Defense Ministry late again for military shopping

Russia’s Defense Ministry once again finds itself under pressure as local media reports that several important strategic contracts have yet to be settled. This Thursday is the deadline set by PM Vladimir Putin for fulfilling all state weapons orders.

­Several suppliers of fighter jets and certain types of submarines and inter-ballistic missiles have not reached a deal with Russia’s Defense Ministry, the Kommersant newspaper reported. The ministry insists that most details of those contracts, including prices, have been settled, and it is a matter of days before the deals are signed.

But major manufacturers are rather skeptical about such a turn of events. If the deals are indeed to be entered into shortly, fulfilling the contracts will be a challenge, as it will leave only four months until the end of the year.

The ministry argues that the critical situation has been caused by hardware manufacturers themselves, as they increased this year’s prices several times over. Defense Minister Andrey Serdyukov sharply criticized the move, saying there are no grounds for the inflated figures.

Unfortunately, we cannot accept the prices given by the industry,” said Serdyukov. “They often have no basis.

Putin has backed Serdyukov’s position. In late July he assigned Finance Minister Alexey Kudrin to inquire into the pricing mechanisms of the defense industry.

The manufacturers defended their positions, saying they would not sign any agreements which would not only result in zero profits, but would cause losses. Moreover, most of them cannot complain they lack orders, as Russia accounts for almost a third of military hardware sold internationally.

Experts suggest that this recent contract chasing is the echo of a backstage fight between senior officials to divide the millions of dollars thrown into Russia’s military budget. In December 2010, Putin shared plans to invest over $650 billion to upgrade Russia’s army by 2020. But this past May, Chief Military Prosecutor, Sergey Fridinskiy declared that some 20 percent of Russia’s defense spending was being stolen or defrauded.

The Kremlin has also been following the Ministry’s purchasing progress. Thus, this Thursday, President Dmitry Medvedev appointed Anatoly Sukhorukov as the first deputy to Andrey Serdyukov. Sukhorukov, who previously worked with Russia’s Tax Service, will be directly overseeing all expenditures related to defense procurement.

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