COMBING THE WEST FOR MONEY

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EVERY THIRD ENTERPRISE OF THE RUSSIAN MILITARY-INDUSTRIAL COMPLEX SHOWS SIGNS OF IMPENDING BANKRUPTCY

Domestic loans are more than the national military-industrial complex can afford.


Addressing the Duma yesterday, Sergei Chemezov of Russian Technologies said he did not think the national military-industrial complex would retain stability at the interest rate Russian banks demanded.

“The maximum interest rate the military-industrial complex can afford is 10-12%,” Chemezov said. “Borrowing money at a higher interest rate will only generate losses.” That was apparently why Russian Technologies was already in touch with Western banks. “We’ll probably borrow money there and loan it to enterprises here,” was how Chemezov put it. (According to Russian Association of Regional Banks President Anatoly Aksakov, Russian banks offer money at the interest rate of between 18% and 40%, these days.)

“Practically every third enterprise of the military-industrial complex shows signs of impending bankruptcy. Only 36 strategic enterprises enjoy financial stability,” Chemezov said. Their credit indebtedness at this point amounts to 625 billion rubles.

Chemezov said the situation was particularly dire with enterprises producing ordnance and special chemical agents.

“Margin of safety is approached fast,” he warned.

Apart from financial difficulties, there are also problems fomented by inept management. “The attempt to establish 75 vertically integrated holdings within the military-industrial complex by 2006 failed. Only 24 structures were established,” Chemezov admitted.

Chemezov suggested concentration of resources in the fields and spheres holding the best promise of a breakthrough.

Deputy Premier Sergei Ivanov had the floor then. He admitted existence of certain negative trends in the defense industry but said they mostly affected the enterprises converted to production of civilian and hi-tech goods. Needless to say, Ivanov attributed it to the falling demand.

By and large, Ivanov proclaimed the military-industrial complex less affected by the crisis than civilian economy had been. “End products of the Russian military-industrial complex remain in high demand in foreign markets. All export contracts are fulfilled. The military-industrial complex is quite secure,” Ivanov said.

Ivanov attributed this stability to the fact that the military-industrial complex was using budget monies. He admitted, however, that loans from banks were more than most enterprises could afford.

“Priority in implementation of the 2009 state defense order will be given to development of the strategic nuclear forces,” Ivanov said. “It is going to be expensive, but we have no choice in the matter.”

The deputy premier reminded the Duma that the state defense order this year amounted to 1 trillion rubles and that the money was earmarked for the Defense Ministry and ten other ministries and departments.

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