Yet another revamping of the military industrial complex from the Russian government

Published: 6/10/1999

The Russian government has embarked on its eleventh attempt, since 1986, to revamp its military industrial complex: a huge system which includes more than 1,200 enterprises. Although Mr Sergei Stepashin, Prime Minister, insists that it is time to consolidate the country"s defence industries, this latest effort looks more like an attempt to revive the old Soviet system of industrial ministries. The main difference this time, however, is that the ministries will be referred to as agencies. One will exist for each sector: shipbuilding, weapons, radio technology, communications, and ammunition. The Russian Aerospace Agency, which now incorporates the aircraft industry, is also set to become an industrial agency.Finally, the State Committee for Foreign Economic Relations -which used to supervise the U.S.S.R."s arms trade -will also be revived. The current plan calls for the consolidation of the country"s three major arms-trading companies under a single hierarchy. In the Soviet era, a Communist Party Central Committee secretary oversaw the military industrial complex. Now, a First Deputy Prime Minister will assume this role. The directors of Russia"s military industrial complex (VPK) have long complained that the government pays little attention to the sector. Nor do they expect a return to Soviet times, when defence expenditure constituted 40-60%of the gross domestic product (GDP). Directives and official documents have now established that the country will maintain its arsenal at deterrence levels only for the next 10 to 15 years. However, former Security Council Secretary, Mr Andrei Kokoshin, has repeatedly emphasised that Defence Minister, Mr Igor Sergeev and VPK directors have “ played dumb", maintaining that Russia needs a massive increase in its armaments capabilities. NATO action in the Balkans provided VPK directors with a convenient excuse to declare publicly that Russia is militarily impotent and would be unable to resist a military attack. It is highly unlikely, however, that the military industrial complex will be given any additional money. Mr Stepashin"s comments suggest only empty promises and minor reorganisation. That, however, may suffice for VPK directors. Simple promises are enough to warrant new military production, for which the government will be obliged to pay.That, in turn, will force the government to revive a practice of mutual debt offsets, so creating fertile ground for fraud and deception, since the government simply does not have the funds to pay for extra military hardware. That is where VPK directors, opposed to sweeping reforms in their sector, find common ground with Kremlin insiders, seeking to use budget funds for political ends. VPK directors and Kremlin back-room dealers need only to place a trusted person in charge of finances. A malleable finance minister would not attempt to keep the defence industry production with its budget requirements. A propaganda campaign has already been launched to persuade the public that Russia can re-equip its armed forces with money from exports sold by the state arms export company, Rosvooruzhenie. Advocates of the method would only have to sack Mr Grigory Rapota, Head of Rosvooruzhenie and replace him with Kremlin stalwart, Mr Alexei Ogarev, former Deputy Head of the presidential administration responsible for the military industrial complex and arms trade. According to knowledgeable sources,Russian arms exports totalled nearly $2.5 billion in 1998 and analysts predict an upper limit of $4 billion in 1999. Analysts note, however, that the money is unlikely to be spent on re-equipping the armed forces because defence industry giants will not part with their profits. At the same time, money raised by Defence Ministry sales of superfluous military property cannot be spent on new arms and equipment because the law requires that proceeds are channelled into military reforms (mainly consisting of purchasing apartments for retired officers). But no one seriously plans to use arms export revenues to boost the country"s defence potential. VPK directors well remember how, in 1992, they duped the government of acting Prime Minister, Mr Yegor Gaidar. At the time, defence industry bosses managed to side-step an 85% reduction in state defence orders by proffering the government bogus arms export contracts. The current reorganisation plan may well represent an attempt to use the same tactic.

Article ID: 571