Week of January 27, 1997
Russian Aircraft Designers Want IndependenceFor several years the Minoboronprom (Ministry for Defense Branches of Industry) has been trying to integrate Russia into more viable structures. The initial plan called for the foundation of two groups of civil aircraft manufacturers, one dealing with long-range, wide-body aircraft from Ilyushin (main product - the Il-96 transcontinental airliner), with the other specializing in narrow-body aircraft (the Tu-204 and smaller). Simultaneously, it was proposed to unite Mikoyan, Sukhoi and mass production plants associated with them in one consortium in order to have one powerful structure dealing with combat aircraft.Andrei Kokoshin, first deputy to the Russian Defense Minister, agreed with this plan in principal, saying that "the Defense Ministry supports efforts of the Minoboronprom on the integration of Russian developers and manufacturers of weapons systems. The Ministry is interested in the existence of powerful and effective companies that would be able to carry out complex R&D programs for the national defense."
VPK MiG MAPOThe foundation in January 1996 of VPK MiG MAPO was the first step in the process of integration of Russian aircraft makers. The backbone of the merger is MAPO, Moscow Aircraft Production Organisation, a mass production plant manufacturing the MiG-29. Among the other thirteen members are the Mikoyan design bureau, Kamov design bureau (helicopters), Klimov's Plant (engine developer) and Chernyshev's Machinery-building Enterprise (mass production of engines). VPK MiG MAPO has its own dedicated financial structure in the form of Aviabank.As soon as VPK MiG MAPO was established, its leadership started attempts to take control over Sukhoi. However, Mikhail Simonov, General Designer at Sukhoi design bureau, objected to his enterprise joining VPK MAPO MiG. Instead, he proposed to form an alliance of various enterprises participating in the development and production of Su fighters. It would be comprised of the Sukhoi design bureau and mass production plants in Irkutsk (manufacturer of the Su-30 interceptor), Novosibirsk (Su-34 interdiction aircraft) and Komsomolsk-on-Amur (Su-27 tactical and Su-33 deck fighters). An official from Minoboronprom then thus commented the situation: "MiG people want to devour Sukhoi, and Simonov tries to prevent it by gaining weight." Although the fight with VPK MiG MAPO was hard, Sukhoi supporters - First Premier Oleg Soskovets and Secretary of National Security Council Aleksandr Lebed - helped Simonov take victory.
Presidential Decree On 26 August President Yeltsin signed his "Decree about
foundation of a state unitary enterprise Aviation Military
Industrial Complex Sukhoi (VPK Sukhoi)." In the decree he
ordered the establishment of a single enterprise comprising the
Sukhoi design bureau, Irkutsk Aircraft Production Organisation
(IAPO), Gagarin's Aircraft Production Organisation of
Komsomolsk-on-Amur, Novosibirsk Aircraft Production Organisation
(NAPO) and Beriev's Aircraft Scientific and Production Complex
of Taganrog.
However, the decree brought about a new challenge to Simonov, the relatively old "genius designer," as Zinovy Pak, the minister for defense branches of Industry, once publicly called him, now had to fight for the chair of the general director at VPK Sukhoi with Aleksei Fedorov aged 44, the general director of IAPO. Using all his influence and reputation, Simonov convinced the Government to postpone issuing appropriate orders detailing the decree for a few months. In his interview on Russian TV, he said, "Creation of the VPK is a hard task. It is easy to give birth to a blind cat, not a corporation. To create a good corporation, which would not feed only itself but also contribute into the state budget, is not a task that could be solved quickly. It needs time. So, I say the presidential decree is the right one - it is aimed at creation of powerful, unitary, controllable structures. Now we have to detail it, we have to go in depth. And it needs time."
