Category Archives: Defense Industry

The Most Modern Army

In mid-July, Sergey Shoygu declared the Russian Army to be the world’s most modern. Over eight or nine years, he said, the armed forces have cardinally changed their composition.

Most observers won’t confuse “modern” with adjectives like “good” or “best” and descriptions like “most capable” or “most effective.”

Such assessments depend on a multitude of other factors including manpower, training, employment, etc. They require a hard look at whether recently-procured systems are the right ones. The ones needed for the next war.

Modern also implies and necessitates serious investment in maintenance, upkeep, and more updating and modification down the road. A continuing commitment to stay modern.

But, when all is said and done, modern is better than the alternative.

Aleksandr Golts looks at how Russia’s Defense Ministry has gotten (or is getting) modern, what it means, and what it costs in a recent piece for Republic.ru (paywalled).

Golts notes that Shoygu could have claimed 120 percent modern and no one could dispute him given that only the MOD possesses the data. A good bit of Russia’s “modern” equipment, he writes, consists of venerable but modernized weapons systems like the Su-24 and T-72.

He asks why Russia’s OPK isn’t thriving while pumping out all these modern arms. Put simply the answer is the Putin regime’s unwillingness to pay what they really cost (like gold Golts says) and giving defense industries just enough financing and bailouts for them to limp along. He updates Yuriy Borisov’s previous statements about more than 2 trillion rubles ($27 billion) in total OPK debt.

Lastly, Golts explains the failure to launch new weapons like the Su-57 into series production is due to the inability to get multitudinous subsystems, components, and materials needed for final assembly at KnAAPO. Paying what those parts actually cost inevitably raises the MOD’s final purchase price.

It’s worth remembering that truly independent Russian military journalists of Golts’ caliber — not afraid to write and speak about issues that should make the regime uncomfortable — are an increasingly endangered species.

Below is a moderately cleaned up Google Translate translation.

How much Shoygu’s boasting costs.

“Modern weapons,” which the bosses are so proud of, cost the country as much as if they were made of gold

Russian Defense Minister Sergey Shoygu bragged about stuff. Speaking in Rostov-na-Donu before employees of [Russia’s] largest helicopter plant Rosvertol, the military department’s head said something sensational: “Today everyone – some angrily, some approvingly – understands and says the Russian Army has more than 70%, or if we put it precisely, almost 71% modern armaments and equipment. This is the highest percentage among all world armies.” With two months left until the Duma elections, and Shoygu in the federal “five” of the ruling party and, it can’t be excluded, planning to continue his career in some higher position, such boasting looks excusable. Before elections, they certainly lie no less than in war and in hunting.

Competing with yourself

But the statement that our army is not only one of the most advanced armies in the world (this has already been stated more than once), but that it even surpasses them, requires at a minimum clarifications. First of all, we note that Russia surely wins a competition with itself. Such a criterion as the percentage of modern weapons exists in the official documents of only the Russian military department. For the armed forces of the United States, like the armies of most other states, it would look meaningless at least. There, overseas, military equipment lives a full and very long period of time. Once put into service, the tank and aircraft consistently — stage by stage, cycle by cycle — undergo scheduled repairs and modernization, remaining in service for decades. Here you can recall the F-15 aircraft (adopted in 1976, will remain in the inventory until 2025), the F-16 (transferred to the armed forces in 1978, will serve until 2025), the Abrams tank (in service from 1980, there are no plans to replace it) and the Patriot air defense system (entered service in 1982, serves at the present time). If it had occurred to anyone to calculate the percentage of “modern” weapons in the American armed forces, it would most likely be steady.

Russia, on the other hand, introduced this indicator [“modern”] due to very specific circumstances. ⁠During 15–20 years (from the beginning of the 1990s to the mid-late 2000s), the Russian military’s armament inventory was not only not updated or modernized. The equipment was not even repaired or maintained in proper condition. In 2008, during the war with Georgia (the war that became the moment of truth for the Kremlin), almost half of the tanks and infantry fighting vehicles urgently taken from storage bases simply broke down and did not reach the border. It was already impossible to bring most of this equipment into operation. As a result, the concept of “modern equipment” was invented, which today safely includes both recently developed Su-57 fighters and Armata tanks, as well as the modernized Su-24 and T-72, which have been in service for almost half a century.

