Tag Archives: Gosoboronzakaz

Latest on GOZ Woes (Part II)

To review this week . . . Prime Minister Putin’s current deadline for completing GOZ contracts is August 31, but it’s unlikely to be met, even by loyal Deputy PM and OSK Board Chairman Igor Sechin.  Deputy Finance Minister Siluanov said Defense Ministry contracts are being made on credits and government-backed financing rather than cash.  Putin said the price tag for GOZ-2011 is 750 billion rubles, but 30 percent of projected procurement still isn’t covered by contracts as the final third of the year begins.

How did the government, Defense Ministry, and OPK arrive at an August 31 deadline that’s unlikely to be met?

The latest round of this year’s GOZ woes started in early July when MIT General Designer Yuriy Solomonov told Kommersant that GOZ-2011 was already broken, and Russia’s strategic missile inventory is not being renewed as necessary.  He said there’s no contract for the RS-24 / Yars ICBM, and the late arrival of money makes it impossible to salvage 2011.

President Dmitriy Medvedev responded by calling Defense Minister Anatoliy Serdyukov on the carpet.  According to RIA Novosti, he told him:

“Sort out the situation.  If there’s information that the state defense order is broken, it’s true, organizational conclusions are needed in connection with those who are responsible for this, regardless of position or rank.”

“If the situation is otherwise, we need to look into those who are sowing panic.  You know how according to law in wartime they dealt with panickers — they shot them.  I’m allowing you to dismiss them, do you hear me?”

RIA Novosti reported Serdyukov’s opinion on the “wild growth” in the price of military products, especially from MIT and Sevmash.  He said MIT is asking 3.9 billion and 5.6 billion rubles respectively for Topol-M and Yars ICBMs.  Serdyukov put GOZ-2011 at 581 billion rubles [different from Putin’s figure!], and added that only 108 billion, or 18.5 percent, was not yet under contract.  He said everything would be done in 10 days.

At virtually the same time, Deputy PM and VPK Chairman, Sergey Ivanov told ITAR-TASS 230 billion rubles were not yet contracted out.  OSK piled on Serdyukov, claiming contracts for 40 percent of the Navy’s share of the GOZ weren’t finalized.

In late July, it looked like Northern Wharf (which reportedly produces 75 percent of Russia’s surface ships, and is not part of OSK) might be made into an example for other “GOZ breakers.”  While prosecutors talked vaguely about the misuse of GOZ money, the shipbuilder’s representatives apparently mounted a vigorous defense, asserting that the enterprise has been right on time, even though it’s underfinanced by the Defense Ministry.

Main Military Prosecutor Sergey Fridinskiy said prosecutors uncovered 1,500 GOZ-related legal violations during the preceding 18 months.  He indicated there were 30 criminal convictions, and state losses amounted to millions of rubles in these cases.  The most egregious example  was the theft of over 260 million rubles given to OSK’s Zvezdochka shipyard to repair Kirov-class CGN Petr Velikiy.  Fridinskiy indicated the enterprise director and his close associates apparently had 40 million of the money in their own names.  Recall Fridinskiy earlier said 20 percent of defense procurement funding is stolen.

According to Rossiyskaya gazeta, Defense Minister Serdyukov claimed he was on the verge of signing contracts with MIT for Topol-M and Yars production.  Once again, he said all contracting would be finished in two weeks.

In mid-August, OSK enterprises Sevmash, Admiralty Wharves, and Zvezdochka said they would soon be forced to cease work unless the Defense Ministry signed contracts with them.  Putin, Sechin, and Serdyukov met and launched a special interdepartmental commission to set prices for the Navy’s remaining 40 billion rubles in GOZ contracts.  And, according to Kommersant, everyone was once again reassured that all contracts would be completed in two weeks.

And it’s not just all ICBMs, ships, and submarines . . . Kommersant wrote that the Defense Ministry eschewed contracts for 24 or more MiG-29K and more than 60 Yak-130 trainers at MAKS-2011.

So what does the mid-year GOZ picture look like? 

The president and prime minister have fumed and set a series of deadlines, not met thus far.  And the defense minister and deputy prime ministers have assured them they would meet each deadline in turn. 

More interesting, and somewhat unnoticed, is the fact that the prime minister and defense minister (among others) seem to be consistently working from different sets of numbers on the size of the GOZ, and how much has been placed under contract.  The GOZ hasn’t captured this kind of leadership attention at any time in the past 20 years.

