Russian Defense Industry Under Putin N

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Presentation on the Putin\'s defense industry reform and the industry trends in 1992-2006.

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Russian Defense Industry Under Putin N

  1. 1. <ul><li>Russian Defense Industry Under Putin </li></ul><ul><li>Alla Kassianova </li></ul><ul><li>Humanities and International Studies Fellow, Stanford </li></ul><ul><li>Alla Kassianova 2006 © </li></ul>
  2. 2. Outline <ul><li>Background: Defense industry in the Soviet Union and under Yeltsin in the 90s </li></ul><ul><li>State policy towards defense industry under Putin: basic features </li></ul><ul><li>Critical appraisal </li></ul><ul><li>Whose policy? </li></ul>
  3. 3. Soviet defense industry: “core” quality <ul><li>A “structurally militarized economy” </li></ul><ul><li>Intertwined elites </li></ul><ul><li>Defense production a positive project, source of purpose and pride </li></ul><ul><li> Andrei Sakharov: “ With others, I believed that this was the only way to halt the third world war” </li></ul><ul><li>Defense industry an integral part of the Soviet universe </li></ul>
  4. 4. <ul><li>Gorbachev’s revolution </li></ul><ul><li>Relieve the economy of the defense burden </li></ul><ul><li>Conversion plans </li></ul><ul><li>1989, procurement stopped rising </li></ul><ul><li>and Yeltsin’s shock “therapy” </li></ul><ul><li>1992, procurement slashed 2/3 </li></ul><ul><li>Defense industry initially written off by Gaidar </li></ul>
  5. 5. The 90s: gradual comeback <ul><li>1993, defense industrial lobby starts to produce results </li></ul><ul><li>Ongoing fight against privatization </li></ul><ul><li>Mid-90s, defense industrial planning resumes </li></ul><ul><li>Overall, efforts ineffective because of general weakness of the state and meager resources </li></ul>
  6. 6. State of industry in the 90s <ul><li>Shrunk in size, degraded in material and human assets, disintegrated </li></ul><ul><li>priority rating shifted in favor of fuel/resource sectors </li></ul><ul><li>complex ownership structure: 25-35 percent privately owned </li></ul><ul><li>civil production and export key sustaining factors </li></ul><ul><li>from 1999, steady growth of exports </li></ul>
  7. 7. The Return of the State: Reinstating responsibility <ul><li>Concept of state policy in the area of military and technical cooperation with foreign states up to 2010 </li></ul><ul><li>State Armaments Program, 2000-2010 </li></ul><ul><li>Reform and development of the defense –industrial complex, 2002-2006 </li></ul><ul><li>Global Navigation System 2002 – 2011 </li></ul><ul><li>National Technological Base, 2002 – 2006 </li></ul>
  8. 8. Reform and development of the defense –industrial complex <ul><li>Objective: </li></ul><ul><li>“ create a new image of the defense-industrial complex through reforming it according to the tasks of military planning </li></ul><ul><li>… </li></ul><ul><li>promote its sustainable development and production of domestically and internationally competitive hi-tech goods for military and civil purposes”. </li></ul>
  9. 9. The Return of the State: Pumping resources <ul><li>Steep growth of federal funding </li></ul><ul><li>Emphasis on R&D </li></ul><ul><li>Capital investment through dedicated Federal Programs </li></ul>253 668 2006 137 411 2004 42 209 2000 State Defense Order, bln.rubles Defense budget, bln rubles Year
  10. 10. Intervention: top-down restructuring <ul><li>12 hundred into 40-50 </li></ul><ul><li>a new industry makeup: </li></ul><ul><li>“ integrated structures”, or “holdings”, manufacturing end products </li></ul><ul><li>fully budget-subsidized arsenal-type factories for ammunition </li></ul><ul><li>research centers and design bureaus </li></ul><ul><li>a network of specialized suppliers, including small and middle businesses </li></ul>
  11. 11. Top-down restructuring: 3 out of 40 <ul><li>January 2002 Takticheskoe Raketnoe Vooruzheniye (tactical missiles) </li></ul><ul><li>April 2002 Almaz-Antei (air defense systems), 46 entities, about 100000 employees </li></ul><ul><li>April 2004 Oboronprom (helicopters ) </li></ul>
  12. 12. De-privatization <ul><li>Distrust of private defense companies </li></ul><ul><li>procurement contracts as leverage for conceding shares of stock to the state </li></ul><ul><li>seating state representatives on the board of directors </li></ul><ul><li>transfer of stock in exchange of intellectual property or land ownership rights </li></ul><ul><li>“ Public form of ownership obliges to put the state’s interests first” </li></ul>
  13. 13. Controlling exports <ul><li>2000: </li></ul><ul><li>“ Only the Rosoboronexport State Corporation is entitled to supply to the international market the entire range of Russian armaments officially authorized for export.” </li></ul><ul><li>85-90 percent of export </li></ul><ul><li>Out of hundreds, only 3 +16 defense companies have independent access to the world market </li></ul><ul><li>Federal Service for Military-Technical Cooperation </li></ul><ul><li>awards export licenses and authorizes transfers </li></ul>
  14. 14. Controlling exports Alla Kassianova 2006 ©
  15. 15. The Return of the State: maximizing control <ul><li>6 administrative reorganizations in 6 years: concentration of the state’s controlling powers </li></ul><ul><li>Re-creation of the Military and Industrial Committee </li></ul><ul><li>The ideal of the “President’s Vertical”, a highly centralized line of command seeking to maximize control over the areas considered “strategic” by the state </li></ul><ul><li>Bottom-line: “more state” </li></ul>
  16. 16. Questions about policy <ul><li>Unknown correlation with the military doctrine and security strategy </li></ul><ul><li>Closeness: State Armaments Program secret, defense spending nontransparent </li></ul><ul><li>Sources of investment, international involvement unclear: international cooperation vs. “sovereign” capacity </li></ul><ul><li>“ Control” vs. “market” </li></ul>
  17. 17. Obsession with “control” <ul><li>Ivanov, Defense Minister, August 2005: “…a small presence of state representatives in the company’s board of directors allows to control tens of billions of rubles of the state defense order”. </li></ul><ul><li>Chemezov , Director of Rosoboronexport, January 2006: “… it is extremely important to control a company that is engaged in military and technical cooperation (i.e. weapons exports) via Rosobornexport”. </li></ul>
  18. 18. Implementation: financing of procurement contracts
  19. 19. Whose policy? <ul><li>ideology of “strong power” and symbols of strength </li></ul>
  20. 20. Whose policy? People in charge <ul><li>Rosoboronexport : S ergei Chemezov , KGB intelligence division, worked with Putin in Dresden </li></ul><ul><li>Federal Agency for State Defense Order : Andrey Belyaninov , KGB intelligence division, met Putin in GDR first Director of Rosoboronexport, later appointed to manage procurement order </li></ul>
  21. 21. Whose policy? People in charge <ul><li>Federal Agency for Military and Technical Cooperation : Mikhail Dmitriev , KGB intelligence division, worked with Putin in GDR </li></ul><ul><li>Almaz-Antei board of directors : Viktor Ivanov , Putin’s colleague in KGB, presently personal assistant to President </li></ul>
  22. 22. Conclusion <ul><li>Defense industry is being appropriated by a set of narrow group interests by placing their trusted people at the positions giving control of enormous financial resources and extensive international connections. </li></ul><ul><li>The current policy is thus devoid of public, and therefore, critical and reflective quality. This leaves present policy on a shaky foundation, despite a seeming revival of the industry. </li></ul>Alla Kassianova 2006 ©

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