It should also be noted that the existing system of secrecy and the monopolization of information by the military department excludes any possibility of verifying the victorious reports of General Shoygu. The only exception is strategic nuclear forces, data on the composition of which Moscow regularly provides, fulfilling its obligations under the START Treaty (there is a high rate of “modern weapons” — 83% — due to the fact that Russia spends, according to experts, over 20% of its entire military budget on nuclear weapons). As for the general-purpose forces, Sergey Shoygu can draw any indicator of the availability of modern weapons — at least 70, at least 120% — it is impossible to verify this.

OPK in debt

But if we take the minister’s words on faith, it turns out that the successes in the rearmament of the Russian army are much more significant than those of the U.S. armed forces (whose military budget is more than 10 times higher than the Russian one) and of the Chinese army (which spends at least four times more on military purposes than Russia). But if so the the military-industrial complex (OPK), which fulfills the state defense order so remarkably, should flourish. However, it’s never happened. In 2019, even before all the covid lockdowns and ensuing economic losses, Deputy Prime Minister for the defense sector Yuriy Borisov shocked the expert community, announcing that about 2 trillion rubles of debt was hanging over enterprises of the defense-industrial complex. Moreover, he confirmed “the main body of the credits will never be repaid.” In fact, he talked about the inability even to pay interest on loans. Defense enterprises spent about 200 billion rubles on interest payments, according to Borisov. “This figure beats with the planned profits of the defense industry enterprises, it turns out to be such a paradox. I cite an example from real life all the time: we boil water, drink and refill. That is, there is practically no opportunity to rely on internal sources, on the most effective sources, on our own funds,” Borisov complained. Previously, he compared the work of the military industry with exercising on a stationary bike: no matter how much you push on the pedals, you still won’t get anywhere.

According to media reports, more than 10% of defense industry enterprises (140 out of 1319) are approaching bankruptcy. The only thing that the state can offer is early repayment of loans at the expense of the budget. In 2016, 800 billion of budget rubles were spent on this, in 2017 – another 200 billion. At the same time, the debt burden did not decrease in a remarkable way, but grew. In 2020, Yuriy Borisov proposed to write off the debts of defense enterprises already by 600-700 billion rubles. And he managed to convince Putin of the need for this. According to Borisov, in 2020 “350 billion rubles of ‘toxic’ loans were written off through additional capitalization of enterprises. Another 260 billion rubles were restructured, and there is still a 150 billion ruble reserve.”

So the state twice (once through the allocation of funds for production, the second time through the write-off of loans) financed the manufacture of “modern weapons”, which Sergey Shoygu boasts. Do you think that after that there was finally financial prosperity? Not at all. At the end of last year, as reported by the Vedomosti newspaper, it was decided to again finance the implementation of the state defense order with bank loans, although initially it was proposed to do this through the federal treasury, that is, to transfer money directly from the state budget to the defense industry enterprises. Most likely, this is due to the fact that the state is resolutely unwilling to abandon ambitious rearmament programs, despite the fact that the necessary funds are no longer there. It is planned to attract 360 billion rubles of loans in three years to fulfill the state defense order. That is, there is a continuation of the vicious practice of the past decade, when enterprises disrupted production deadlines, and with them the deadlines for paying debts, and finally got entangled in the endless payment of interest.

Russian defense sector with Soviet problems

I’d venture that the source of the problem is the archaic system of the OPK. With the blessing of Vladimir Putin in the mid-2000s, Sergey Ivanov drove military-industrial enterprises into a dozen and a half vertically integrated industrial corporations, which were a caricature of the famous nine Soviet defense-industrial ministries. They quite successfully inherited all the vices of Soviet bureaucracy, endless approvals, corruption, and unwillingness to take responsibility. But, fortunately or unfortunately, they could no longer inherit the production system. Because of its absence. In the Soviet Union, only final assembly plants were considered defense. And numerous components (in the Su-27, for example, up to 1,500) were manufactured at civilian enterprises, each of which had a so-called mobilization task. It had nothing to do with the economy. The cost of producing military products [those components] was actually included in the cost of civilian goods, which was reflected in their quantity (remember the eternal Soviet deficit) and their quality. To create at least the appearance of profitability, the all-powerful Gosplan [State Planning Committee] artificially balanced the prices of civilian goods and weapons. It is no coincidence that now from OPK managers it’s possible to hear proposals for the revival of Gosplan.

In the meantime, even under the threat of criminal punishment, the state has failed to force owners of private enterprises to make components for the OPK at a loss. Indeed, for the production of a limited number of particular parts, it is necessary to maintain separate production lines (the military has completely different requirements for quality and precision) and extra workers. As a result, the military industry is doomed to produce components at final assembly plants. Only this can explain the simply snail-like pace of armaments production which has been declared serial.

