air Force. The importance of resolving the issue of resource consolidation and the production of a competitive product, should not be underestimated, given that fighter sales currently generate over half of Russia's arms export; in its self, Russia's largest export sector after oil and gas. Dondukov's appointment as Chief of the Aerospace Agency is popular with Prime Minister Kasyanov. This will place a man in charge of the Industry, who is widely regarded as part of the political establishment, and historically seen as being reluctant to embrace radical change, given its impact on the industry's vested interests. This contrasts with Koptev's approach, firstly at the Space Agency (where he was widely credited with creating a viable industry) and, although significantly less successfully, at the newly formed Aerospace Agency. If Dondukov does move to the Aerospace Agency, it would suggest restructuring Ministries and Agencies, which would restore some of the influence that the Agency has lost (under the Putin administration) to the Security Council and the Ministry of Science and Industry, to set the agenda for the future structure and its implementation. The plans for merger of the military producers are by no means new; with a very similar plan suggested by the Deputy Prime Minister, Yury Maslyukov, in February of 1999. The plan was subsequently abandoned in favour of the creation of RSK MiG out of MAPO. For Dondukov to force through a radical industry restructure, it will not be a simple reshuffling of all the constituent parts so much as a series of tough battles, with entrenched interests. Despite there being too much capacity for the current and potential market - particularly in military products - Dondukov will have to dissuade the military from requiring a minimum of two major producers in each aerospace segment on “strategic” grounds. This should be easier since the recent change of control at the MoD Procurement Directorate, with the retirement of Colonel General Sitnov. The scale of this task, politically, should not be underestimated. Everyone involved in the industry's management, even the most recalcitrant, appreciates the need for a restructure to reflect current circumstances. The reluctance for change comes from the fact that much of Russia's aerospace capacity is located in remote areas, where local interests will fight tooth-and-nail for its retention. Its removal from Siberia and the Far East, even in its currently weak state will completely banish the possibility of future industrial growth and any associated tax base and jobs. The relationships between the senior managers within the industry have also proved to be less than cordial in the past, with little sign that they have thawed of late, making the implementation of such a plan, a challenging proposition. Dondukov - seen by many as more of a time-served political bureaucrat than a reshaper of the industry - seems an unlikely candidate to lead such an undertaking. Nevertheless, he does have the advantage of being held in some regard by his former colleagues among the industry's senior managers. This is a situation that is reported not to exist with Koptev; in addition to the support of a Putin administration

Article ID: 2312