Producers are being honest when they say late state contracts mean they can’t do anything (or at least what the Defense Ministry wants them to) in what remains of the year.

Picking up the pieces of GOZ-2011, and trying to put GOZ-2012 on a better footing will occupy the rest of this year.

Lost in everything is what will the Russian military get eventually by way of new hardware, and when will they get it?  And how good will it be?

Latest on GOZ Woes (Part I)

So much has swirled around the state defense order (Gosoboronzakaz or GOZ) this year that it makes one avoid the topic.  But here’s a shot at making amends for neglecting it. 

Perhaps this information will just precede the next wave of GOZ news, likely to break before the end of August.  The current deadline for putting out GOZ contracts is August 31 (who knows when the weapons and other military equipment being bought will actually be delivered?).

You may recall Prime Minister Vladimir Putin set August 31 as the most recent “last deadline” for placing all GOZ-2011 contracts back in late July.  At that time, Putin pretty much put all blame on the Defense Ministry.  Defense Minister Serdyukov said he would complete the contracting, and report to the President and Prime Minister by the deadline.  The report is supposed to be a joint one reflecting the positions of all players involved in the GOZ.

This very day, BFM.ru reports that Deputy PM Igor Sechin says he’ll be two more weeks negotiating OSK shipbuilding contracts with the Defense Ministry.  He claims three of 13 remaining contracts are being signed today.  Prices for the remaining ten will apparently be specified and agreed over the next 14 days.

According to ITAR-TASS, a VPK source indicated the Defense Ministry still needs to contract with Sevmash for delivery of one Proyekt 885 (Yasen-class) and two Proyekt 955 (Borey-class) submarines this year.  The source said work continues despite the lack of a signed contract.

ARMS-TASS, however, provided the best insight into the current state of play on the GOZ.  The news agency cited Deputy Finance Minister Anton Siluanov on a Putin-led government conference on the GOZ early this week.  Siluanov concluded the Defense Ministry will soon sign its contracts and send out advance payments.  Additionally, he criticized the delays for “breaking budgetary discipline,” and added that defense contracts are being signed on credit schemes and state guarantee mechanisms [i.e. not cash].

ARMS-TASS also quoted Putin at length:

“Naturally, the priority in buying equipment, armaments is, of course, domestic equipment, but it should still be modern, wanted, promising and acceptable to the customer, to the Defense Ministry, but taking account of prices for the state.”

“An unprecedented amount of monetary resources — 750 billion rubles — has been allocated for the purchase and modernization of equipment and armaments, for RDT&E on defense subjects.”

“In modern Russia such money has never been allocated so that in a year there’s 750 billion rubles — this is not some kind of percentage, this is half again as much as in 2010.”

“The government is counting on all this enormous money being effectively used to improve the quality of the work of defense industry and state customers.”

“Meanwhile, according to data which I have, more than 30 percent of the total volume of the GOZ still doesn’t have contracts.”

There’s quite a lot in those statements.  Probably as much substantive as Putin’s said publicly about GOZ problems.

Tomorrow we’ll do Part II on the latest woes.  Then maybe we’ll look at 2011 — the year of the GOZ.  And possibly even a look at the GOZ since 2000 or so.

Severodvinsk Trials and GOZ Tribulations

Severodvinsk (photo: RIA Novosti / Vladimir Rodionov)

Your typical good news, bad news story . . . happily for the Russian Navy, the Severodvinsk is nearing its first at-sea testing, but the new submarine has also been held up as a prime example of outrageous price increases in this year’s state defense order.  Final delivery of this SSN, as well as the first two Borey-class SSBNs, represents a big part of troubled GOZ-2011.

RIA Novosti reports new fourth generation Yasen-class (proyekt 885) SSN Severodvinsk will soon head into the White Sea for two months of underway testing, according to Malakhit Design Bureau General Director Vladimir Pyalov.  He added that, after this at-sea period, the final phase of state testing will take place.  

A very precise Mr. Pyalov says Severodvinsk is currently 98.9 percent complete.  He thinks the Navy will accept the new boat before year’s end and, in all, six of these multipurpose submarines will be built.  The second proyekt 885 Kazan is slated for delivery in 2015. 