So, serial deliveries of the fifth generation Su-57 fighter were supposed to begin in 2016. In reality, the first aircraft was manufactured by the end of 2019, but it crashed during a test flight. After that, exactly one year passed before the next “serial” fighter was transferred to the Aerospace Forces. The head of the United Aircraft Building Company, Yuriy Slyusar, promised Vladimir Putin to deliver as many as four aircraft this year. The same story with serial production of the newest tank “Armata.” It was planned to produce more than two thousand tanks by 2020. Then they started talking about only a hundred tanks. Now they promise to start serial production in 2022, but they don’t specify the size of the series. It’s no secret that serial production is characterized by a sharp reduction in the cost of production. After all, the product, roughly speaking, is assembled from a set of standard assemblies and parts. Nothing needs to be “adjusted” and “customized” any longer. However, this isn’t seen at all in the production of “Armata” (and they specify clearly reduced prices for the Su-57). The approximate cost of the tank has increased from 250 million rubles to 450 million rubles per unit.

On July 20, the international air show MAKS-2021 will open in Zhukovskiy near Moscow. Vladimir Putin promised to attend. Probably, on this day we will hear a lot of praise about the successes of our OPK, including, of course, the rearmament of the army. However, one must remember: all these “modern weapons”, of which the authorities are so proud, cost the country like they were made of gold.

More Airborne Armor

The Ivanovo-based 217th Parachute Regiment of VDV’s 98th Airborne Division is reportedly taking delivery of the eleventh battalion set of new armor today, according to local media.

Interfaks-AVN reports the 98th VDD will get 31 BMD-4M Sadovnitsa and six BTR-MDM Rakushka (shown above).

Introduction of the new armored vehicles looks like this (click image):

At the current pace, VDV seems likely to get one or two more battalion sets before the end of 2021.

Usually less than 40 armored vehicles (mostly BMD-4M), these eleven battalion sets represent about 400 new pieces of equipment so far.

Deliveries aren’t likely to end soon. A fully new armor inventory for the VDV probably means a total of 1,200 new vehicles. So maybe another 20 battalion sets with 800 vehicles. But the exact endpoint for new airborne armor procurement hasn’t been publicized.

The BMD-4M and BTR-MDM are big development and production undertakings that started before 2010 and haven’t proceeded quickly or smoothly, all Shoygu’s braggadocio about RF MOD rearmament notwithstanding.

An-124 Program

KZ coverage of yesterday’s MOD leadership videoconference provided a little window into what has apparently become the modest modernization program for Russia’s An-124 Ruslan heavy transport aircraft.

Defense Minister Sergey Shoygu proposed discussion about the modernization and repair of the An-124, saying:

In conditions where the demand for transport of super-heavy and large diameter loads in the Armed Forces is growing, resolution of this problem has taken on special importance. In the conference, we will hear proposals of the directors of Aviation Complex named for S. V. Ilyushin and the Ural Civil Aviation Plant [UZGA] regarding completion of the contract for modernization, restoration, and life extension of two An-124 aircraft, but also for the capital repair and modernization of 12 D-18T aircraft engines.

So that’s modernization of two aircraft and 12 engines (three aircraft?). Shoygu confirmed what was reported for VPK in 2018 by one-time officer and KZ journalist Oleg Falichev.

Falichev called (perhaps shilled?) for work on 12 D-18T engines. He claimed Russia’s An-124s received only two percent of funding required for their maintenance, and indicated UZGA had not “mastered” repair of the D-18T, a Soviet-era product made on the territory of Ukraine.

Recall we see various numbers for An-124s in VTA’s inventory, perhaps four or nine operational aircraft with maybe more than 20 airframes in various states of repair (or disrepair).

It’s been clear for a while that Moscow won’t try to recreate production of An-124s; modernization is supposed to allow them to serve until the 2040s when PAK TA might enter the force.

Shoygu could be right. The demand for super-heavy airlift might be growing, especially given the current state of world disorder and Moscow’s increased activism abroad. This could put a premium on the ability to deliver large amounts of cargo rapidly to great distances.

Then again, if this is the extent of the An-124 modernization program, it doesn’t sound like a high priority. It sounds like a band aid. Always resourceful, the Kremlin will find simpler ways to get the job done.

