President urges punishment of those to blame for defense contract disruption.

7/7 Tass 163

By Itar-Tass World Service writer Lyudmila Alexandrova

MOSCOW, July 7 (Itar-Tass) —— Russian President Dmitry Medvedev has reiterated his demand for punishing those guilty of disrupting 2011 defense contracts. On Wednesday, he excoriated Defense Minister Anatoly Serdyukov, instructing him to report in three days whether the state contract would be fulfilled this year. Meanwhile, the Defense Industry and arms manufacturers have been exchanging accusations.

Apparently, the reason that brought the issue to the highest state level was the interview with the general designer of the Moscow Institute of Thermal Engineering, Yuri Solomonov, published by the newspaper Kommersant on Wednesday. Solomonov argued that the Defense Ministry had disrupted the recently approved state program for equipping the Russian army with strategic missiles.

Solomonov led the development of four missile systems for the strategic missile force, including the complexes Topol-M – both silo and mobile based, as well as the complex Yars with the RS-24 missile, carrying a multiple warhead. Also, the Thermal Engineering Institute developed the solid propellant submarine-launched missile Bulava.

The president urged the defense minister to deal with the defense contract situation. “If it is really as black as some of our colleagues are painting it, then the necessary organizational measures are necessary towards all those who are responsible for it in the government, regardless of ranks and titles,” Medvedev demanded. “And if it is different, then you need to deal with those who breed panic. Do you know the way the alarmists were treated under wartime laws? They were shot! Clear?”

This is a fourth time over the past six months that Medvedev has called for punishing those guilty of disrupting the defense contracts. Previously, the disruption of state contracts in 2010 resulted in the dismissal from their posts of a whole cohort of defense industry officials. In particular, the general director of Izhmash and of the federal state unitary enterprise Scientific-Research Institute of Electromechanics. The most scandalous one was the resignation of the head of the Federal Space Agency, Anatoly Perminov, which coincided with his 60th birthday.

Yuri Solomonov is convinced that the 2011 government contract has been disrupted. He claimed that “to date not a single contract has been concluded as far as strategic nuclear forces are concerned.”

“It’s July. There has never been a situation like that for the past fourteen years. The latest date when we signed contracts for a current year on all previous occasions was late April or mid May. And even then this led to a convulsive, spasmodic mode of operation of the industry, but the implementation of contracts was still possible at least by late November or early December, when the fiscal year ends. Now there are no such chances,” said Solomonov.

He declared that he had sent a letter critical of the Defense Ministry to the government. According to the scientist, “the position that the ministry is taking is not just non-constructive, it is incomprehensible from the standpoint of the state interests.” According to Solomonov, the Defense Ministry today is an utterly incompetent system.

As the site says, the president’s representative in the Siberian Federal District, Viktor Tolokonsky, mounted similar criticism on Wednesday. The Defense Ministry’s delays in placing 2011 contracts have put dozens of companies in the region in a difficult financial position, he said at a joint meeting of the council under the presidential representative’s office and the council of interregional association Siberian Accord. Delayed financing has caused social unrest in labor staffs and created a risk of disruptions in supplies, Tolokonsky said.

At the end of the first quarter, he added, more than half of the defense enterprises in the Siberian Federal District had no defense contracts. As of July 1 over a third of the Siberian industrial plants, research institutes and design bureaus were working without any formalized contracts.

In response to these statements, Anatoly Serdyukov told reporters Wednesday that the Defense Ministry had delayed the conclusion of contracts more than 100 billion rubles worth due to what he described as “wild growth” in the prices of military products. He promised that the Defense Ministry in the coming weeks would conclude the 2011 contracts within weeks. “The state defense order for 2011 was approved in an amount of 581.5 billion rubles. Today, 18% of defense contracts 108 billion rubles worth have not been concluded. We have already dispatched contract documentation to the manufacturers. I think in the next couple of weeks we will settle this issue,” said Serdyukov.

As he explained why the contracts had been delayed, Serdyukov said that some large companies, such as the Thermal Engineering Institute, Almaz Antey and others, had significantly raised this year’s prices of their products.

The biggest criticism from the military was about what the Navy’s commander, Admiral Vysotsky on Wednesday described as “incompetently overstated” costs of the newest nuclear submarine Severodvinsk, being built at the Sevmash shipyards.

The arms manufacturing companies argue the problem was largely created by the Ministry of Defense itself, which holds back payments for defense contracts. The situation is aggravated by the rapid growth in the tariffs of natural monopolies, which cannot but affect the final price of products. According to some independent experts Novyie Izvestia refers to, corrupt military aggravates the situation still further, and astronomical military appropriations yield no tangible results. “Despite the fact that military spending next year will grow by 1.5% of the GDP, the re-armament of the Russian army seems to have reached an impasse,” the newspaper warns.

Meanwhile, according to the Navy’s commander, the purchase of the first nuclear submarine of a new generation can be disrupted. The admiral said nothing about what it would cost the state, but the average value of this class of products in the world is about one billion dollars.

As the director of the Center for Analysis of Global Arms Trade, Igor Korotchenko, told the newspaper, “the cause of higher costs of defense industry products is the soaring prices of fuel, electricity and metal, which cannot but be reflected in the final product.”

Previously, relatively low costs of the Russian defense industry products were one of the most important trump cards in promoting armaments of domestic manufacture to the world markets. Now, however, this advantage seems to have been lost. Russian military will now have to pay its own “defense industry” at world prices. This is something they seem to be utterly unprepared for.

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