RIA Novosti says proyekt 885 is a double-hulled, single-shaft boat with a reduced acoustic signature.  The conning tower has a streamlined, oval shape.  The boat is divided into ten compartments. 

For the first time, according to RIA Novosti, Russian designers put the submarine’s torpedo tubes amidships to allow for a new bow-mounted sonar system.  Proyekt 885 has eight vertical launch tubes for supersonic cruise missiles.  It has new communications and navigation systems as well as a fundamentally new nuclear power plant, according to the news agency’s report.  The new submarine is said to be first in noise reduction and stealth among attack submarines worldwide.

But the Severodvinsk couldn’t evade detection in the furor over breakdowns in the state defense order.

Earlier this month, RIA Novosti reported on disputes between the United Shipbuilding Corporation (OSK), submarine-builder Sevmash, and the Defense Ministry over naval construction in this year’s GOZ.  In particular, the military accuses the builder of doubling its prices for proyekt 955 Yuriy Dolgorukiy and proyekt 885 Severodvinsk.

An OSK spokesman defended Sevmash saying the cost of its work on Severodvinsk is only 30 percent of the total price, with the balance being the cost of armaments and components supplied by several dozen enterprises.  He blamed inflation in the industrial sector and the economy more generally.

Summarizing his discussion of submarines with OSK, RIA Novosti reports, Defense Minister Serdyukov said:

“They are giving us an increase in prices on new orders, and, naturally, we don’t agree with this.”

But, he added he’s convinced the Defense Ministry will persuade the producer to lower its prices.

Izvestiya mentioned that Severodvinsk was originally intended for a production run of 30 submarines, now reduced to six more than 20 years later.  As recently as March, the Navy still publicly hoped for ten.

Serdyukov told the paper:

“. . . it’s incomprehensible what the price of the ship [sic] consists of, if the cost of the lead boat was 47 billion rubles ($1.7 billion), but the next, exactly the same is now 112 billion ($4 billion).”

“Of course, the price will grow if, in the cost of one ship [sic], they include all accompanying expenditures on other enterprise projects in no way connected with it, like maintaining kindergartens, infrastructure, etc.”

“We’re prepared to pay, but on the condition that the price formation process will be transparent.  As practice shows, if all articles in the contracts are “decoded,” then it seems it’s possible with confidence to deduct up to 30% from the final cost of a finished product.”

These must be bitter words for an enterprise that went many, many years without completing its trademark product — a nuclear-powered submarine.

A Sevmash source says the cost of submarine construction is directly related to higher prices for materials, energy, and integration:

“The entire range of equipment for a submarine is supplied by monopolistic companies trying to dictate their prices.”

Government Hour (Part II)

There was plenty of interesting media coverage of the Defense Minister’s meeting with the Duma on Wednesday, and plenty of criticism of what he said or didn’t say.  Plenty worth covering in a Part II, especially regarding Serdyukov’s effort to shift the blame for another failing GOZ.

Radio Svoboda quoted KPRF deputy Vladimir Ulas putting all the blame for the army’s current state right at Anatoliy Serdyukov’s feet:

“The public clearly understands that the situation in the Armed Forces is far from favorable.  Constant scandals which rock this department, the morale-psychological situation in which personnel, first and foremost, the officer corps, find themselves, both the material condition, and the lack of modern armaments – all these problems are completely real.  I also hoped to hear answers to questions, how the Defense Ministry intends to solve them, from the minister.  But, to my greatest regret, the biggest, in my view, problem of today’s Armed Forces is the absolutely dense incompetence of the military leadership.  With people like Serdyukov still heading our Armed Forces, and he, unfortunately, is far from the only one, hoping for some kind of positive shifts is absolutely senseless.”

There was plenty more to be said about problems with the GOZ, the OPK, and the VPK and Defense Ministry blaming each other for what looks like a failing GOZ-2011.

KPRF deputy Anatoliy Lokot told Nakanune.ru:

“I have the impression that these sessions are ‘closed’ to hide the bitterness of the questions and negative results of the work of Military-Industrial Commission (VPK) and Defense Ministry leaders.”