Akula Update Progressing, Slowly

Russia’s effort to extend the service lives of its Akula submarines and increase their capability to the level of new Yasen-M boats is progressing, but not as quickly as Moscow planned.

The Russian Navy counts on refueled reactors and new major systems to enable project 971 Akula-class SSNs to operate at least 15 more years. This would provide needed time for construction of new Yasen-M submarines. The modernization of the Akulas, to include possible deployment of Kalibr missiles on them, will bring them closer in capability to new fourth generation Yasen-M SSNs.

Akula-class SSN Vepr returned to service in the Northern Fleet around August 5, according to an OPK source. The submarine arrived at Nerpa, in Snezhnogorsk near Murmansk, in 2012 for repairs and modernization. Vepr was originally scheduled to rejoin the fleet in 2014, but this was delayed several times.

Nice photo of renovated pr. 971 Akula SSN Vepr (K-157) from Murmanskiy vestnik

Vepr is the second renovated Akula. Kuzbass was modernized at Zvezda in Bolshoy Kamen between 2009 and 2016 when it returned to the Pacific Fleet. Kuzbass reportedly received Kalibr cruise missiles during its modernization. But that capability has not been demonstrated.

Vepr gives the Russian Navy maybe three operational Akula SSNs. Six Akulas, all 25 or more years old, are currently located at Zvezdochka, Nerpa, or Zvezda.

The Northern Fleet’s Leopard arrived at Zvezdochka for repair and modernization in 2011 , with a planned return to service in 2015. That deadline passed, as did ones in 2016 and 2018. Completion of work on Leopard is now expected in 2020 or 2021.

Volk arrived at Zvezdochka possibly as early as 2011 and repairs began in 2014. The Pacific Fleet’s Bratsk and Samara arrived in late 2014 on a heavy lift vessel via the Northern Sea Route. Serious work on Bratsk and Samara likely awaits the completion of Leopard and Volk. Volk may be ready in 2023.

Northern Fleet boat Tigr was towed to Nerpa in 2017. According to Izvestiya’s source in the Russian MOD, Tigr will be renovated, armed with Kalibr missiles, and returned to the fleet in 2023.

In mid-2019, a Vladivostok news agency reported the repair and modernization of Magadan had commenced at Zvezda in Bolshoy Kamen, although some initial work may have started in 2018. The submarine arrived at the shipyard in 2015 or even earlier. It will not to return to operational status before 2023.

On September 25, an MOD source claimed it will return in 2021 or early 2022. It will receive a new name given that Magadan has been assigned to a project 636.3 diesel-electric submarine under construction for the Pacific Fleet.

The Akula repair program first and foremost entails refueling the nuclear reactors and restoring the hulls of the SSNs. Reactor and propulsion system components – steam generators, turbines, turbogenerators, motors, gears, shafts, rudders, and propellers – likely require major work.

The modernized Akulas probably are receiving new major ship and combat systems including command, control, and communications, navigation, fire control, sonars and non-acoustic sensors, and weapons possibly including the Kalibr anti-ship and land-attack cruise missile system. Its land-attack 3M-14 missile has a range possibly up to 2,500 km.

Despite frequent announcements that Kalibr is being incorporated, no firing of the missile from a modernized Akula has been reported. A test launch of the new system would be a normal part of combat certification for returning to operational status. Moreover, when it occurs, the MOD can be expected to publicize it widely.

Delays in the Akula repair and modernization program are endemic. In 2016, Zvezdochka’s press-service reported that the shipyard routinely had to begin repair work – dismantling the hull and equipment – while awaiting design documents. Zvezdochka also indicated it faced difficulty in obtaining new or repaired components because some original manufacturers are defunct. The shipyard has retooled and re-equipped to support the program, but making changes inside its shops has pushed the completion of the Akulas to the right.

Russian shipyards are likely at capacity with submarine repairs. Zvezdochka has been maintaining and upgrading Russia’s Project 667BRDM Delta IV-class nuclear-powered ballistic missile submarines, and it modernized Oscar II-class cruise missile submarine Orel. This work has slowed progress on the Akulas. Similarly, at Zvezda on the Pacific, modernization of Oscar IIs, specifically Irkutsk — now supposed to be finished in late 2022 or 2023 — competes with work on Akulas.

Despite these challenges, Moscow is committed to returning modernized Akulas to operation to retain its capability for long-range anti-submarine and anti-surface warfare while it awaits new SSNs. The first Project 885M Yasen-M SSN, Kazan, has been undergoing trials since 2017 and is expected to be delivered in 2020. The Russian Navy plans to add seven Yasen-M by 2027, but at the current pace of construction, it is unlikely to have its full complement of new production SSNs before the early 2030s.

