Russia's defense procurement system is once again mired in scandal, with some officials disciplined and others fired. Yury Solomonov, chief designer at the Moscow Institute of Thermal Technology (MITT), the man behind the Topol-M, Yars and Bulava ballistic missiles, said in an interview with the business newspaper Kommersant that the state defense order for 2011 is in jeopardy because not a single contract for strategic nuclear systems has been signed.
"Nothing like this has happened in the past 14 years," Solomonov said.
That interview clearly alarmed the president. "Find out what is going on," Dmitry Medvedev told Defense Minister Anatoly Serdyukov in a conference call quoted by RIA Novosti. "If the reports about the disruption of the state defense order are true, then those responsible for this should be punished regardless of rank or post."
"But if they are not true, we must deal with whoever is creating this panic," Medvedev continued. "You know that during wars panic mongers were shot on the spot. I authorize you to fire the guilty persons. Do you hear me?" Serdyukov nodded.
All defense contracts for 2011 should have been signed by April 15. Medvedev criticized the defense industry for the delay on May 10 and extended the deadline until the end of May. Several minor officials were fired, but journalists learned that most of them had already resigned, some of them as long ago as six months before the official discharge.
So, what is going on in the defense procurement system? Why do problems multiply when the government spends more money on armaments?
An order without a customer
The fundamental problem is that Russia essentially lacks a comprehensive defense procurement system. Many orders are placed, but not always with Russian manufacturers. And the Defense Ministry simply refuses to deal with this problem.
The Defense Ministry has purchased Mistral helicopter carriers from France, unmanned aerial vehicles from Israel, and Iveco armored vehicles from Italy. It has criticized Russian-made tanks, saying "it is better to spend the money on German Leopards." Taken together, this is evidence of an alarming trend: the Defense Ministry wants the finished product but does not want to deal with production.
It does not accept equipment that is not to its liking. It demands improvements, as was the case with Russian-made UAVs following the purchase of Israeli drones (the same thing almost happened with Tiger armored vehicles during the talks with Iveco); or the ministry gives up and buys foreign-made equipment.
To be sure, planning military production is not the Defense Ministry's responsibility. It should be done by a competent and duly authorized interdepartmental coordinating agency under the government.
Officially, this responsibility lies with the government's Military Industrial Commission headed by Deputy Prime Minister Sergei Ivanov. The commission is supposed to coordinate the ministry's requirements and the industry's capabilities to formulate a common policy for executing defense orders and developing the defense industry.
But the commission has fallen short. In fact, the government does not control the defense industry. Its efforts to consolidate military assets in defense holding companies has only increased control in a very few cases. The problem is that the government can control the operations of a defense concern but not its privately owned partners.
Many of these partners have monopolies in their own narrow fields, such as special alloys, composite materials, electronic components, and other components that constitute defense goods.
Wild wild market
The management at large defense enterprises blames their problems, including growing prices, on their partners who work in the free market and hence can set any price they want for their goods. This is why the cost of Russian-made military equipment is growing faster than the volume of defense orders.
Defense Minister Serdyukov told journalists that his ministry failed to conclude around 18% of contracts (108 billion rubles, or $3.9 billion) in the total 2011 state defense order (581.5 billion rubles, or $20.7 billion), due to soaring prices for military products. He cited the example of the Moscow Institute of Thermal Technology (MITT), which proposed raising the cost of some products by 3.9 billion and other products by 5.6 billion rubles.
Under the state armaments program, over 20 trillion rubles ($726 billion) are to be invested through 2020. The defense industry, which has been cash-strapped for 20 years, will have the money now. The government will distribute the funds among leading companies, and it expects them to deliver. How? That is the contractors' problem.
Over the past 20 years, people have come to believe that any problem can be solved by throwing money at it and that all problems boil down to a lack of money.
But this seems like the wrong approach toward defense procurement. The government shouldn't just give money to the industry; it should work jointly with it to create a legitimate military-industrial complex in Russia. The only other option is buying weapons abroad.
Konstantin Bogdanov is commentator with the newspaper Military-Industrial Courier
The views expressed in this article are the author's and may not necessarily represent those of RIA Novosti.