United Russia’s Igor Barinov reiterated what he said he told President Medvedev a year ago:

“I noted then that the lack of competition and incomprehensible system of price formation in the VPK is a deadend path.  We’re reaping the fruits of this now.  Judge yourself:  one, well, a maximum of two enterprises produce this or that type of our armament or military equipment.  Meanwhile, enterprises getting money from the federal budget dispose of it as they wish.  Prices simply come from the ceiling.  No one bears any responsibility for quality.  No one invests money in improving types of military equipment, in the end it goes that even in infantry weapons we’ve fallen behind.  Our legendary automatic weapon Kalashnikov, the value of which everyone recognized before, now lags the best Western types in tactical-technical characteristics.  And so it is in almost every area, with rare exceptions in the areas of missiles and some aircraft.”

“The Defense Ministry announced it won’t buy airborne combat vehicles [BMDs] and infantry combat vehicles [BMPs] from ‘Kurganmashzavod.’  This enterprise was one of the guilty in breaking the Gosoboronzakaz.  And here’s the thing in this.  ‘Kurganmashzavod’ is part of the United ‘Tractor Plants’ Corporation.  Budget money is shared out with ‘Kurganmashzavod’ in a targeted way for the purchase of equipment, but the corporation’s directors dispose of it according to their discretion, and, naturally, BMP and BMD production is the last thing of concern for the owners of this holding company.”

“If they understand that they can be deprived of budget resources, then this enterprise will be forced to invest in quality, and in cutting defects, and in the improvement of product types.  In addition, strict supervision is needed.  Money was allocated but no one asked anyone about this money, and the result was zero.”

The KPRF’s Lokot also dwelled on the GOZ:

“It’s obvious that if the Gosoboronzakaz isn’t formed in the first half of the year, then nothing will be accomplished in the remaining part of the time since money will only begin coming in at the end of the year.  Serdyukov acknowledged that today 13.4% of all contracts in the plan have been formed.  Some time ago, Sergey Ivanov gave us other numbers.  But I think that this number juggling was caused by competition between the Defense Minister and the Military-Industrial Commission.  Ivanov lumps all the blame on the Defense Ministry, Serdyukov – on the defense-industrial complex.  He even began his [Duma] speech with this, saying that the military-industrial complex is guilty of everything.  They have poor qualifications, technology losses, poor production and so forth.  But really at a minimum the Defense Ministry itself bears 50% percent of the responsibility for such a situation.”

“I have given the example of Novosibirsk proving the obvious guilt of the Defense Ministry in breaking the order.  One of the enterprises – the Lenin Factory, which puts out very important products for infantry weapons, became a victim of Defense Ministry officials.  In January this year, Serdyukov opened a state order tender with his signature, but closed it in March.  Now half the year is gone, and there are no results.  The enterprise isn’t working, products aren’t coming out, 211 million rubles spent on reequipping won’t bring any returns, and now they’re generally talking about cutting part of the work force.

“Right in Novosibirsk at the Comintern Factory the S-400 surface-to-air missile system is being produced on the enterprise’s own money, and not with government resources.  Serdyukov says:  ‘I don’t see anything terrible in this, let the enterprise do it on its own money.’  But where does it get its capital resources?  What world is Serdyukov living in?”

Vedomosti talked to a former Defense Ministry official who basically said the threat of arms purchases abroad really didn’t scare anyone.  And, according to him, although Serdyukov considers defense industry leaders lazy and prone to stealing, everyone understands imports can never replace domestic production.  Finally, a source close to the PA told the business daily that Serdyukov himself opposes the Mistral acquisition because of the large expenditures required to build its base infrastructure.

Government Hour (Part I)

Yesterday Defense Minister Anatoliy Serdyukov appeared for his latest “government hour” to discuss the state of Russia’s defenses with parliamentarians.  One gets the sense his opponents were more on the offense this time than in the past.

The KPRF pushed to have his Duma meeting opened to the press, but its motion failed.  The faction noted Serdyukov’s yet to have an open session.  It’s first deputy chairman, Sergey Reshulskiy said:

“In all the previous closed ‘government hours,’ I never once heard and no one has proven to me that we are discussing anything secret here.”

“What will he [Serdyukov] tell us?  That they are supplying ‘Mistral’ without its full equipment?  This isn’t a secret.  That servicemen sent into retirement aren’t getting housing, this isn’t a secret either.”

Faction member Vladimir Fedotkin said:

“The West knows a hundred times better than we deputies what’s being created in our army.”

United Russia supporters thought Serdyukov’s answers exhaustive, but others were dissatisfied with his presentation.  Reshulskiy said he heard nothing concrete in Serdyukov’s statements about the recent depot explosions, fulfilling the GOZ, or resettling servicemen from the far north.

