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Russia: Parliament Calls For Support For Arms Industry

Moscow, 10 December 1997 (RFE/RL) -- The Chairman of each house of Russia's Parliament has urged the government to boost state management of the country's struggling arms industry.

Gennady Seleznyov of the State Duma and Yegor Stroyev of the Federation Council suggested to President Boris Yeltsin that he set up an independent Committee on Management of the Defense Industry. The two Chairmen discussed the arms industry's dire straits with Yeltsin and Prime Minister Viktor Chernomyrdin other subjects, during a meeting yesterday of what is called the "big four."

After the meeting, Seleznyov told reporters that the big four had not only "touched upon this problem," but that the government has already started working out a new management scheme for the arms industry. "I don't know yet how the government is going to solve this problem: either to set up a committee as we suggest, or reinforce the (existing) defense department in the Economics Ministry, the State Duma Chairman said.

Contacted by RFE/RL after Seleznyov's comment, representatives of the Economics Ministry spoke against the suggested reorganization. "I don't really see how it will all work out," said Alexander Shalimov of the ministry's defense department. "I think we have had more than enough of reshuffles," said Shalimov, who has helped to run first the Soviet and then the Russian arms industry planning for more than a decade.

Indeed, Russia's arms industry and its exporting branch have seen so many reorganizations that observers wonder what new the cabinet might propose.

With the disunion of the USSR and the advent of market reforms, Russia's government assumed that a single state committee would be enough to run the gigantic arms industry. This assumption turned out to be incorrect and the committee was upgraded into the ministry of defense industry (Minoboronprom). That ministry was disbanded this year, and several departments were set up in the Economics Ministry.

"How can a ministry manage us efficiently if it has one department to deal with both naval and aviation sectors, (which are) giants of its own," argued a middle-rank official (anonymous) of the Irkutsk Aviation Production Enterprise (IAPO).

Alexander Dondukov of the Yakovlev design bureau is much more flamboyant in criticizing the existing structure of state management. Dondukov, who is Yakovlev's chief designer, has openly called the Economics Ministry's management of the arms industry "obsolete and short-sighted.

"It is more than clear that we need a separate governing body until enterprises merge into large conglomerates," stressed the IAPO official.

Despite numerous public vows, the Economics Ministry has, so far, failed to facilitate mergers among arms industry giants, which experts say is much needed to boost efficiency and competitiveness.

According to statistics released at recent parliamentary hearings on the arms industry, every second defense enterprise is close to bankruptcy, due to sheer lack of state orders. Even the largest, which still get orders can barely survive, as the state manages to pay for only 45 per cent of what it has ordered - while demanding that contractors fully pay taxes on their products.

The government remains so cash-strapped that it has even decided to allow a Far East contractor to sell its anti-ship, supersonic missile (Mosquitoes) to China. Until this decision, the missile had been on the top state secret list, despite numerous appeals of arms makers and exporters.