Defense Minister Sergei Ivanov discusses the Unified Aviation Corporation

Defense Minister Sergei Ivanov has a new role: chairman of the board at the Unified Aviation Corporation, which has significant state support and is intended to revive Russia’s aviation industry. In this interview, Sergei Ivanov discusses how this can be done.

“To borrow some sporting terminology, I’d like to say that we will be able to return our corporation into the top league, or the premiership league, among the world’s leading players in the aviation sector,” said Deputy Prime Minister and Defense Minister Sergei Ivanov on December 12, at the first meeting of the Unified Aviation Corporation (OAK) board of directors. In this exclusive interview, Sergei Ivanov discusses how this can be done.

Question: The OAK is the only company in the high-tech sector of the economy where you have become the chairman of the board. What are the reasons for your appointment?

Sergei Ivanov: I’ll put it this way: as deputy prime minister and defense minister, I have been instructed to chair the OAK board of directors. First of all, air power is becoming increasingly important for national security. Secondly, over the past century, the aviation sector’s needs have stimulated the development of advanced technologies – serving as a driving force in the development of science and industry. And Russia must not fall behind other countries in this field. Thirdly, aircraft-building is one of the few high-tech sectors in which Russia is still competitive, despite the hardships of the 1990s. Aviation offers the primary opportunity for implementing the innovation-based development model which is the only alternative to the dead-end path of an economy dependent on raw materials exports. Finally, Russia’s vast expanses require us to develop civil aviation as the leading form of transport – in some areas, the only form.

Extricating this complex system from its state of crisis and placing it on a path of steady development is only possible if we adopt a systematic approach, based on a common concept and substantial powers. This is a state-level task. Actually, I recently requested President Putin to issue instructions for preparing a decree that will include the OAK on the list of Russia’s strategic enterprises. We plan to have the corporation operating at full capacity by 2015.

Question: Aside from MiG Corporation CEO Alexei Fedorov, the OAK board of directors doesn’t include any other aviation industry executives. You’re a federal-level politician, while the other board members are senior state officials or the chief executives of major banks. To all appearances, compiling this selection of board members for the OAK would have required a number of top-level decisions. What are their motives: to emphasize the role of the aviation sector, or to end the conflicts within the sector?

Question: Indeed, the OAK board does include some very high-ranking individuals. A deputy prime minister, two ministers, a presidential aide, three directors of federal agencies and services, two deputy ministers, the Air Force commander, the general director of Rosoboroneksport, the heads of SberBank and VneshTorgBank. But I don’t see anything sensational in this composition of the board. On the contrary, it’s an adequate reflection of the aviation sector’s importance for Russia. I would like to note that by joining the OAK board, the heads of key agencies have gained the right to influence decisions made within the OAK, and assumed responsibility for aircraft-building in Russia. As for the conflicts you mentioned, there simply cannot be any – with this composition of the board of directors, and the attention the state is now paying to the aviation industry.

Question: The authorities are setting both political and economic objectives for the OAK. Could you name the priorities?

Sergei Ivanov: The priority is to produce modern aircraft of various types, using the full technological cycle – from research and development to regular production. Only a few countries or multi-state formations are capable of doing that. Russia has these capabilities, and it will develop them. This is the OAK’s main task, with both political and economic aspects. For one thing, the aviation industry needs to supply the Russian Armed Forces with modern hardware. That includes developing a fifth-generation fighter, producing the YaK-130 combat and training jet, and developing new engines for the Il-76. Developing scientific resarch and modern industry will stimulate what is known as human capital. Thus, the aviation industry will have a positive effect on economic, social, and political processes in our state.

Question: How can Russia’s aviation industry attract investment?

Sergei Ivanov: In terms of foreign investment, I’ll put it this way: by using its own efforts to make the Russian aviation industry more attractive to investors, the state is creating suitable conditions for attracting private foreign capital into this sector. We are clearly aware that unless this is done, a number of OAK subdivisions, especially those specializing in civil aviation, cannot become competitive. So we anticipate and welcome such investment. Meanwhile, the OAK will use and develop the positive experience of state-private partnership accumulated by OAK participant enterprises. And although the OAK’s development strategy entails private companies, including foreign companies, holding an increased stake in the corporation, the state will still retain ownership of a stake large enough to protect Russia’s national interests.

Question: All the same, attracting foreign investors into strategic sectors, and expanding international cooperation – that’s a double-edged sword. On the one hand, globalization demands such an approach – but there’s also the danger of losing our technology independence. Is there any safe path in this situation?

Sergei Ivanov: We shall consistently develop cooperation with our foreign partners – especially companies which already have mutually beneficial cooperation relationships with Russian enterprises. Neither do we rule out close cooperation with our strategic partners abroad – but only on certain programs. In civil and transport aviation, for example, we would only welcome the involvement of foreign capital and foreign partners with advanced technologies. This should help Russia’s aviation sector get back on its feet and grow stronger. But the military aviation sector in the OAK will be off limits to foreign capital – in the interests of national security, of course.