LDPR member Sergey Ivanov [not to be confused with Serdyukov’s predecessor] said he had counted on having a different conversation with the Defense Minister, and Serdyukov answered questions like a partisan politician.  Ivanov continued:

“In particular, Serdyukov didn’t give any concrete answer why Russia is buying ‘Mistral’ helicopter carriers from France and where they will be deployed.”

Just Russia’s Svetlana Goryacheva said her party “heard very sad things:  everything’s either not completely financed, not fulfilled, not completely fulfilled.  The Gosoboronzakaz is practically broken.”

Serdyukov apparently called the 102nd Arsenal disaster in Udmurtia a “remnant” of the Soviet era.  The munitions located there arrived during the early 1990s pullout from Germany and Hungary.  He blamed the “human factor” as well as “inadequate storage capabilities.”

Serdyukov also reportedly denied any retaliation against the Lipetsk pilots who blew the whistle on premium pay extortion at the base.  He said the scandal would not reflect on them in any way, and they would continue to serve.

The Defense Minister said Russia won’t be buying German Leopard tanks [recall Postnikov’s suggestion that they might be cheaper than a reworked T-72].  Nor is NATO standardization in the offing.

After the ‘government hour,’ United Russia’s Igor Barinov, deputy chairman of the Duma defense committee, told the press the Mistral deal is complete except for formalities, but most deputies believe buying the ships is a mistake:

“I myself am a little skeptical about the possibilities for combat employment of these types of weapons.”

Nakanune.ru had good coverage of the session.  It’s description said problems with the GOZ were front and center.  When Serdyukov explained how officials and factory directors were punished for breaking the GOZ, several deputies suggested that Serdyukov should resign if his qualifications don’t enable him to solve defense production problems.

Barinov also addressed this saying:

“I won’t cite concrete figures, since this could be secret information, but it’s possible to call the situation lamentable.”

Look for Part II tomorrow.

Kicking the Defense Ministry and OPK

President's Meeting on the OPK

President Medvedev is irritated as ever that the Defense Ministry and OPK aren’t moving out smartly to rearm and reequip the Armed Forces.  He’s trying to kick them into gear, but can he get results where his predecessors either didn’t care or simply failed?

According to Kremlin.ru, Medvedev met this afternoon in Gorki with a host of government officials and industrial chiefs.  They included, inter alia, Sergey Ivanov, Anatoliy Serdyukov, Vladimir Popovkin, Nikolay Makarov, Denis Manturov, Yuriy Borisov, Sergey Chemezov, Sergey Nikulin, Mikhail Pogosyan, and Roman Trotsenko.

Medvedev’s opening monologue enumerated what’s been done for defense industry — providing a full state defense order and financial support, creating integrated development and production structures [OSK, OAK], etc..

Then the President says:

“However, despite all adopted measures, the state of defense production cannot be called good, all attending understand this.  There are objective reasons:  the deterioration of enterprises’ basic capital is nearly 70 percent (on average), in some enterprises it’s all much worse.  We still have not even managed to establish effective mechanisms to attract innovation and off-budget resources to the defense-industrial complex.”

Medvedev goes on to say that all relevant documents, including the GPV 2011-2020, have been signed, but the assembled group still needs to think about how to implement the GPV.  He reviews how he talked at the Defense Ministry Collegium in March about balancing producer and buyer interests, about justifiable and understandable prices.

But in many areas, says Medvedev, this has already become moot, and he intends to increase responsibility for the fulfillment of these obligations.

First, he wants a Federal Goal Program for OPK Development in 2011-2020.  Its focus is to be “real readiness” of the OPK to produce actual weapons and equipment.

Second, he wants the Defense Ministry to finish placing GOZ-2011 completely by the end of May, and advance payments issued to producers in accordance with the 2011 and 2012-2013 plans.

Work to date, he says, is going poorly and slowly.  He reminds the assembled that he told them about the failure of previous state armament programs:

“Today I want to hear from all present why this happened:  both from government leaders, and from industry leaders, who was punished for this and how.  Report proposals to me, if they still aren’t implemented, with positions, with the types of responsibility, completely concretely.  If such  proposals aren’t reported, it means [industrial] sector leaders and government leaders have to answer for it.”

