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Russia: Arms Giant Told To Sell More

Moscow, 7 August 1997 (RFE/RL) -- The Russian federal government is not fully satisfied with the performance of the gigantic arms dealing company Rosvooruzhenye, and it plans to improve the system of state weaponry exports.

That's according to Prime Minister Viktor Chernomyrdin, who has just been put in charge of Rosvooruzhenye by a decree from President Boris Yeltsin.

In remarks last week which were tinged with exasperation, Chernomyrdin said Russian arms dealers have not yet learnt how to sell even the best products manufactured by their country's sprawling defence industry. "This should be radically changed", he said. "It is time they learned (to sell) and we will teach them how".

He did not reveal exactly what he had in mind. But his remarks sounded an almost jarring note in an era of pro-market reforms, in that he said that what Rosvooruzhenye needs is more state control -- not less.

He said nothing "scary" is planned under Yeltsin's decree, but that ways will be found to exercise efficient control over Rosvooruzhenye. RFE/RL reports from Moscow that the word in government circles is that First Deputy Prime Ministers Anatoly Chubais and Boris Nemtsov are going to routinely supervise the activities of Rosvooruzhenye, which has a multi-billion dollar annual turnover and which made Russia the world's second largest arms exporter after the United States last year.

The gigantic state-owned concern accounted for 95 percent of the $3.5 billion worth of Russian weaponry exports last year, and is hoping to clinch contracts worth up to $9 billion this year. RFE/RL reports the company has already clinched deals worth $7 billion this year.

In an apparent recognition of Rosvooruzhenye's role in re-envigorating Moscow's arms exports, which dwindled after the collapse of Socialism, Chernomyrdin stressed, however, that the aim of the new regime will not be to "hinder anyone".

In remarks which mirrored Chernomyrdin's tone, Rosvooruzhenye spokesman Valery Kartavtsev told RFE/RL that his company "welcomes" more state control. Moreover, Kartavtsev said, it was his company that "came out with initiative" to be put under direct control of the Prime Minister. The spokesman noted, however, that whether Rosvooruzhenye needs any radical changes or not is a "a matter of polemics".

Formed after the collapse of the USSR, Rosvooruzhenye has almost monopolized Russia's arms exports formerly supervised by three Soviet-era mediator entities, namely Spetsvneshtekhnika, Obornexport and Voentekh, which were often criticised for the dumping prices at which they offered arms.

While he was President Yeltsin's chief bodyguard, Alexander Korzhakov reportedly installed an associate, Alexander Kotyolkin, to run the company. Korzhakov was said to have personally acted as a patron of both arms production and exports in Russia, although officially Rosvooruzhenye was under direct control of then-First Deputy Premier Oleg Soskovets. Korzhakov and Soskovets were ousted last year, leaving no government official specifically charged with overseeing Rosvooruzhenye.

The company periodically draws media criticism which -- it says -- is inspired by its Western rivals. The latest of such attacks came last month when the weekly Novaya Gazeta accused Rosvooruzhenye of dubious deals and transactions. It quoted a Russian banker as alleging he had been involved in laundering at least $400 billion from shady arms deals clinched by Rosvooruzhenye's top managers.