New Dry Dock

SSK Zvezda has completed a massive dry dock at Bolshoy Kamen, reportedly four years ahead of schedule.

The Rosneft-owned facility will build ships to support Russian oil and gas extraction and transport.

The dock is 485 meters long, 114 in width, and 14 deep. It is outfitted with internal gates to create separate compartments that can be flooded independently. Besides the massive 1,200-ton gantry crane, the dock has four 60-ton tower cranes.

This image from May shows the new dock in the lower left, and the existing buildingway (also pretty new) just right of center adjacent to DVZ Zvezda. Recall DVZ Zvezda is Russia’s sole sub repair yard on the Pacific Ocean.

Shaposhnikov Trials

Marshal Shaposhnikov enroute to factory trials

Marshal Shaposhnikov enroute to factory trials

Mil.ru reports Russian Pacific Fleet Udaloy-class destroyer Marshal Shaposhnikov departed Dalzavod shipyard in Vladivostok yesterday after an overhaul and modernization which took five years to complete. The original plan was three.

The 35-year-old ship will conduct factory trials in the Sea of Japan.

Below is Izvestiya’s video.

 

The destroyer’s hull and fittings were repaired and new equipment was installed, according to Mil.ru. More than 20 percent of the superstructure was dismantled and refurbished. Trunk cables were partially replaced.

Most significantly, the modernized destroyer became a land-attack and anti-surface warfare platform whereas it was primarily ASW before. It received long-range Kalibr-NK (SS-N-27 Sizzler) missiles and Uran (SS-N-25 Switchblade) ASCMs.

TV Zvezda also had a long video in which Shaposhnikov’s new armament is easy to see.

The destroyer is supposed to rejoin the Pacific Fleet’s order-of-battle before the end of 2020.

Russian media have claimed four of the Navy’s other seven Udaloy (pr. 1155) destroyers will be modernized. But the Russian MOD and Navy may not have committed to this yet, waiting perhaps to absorb how the process turned out and exactly what it cost. The upgraded Shaposhnikov could be a stopgap for a fleet awaiting more new corvettes and possibly frigates.

New Airborne Armor Deliveries

ROC priest blesses new BMD-4M delivered in January

ROC priest blesses BMD-4M delivered in January

Russia’s VDV got its ninth battalion set of new BMD-4M and BTR-MDM armored vehicles on June 19, according to media in Pskov — home of  the 76th Air-Assault Division’s 234th Air-Assault Regiment. The tenth battalion set will reach troops in Stavropol before the end of 2020, according to the Russian Defense Ministry.

Here’s some info on when and where these new airborne infantry fighting vehicles and personnel carriers were delivered.

Click on the image for a larger table where you can click the links therein.

Leader in Combat Aviation?

Videoconference on help to the aviation industry

On May 13, RF President Vladimir Putin conducted a videoconference from his “bunker” in Novo-Ogarevo on support to Russia’s aviation industry in the pandemic and economic crisis. He directed his ministers to shift civilian, and possibly some military, aircraft production “to the left” to give work to struggling enterprises.

In the process, he said:

Domestic aircraft compete on equal terms with foreign analogues, with world market leaders in many of their characteristics, and by the way, in some [characteristics] — in combat aviation — is considerably superior to them.

Putin’s assessment of Russia’s place as the (or a) leader in military aviation spurred Militaryparitet.com to editorialize. The comments are worth a few moments.

Deputy PM Yuriy Borisov used the occasion, Militaryparitet writes, to ask once again for Putin to erase defense industry’s chronic debts. And nothing in Borisov’s plea smells like the competitiveness Putin claims.

The site continues:

This announcement [about Russia’s lead in military aviation] is highly interesting, but it has been repeated like a mantra for two decades already. So where is Russia outpacing its competitors in combat and military aviation?

First, Russia still hasn’t gotten its fifth-generation fighter, the Su-57, into the force. The U.S. long ago jumped ahead with its F-22 and F-35, and even the Chinese claim they have 40 series-produced J-20 fighters.

Second, Russia’s fourth-generation fighters are laggards. Not a single one has an active phased array radar. This is no longer an innovation for the U.S. The French have it. And China also asserts success in putting it on its fighters.

Third, the Indians are unhappy with Russia’s R-77 air-to-air missiles they purchased. New Delhi says they lack the range and effectiveness of U.S. AIM-120 and European Meteor missiles.