It’s unacceptable, he says, that high-level decisions have been made, money allocated, but a product isn’t supplied.  He recalls his late 2009 Poslaniye in which he said 30 land- and sea-based ballistic missiles, 5 Iskander missile systems, nearly 300 armored vehicles, 30 helicopters, 28 combat aircraft, 3 nuclear submarines, one corvette, and 11 satellites would be delivered in 2010.  

Everyone here, says Medvedev, agreed with this, so why wasn’t it done.  He is, he says, waiting for an answer, and:

“. . . we have to answer for the duties we’ve taken on ourselves, we look simply in this sense absolutely unacceptable.”

Medvedev finishes by saying he knows military production is profitable, and it’s possible to attract strategic investors.  He says he wants to talk about how to stimulate investment.  The goal for the day is concrete reports on what’s been done on the level of those responsible for organizing work and correcting the situation in defense industry.

Where’s this leave things?

Not exactly throwing down the gauntlet, just another warning that he’s getting serious.  But it’s doubtful the government or defense industry will take Medvedev seriously until he fires a minister, other high-ranking official, or an important enterprise director.  And it’ll probably take more than a couple dismissals to get anyone’s attention.  Medvedev is running out of time on this account (as well as others).  Those he’d like to make responsible or punish will just take the tongue-lashings and wait him out.

Pavel Baev on Politics and the Military

Last week BFM.ru interviewed Pavel Baev of Peace Research Institute Oslo about Russia’s military reforms.  Baev’s view of the reality of ongoing reforms is captured in one word — catastrophic. 

Now Baev doesn’t get everything exactly.  Some military policy changes — like the one-year draft and a new, higher military pay system — were made some time ago, not necessarily for the 2012 presidential election. 

But he’s right about lots of other things.  Some decisions made in Defense Minister Serdyukov’s reforms haven’t meshed, or even been antithetical.  Decisions like higher pay have become, like it or not, part of the electoral picture, and the leadership has to follow through.

Baev believes the army might not be combat capable due to personnel cuts.  He allows for the possibility that Serdyukov might be sacrificed by his political masters.  The Kremlin and White House are using pay and apartments to keep serving officers politically quiescent.  But Baev thinks these aren’t enough; at some point, the army will insist on having its combat capability restored.  He hints later that the state and inclinations of the army were factors in the recent Arab revolutions that overturned long-time rulers.

The interviewer asks Baev to reconcile Prime Minister Putin’s Duma session last week in which he emphasized using the defense budget at home to create good, high technology jobs in Russia with President Medvedev’s [and Putin’s] statements about the failure of the state defense order:

“It seems to me that on the whole in the realm of military reform, and the Gosoboronzakaz in particular, there are very many concealed problems which Putin generally didn’t talk about.  The speech [Putin’s Duma speech], in large measure, on the whole was very unproblematic.  Somehow everything was more about achievements, future developments, very little about problems.  In the military arena, many problems have accumulated, and in the course of military reform not a few new ones were created.  The situation is very complicated, and attempts to correct the situation somehow largely lead to problems becoming even more acute, particularly problems with personnel.”

Baev went on to say that the Gosoboronzakaz and the problems of buying new military equipment have reached a critical point because of the aging of current weapons systems.  There is, he says, an undercover battle over what to buy and, especially, what should be bought abroad.  The situation around Mistral has become so complicated and political that it’s now more a “special operation” than an export contract.

Baev says the Russian Navy didn’t really want such ships, but went with the idea when it was foisted on them.  The real struggle and lobbying over Mistral concerns which shipyard in Russia will build units 3 and 4, according to Baev.  He suggests the whole deal might have been French President Sarkozy’s way of placing a bet on President Medvedev to be Russia’s future leader, and organizing the “political climate” in Europe toward this end.  But right now, of course, the Mistral deal looks very uncertain.

BFM.ru asked Baev for his interim assessment of the military reforms begun in late 2008:

“Purely catastrophic.  In every reform, there’s such a moment when the old thing is no longer working, and the new one isn’t working yet.  At this critical moment for any reform, we have a situation when nothing is working; where to move — either forward along the path of reforms or to try to work back, — is in large measure a political question.  Just in the area of Armed Forces personnel policy, an unknown number of things have been botched.  The initiatives advanced, — cutting the officer corps, contract service, sergeant training, cutting the conscription term — each of them has its own basis, but they’re absolutely mismatched.  That is, we now have a situation with military personnel when the army is in fact not combat capable.”