Fourth, with respect to strategic bombers, Russia is renewing production of the existing Tu-160 Blackjack. A new design PAK DA will require “remarkable patience” at a minimum and, with a long-term recession looming, it probably won’t happen at all.

Fifth, Russia hasn’t managed to put an active phased array radar on its AEW aircraft because of its almost total lack of commercial electronics and microelectronics industries.

Sixth, for transports, Russia continues to rely on the Il-76 while the U.S. introduced the C-17 with nearly double the cargo capacity in the 1990s.

Seventh, Russian unmanned aviation is a complete bust. There is the single S-70 Okhotnik, but you couldn’t see a Russian analogue to Global Hawk “even with a telescope.”

Militaryparitet sums up:

So what kind of Russian leadership in combat (military) aviation is Putin talking about every time? Russia has long been on the margins of progress in this sector, and there is no hope to get to the cutting edge “by its own efforts.” We are living in a time when you can’t do anything good without cooperation . . . .

But . . . is there all of a sudden an area where Russia is overtaking the entire world in combat aviation? If there is, speak up, please. We’ll celebrate together.

Mass Counterfeiting

Overlooked in recent days was new RF Prosecutor General Igor Krasnov’s announcement about the “mass use” of counterfeit materials and parts in Russia’s OPK.

Igor Krasnov

Krasnov

Interfaks-AVN reported Krasnov told fellow prosecutors at a “broadened collegium” in Moscow:

The mass use of counterfeit materials and parts by OPK enterprises is a cause for special alarm. Considering the strategic character of this problem, it’s necessary to carry all planned oversight measures to their logical end.

We know “logical end” means arrest and convict people, don’t collude with them. 

Krasnov continued:

. . . the condition of legality dictates the need to increase the oversight component in strengthening financial discipline, reducing the indebtedness of OPK enterprises for unmet obligations and increasing the quality of military products.

Krasnov claimed during the past year military prosecutors uncovered more than 44,000 legal violations in the OPK.

TASS reported Krasnov directed military prosecutors to ensure MOD officials responsible for “military acceptance” respect relevant laws and exert control over the fulfillment of GOZ work.

Counterfeiting in Russia’s defense industry isn’t novel. It just doesn’t get much attention. There are likely egregious cases of counterfeit equipment that never surfaced. But a few have:

  • An official in the MOD’s 1st TsNII (Shipbuilding) said in 2018 that counterfeit parts were hampering Russian efforts to build its own ship engines to replace those once bought from Ukraine and Western countries.
  • As late as the first half of the 2010s, torpedo maker Dagdizel was “recycling” parts from old dismantled weapons for “new” torpedoes.
  • Several managers at Zvezdochka were arrested in 2015 for using fake parts in the repair of Indian Kilo subs.
  • An experimental Ka-60 helo crashed in 2010 due to faulty tail rotor parts made by an unauthorized “underground” manufacturer.
  • The MiG-29SMT fighters sold to Algeria and returned in 2008 is just the most famous scandal. Some “new” parts on those planes were stamped in the early 1990s.

Some recent glaring example of counterfeiting in Russia’s OPK must’ve sparked the new Prosecutor General’s comment but we just haven’t learned about it yet.

OPK Write-Off

Yesterday Russia’s Deputy PM Yuriy Borisov was in Kazan to inspect Tupolev’s work on strategic bombers and gave the media details on the plan to deal with defense-industrial complex (OPK) debt.

Borisov (right) with Tatar President Rustam Minnikhanov

Borisov (right) with Tatar President Rustam Minnikhanov

The government arms tsar and former deputy defense minister said the plan will restructure 750 billion rubles ($11 billion) in debt. Actually, 300 billion rubles in non-performing loans will be written off. The other 450 will be restructured into 15-year loans at three percent interest.

For Russia’s defense producers, Borisov concluded:

It’s a very serious measure that will allow them to be free of big payments to bankers and free up resources for their own development.

For anything more specific, however, one would have to read President Putin’s secret ukaz on the issue.

This result is somewhat the reverse of what Borisov wanted. More favorable to enterprises than bankers, he sought a 400-450 billion write-off and restructuring of 300-350 billion for 15 years at two percent with a five-year payment holiday to start.

Before that, he sought a complete write-off but Russia’s big banks flatly refused.

Recall this 750 billion rubles represents only Russia’s most troubled defense industry debt. The total burden on the sector is 2.3 trillion rubles ($34 billion).