Asked about military pay raises planned for next year, Baev says:

“I think the main sense of this initiative is still to lift the officer corps’ very obvious dissatisfaction with all these reforms.  Great potential dissatisfaction has built up in the army, it is focused more or less on the minister, which, they most likely will sacrifice.  But this isn’t enough to lift this dissatisfaction, but the promised money plus the long ago promised apartments, and they are still gradually giving them out, — this is somewhat capable of  damping down this dissatisfaction.  And the fact that they are promising lieutenants, — for young officers it sounds completely improbable, and, most likely, they are prepared to wait for such money.”

“It’s perfectly obvious that very many political initiatives are aimed at this critical electoral sector — to lift the tension now, to make so that the army sits quietly in its barracks, not speaking out, waiting for its money and apartments, — and everything.  These are purely short-term things, which can help get through a complex electoral period.  It seems no one particularly looks after this [military] sector, inasmuch as, generally, for officers money is money, but they are people of service.  If even in addition they pay the money, service doesn’t go because they aren’t succeeding in reforming the Armed Forces so that they become combat capable, then this is a more serious source of dissatisfaction than simply a lack of money.”

“. . . the Armed Forces are the only area where genuinely serious and deep reforms are going on.  But with reforms, problems always take on a new character, change.  Here some kind of forward dynamic is occurring, it isn’t going in circles.  But the lack of resolution of these problems in the absence of political will is very evident, and all political will is going now to electoral projects which aren’t clear how they will be implemented because it’s not clear to anyone who in the end will be Supreme CINC, that is also a question of no small importance for the Armed Forces.”

Baev sees a lesson for Russia and the Russian Army in the Arab revolutions:

“But it’s clear that several conclusion flow from the Arab revolutions, and not just in relation to missile systems, but in the fact that the army is a serious political force.  This is more the conclusion of events not in Libya, but of the situation in Egypt.  And attempts somehow to neutralize the politicization of the army grow more from here [Egypt], than from Libya, where the army was in a pitiful condition, from here [Libya] also, in large measure, there is a civil war.  If there were a powerful army there, such a thing [civil war] wouldn’t have occurred.”

He finishes by talking about obsession with ultra-modern weapons when existing systems are perfect for today’s armed warfare.  His discussion leads to an open question about the fit between Russia’s military doctrine and its future armament plans:

“Therefore, the conversation about how we realistically need to outfit the Russian Armed Forces depends largely on whom we intend to fight, where we intend to employ these Armed Forces, against what kind of potential enemies, — answers to all these questions don’t exist, the doctrine doesn’t provide these answers.  It’s essential to replace weapons systems which have already outlived their time, but whether it’s necessary to replace them with the most super modern systems, — this is still a question.”

Corruption and the GPV

This morning’s press included various accounts of statements from Igor Korotchenko or in the name of the Defense Ministry’s Public Council, on which Korotchenko serves, about mitigating the impact of corruption on the State Program of Armaments (GPV), 2011-2020.

RIA Novosti quoted Korotchenko to the effect that the rearmament program will only be successful with strict financial accounting and effective measures against corruption in the State Defense Order (GOZ or гособоронзаказ).

He said Defense Minister Serdyukov is taking steps to ensure that resources are used as intended, including the establishment of a Military Products Price Formation Department and the resubordination of the Federal Arms, Military, Special Equipment and Material Resources Supply Agency (Rosoboronpostavka) to the Defense Ministry.  But the latter step was done over six months ago, and not much has been heard about it since.

Novyye izvestiya and Novyy region quoted the Public Council’s statement:

“But for the army to receive all this [equipment in the GPV], money is simply not enough – it’s necessary to make things so that Defense Ministry generals, who to this point were occupied simultaneously with orders and purchases of weapons, don’t get access to money, are occupied only with formulating lists of everything needed for the conduct of modern war, but the function of monitoring prices and purchases should be transferred to other departments.  Otherwise, government resources allocated to the GPV will get ‘sawed off,’ placing this program in jeopardy.”

Those are, of course, the jobs of the new Price Formation Department and Rosoboronpostavka.  Serdyukov’s tax service veterans are supposed to free the payments system from graft, and use their experience to uncover complex theft schemes.  Military prosecutors are also expected to be more active here.  Main Military Prosecutor (GVP) Sergey Fridinskiy told Novyy region about prosecutors’ work in uncovering the theft of 6.5 billion rubles’ worth of military budget.  He claimed his prosecutors have stopped 240,000 violations, suspended 12,000 illegal actions, held 40,000 people to account, and returned 4 billion rubles to the treasury.  But it’s not clear what time period he’s talking about.

RIA Novosti recounted Korotchenko’s comments about preventing corruption in military RDT&E:

“Special control needs to be provided on scientific-research work and justification of expenditures on it, but also on the development of new types of armaments, since it’s precisely here that opportunities for different types of financial machinations and abuse exist.”

Of course, reminds RIA Novosti, RDT&E only amounts to 10 percent of the GPV.  Bigger chances for theft exist in procurement, which is supposed to be 78-80 percent of the rearmament plan.

According to Novyye izvestiya, on the procurement side, Korotchenko says, in past years, a minimum of 45-50 percent of money for arms simply ended up in someone’s pocket.  For this reason:

“For the very same money, Russia buys 14 tanks a year, and India 100.  This led the country’s leadership to the kind of thinking reflected in the Defense Minister’s authority to reorganize the entire purchasing scheme.  This time [the new GPV] 19 trillion rubles are at stake.  Can you imagine with what interest the ‘market players’ are waiting for them?  But the state machinery is running: many OPK directors are already being removed, in the case of the director of one of the system-forming design bureaus, suspected of stealing money from a state order through offshore shell companies, an investigation is being conducted, and other criminal cases in orders-purchases from previous years are also possible.”

The nongovernmental National Anticorruption Committee says the average kickback in civilian contracting is 30 percent, but, in defense, it’s 60 to 70 percent.  Because arms prices are secret [and hard to determine anyway], no one knows how much this is.  But common sense says this makes everything cost nearly twice what it should.

Defense Ministry Claims More Money Needed for Armaments

General-Lieutenant Frolov

Speaking before the Duma yesterday, acting Armaments Chief, General-Lieutenant Oleg Frolov indicated the proposed 13-trillion-ruble State Armaments Program (GPV or ГПВ) for 2011-2020 is not enough to accomplish the Kremlin’s rearmament goals.  RIA Novosti reported the draft GPV will go the government’s Military-Industrial Commission (VPK or ВПК) by the end of this month. 

From the Space Troops like his boss Vladimir Popovkin, Frolov is the Defense Ministry’s Deputy Armaments Chief, and Chief of the Main Armaments Directorate. 

Frolov said 13 trillion rubles will guarantee development of strategic nuclear forces, air defense, and aviation, but the Ground Troops’ requirements for modern weapons will be underfinanced. 

He added that 28 trillion rubles would allow the Defense Ministry to cover the Ground Troops’ needs, and 36 trillion—almost three times the planned amount of the GPV—would fully finance programs for the Navy and Space Troops. 

First Deputy VPK Chairman, ex-general Vladislav Putilin responded that his commission hasn’t heard answers as to why the proposed 13-trillion-ruble allocation is insufficient for the military’s needs: 

“In the Defense Ministry’s opinion, the armed forces will degrade under an allocation of 13 trillion rubles out to 2020.  But we haven’t gotten explanations even though we’re asking:  show us these horror stories.” 

Putilin noted that the GPV is still a ‘working’ document at this point. 

At the same time, the Audit Chamber (a GAO-type organization) told the Duma the Defense Ministry is not succeeding in using its allocated funding.  Lenta.ru reported that, by varying measures, the Defense Ministry executed only 42-65 percent of the State Defense Order (GOZ, Gosoboronzakaz, ГОЗ, Гособоронзаказ) for last year.  Also of interest from yesterday, SIPRI released its estimate of Russian defense spending for 2009–$53 billion (about 1.6 trillion rubles), good enough for fifth place worldwide.  See also Grani.ru for coverage of the Defense Ministry’s difficulty spending the GOZ. 

Newsru.com captured this story appropriately as a Defense Ministry demand for more funding.  Prime Minister Putin and President  Medvedev have vowed repeatedly to increase new armaments, from the current level of 10 percent, to 30 and 70 percent of the inventory in 2015 and 2020 respectively.  What’s unknown is why at least one uniformed military man has decided to challenge the feasibility of his political masters’ long-term rearmament goals.