Place And Role Of BanksSomebody once said that selling weapons is the most profitable business after narcotics and prostitution. While good statistics on the latter two activities are absent, there are some figures available on Russian military exports. In 1995, Russia held second place in the world, after the US, with weapons sales worth US $3.0 billion. In 1996 the figure rose to US $3.6 billion. It is reported that Russia is in negotiations with several countries on contracts that may bring the country US $8 billion more.Aleksei Bolshakov, Vice-premier of the Russian Government, says, "Any barter deal means escape from paying dues, hiding of income and corruption." If so, then Russian arms sellers should be very corrupted, taking into account the fact that a third of all arms sales involving Russian weaponry are barter deals. In addition, the Russian arms-trade system is highly monopolized. 90% of the money from weapons sales comes through the Rosvooruzhenie (for "Russian Armament") state agency. Various Moscow financial structures are keen to get involved in the lucrative business, but very few of them have managed to succeed. "You can not even guess how they pressed on me from the very high level to get me to appoint a not very suitable bank as the primary one in the deal with India," says Aleksandr Kotelkin, General Director of Rosvooruzhenie. "I refused, and, in the end, ONEXIMbank was appointed." So far, two big financial structures participated in the affairs with Su aircraft; those are ONEXIMbank and Incombank, holding respectively 25% and 14% of shares in the Sukhoi design bureau. Both are members in the 13-strong "V" banking group composed of so-called "universal agents of the Russian Government." The V-group banks are given rights to perform a wide range of financial operations, including participation in arms sales on behalf of the Russian Federation. However, the Russian banking system is at an embryonic stage of its evolution and, therefore, can not play a perceived part in such long-term programs like the creation of new combat aircraft. "Banks... they are not in a hurry to invest money into development of our new designs," Mikhail Simonov complains, "what they do is criticize us for having outdated control structures, and then give no money." Despite that, the banks feel they should participate in the life of the Russian military industrial complex. In its press handouts ONEXIMbank says, "Our bank is interested in a strong technological and sales policy to be carried out by the enterprises involved in the production of Sukhoi aircraft. Only a unitary enterprise is able to carry out such a policy."
Fedorov's appointmentOn 30 December 1996, four months after President Yeltsin signed his decree, the Russian Government appointed Aleksei Fedorov the general director of VPK Sukhoi. It is believed that Fedorov was chosen for his valuable contribution in the Indian deal on delivery of 40 Sukhoi SU-30MKI multi-role fighters worth US $1.8 billion.ONEXIMbank played an important role in Fedorov's appointment. During the last three years ONEXIMbank, which was in fight with its rival Incombank for the leading role in serving foreign contracts on deliveries of Su aircraft, granted IAPO credits worth US $70 million for the construction of the Be-200 amphibian prototype and the first series-production Su-30K for the Indian Air Force. The money allowed Fedorov to put the fighter into the air before the Indian contract was signed, which greatly helped the Russians in getting India do ink the deal. Fedorov is convinced that the export of Russian-made aircraft in the next 15 years will be determined by Sukhoi aircraft. In order to boost sales of such sophisticated and complex aircraft systems like Su-27-family fighters, he offers a maximal concentration of finances and state political support in one place. Fedorov believes that only a powerful union of various defense companies can effectively win foreign contracts. "A bright example of this approach is the Indian contract, where Rosvooruzhenie, Sukhoi, IAPO and the Defense Ministry worked hand-in-hand. Without joint efforts it would never have happened," he states.
Non-replaceable SimonovThe resignations of Oleg Soskovets and Aleksandr Lebed last year seriously impaired Simonov's positions. Although the idea to find a new person for the post of Sukhoi General Designer is not a new one, the likelihood of its realization remains low. The respectable Commersant Daily newspaper thus writes about it, "Simonov ought to be fired, but there is no one who could replace him."To strengthen positions of his and the design bureau in the fight for independence of leadership of mass-production factories, Simonov tries to include research and development programs in contracts with foreigners. The Indian deal is a good illustration of his tactics. According to the contract, Russia will deliver 8 Su-30Ks in 1997, 8 Su-30Ks with upgraded avionics in 1998, 12 Su-30MKs fitted with canards in 1999, and 12 Su-30MKI with thrust-vectored Al-37FU engines in 2000 (and then the first-series Su-30Ks then will be upgraded to the Su-30MKI standard). In fact, the Su-30MKI does not exist, needing at least two years to be created. Thereby Simonov puts IAPO and its sub-contractors in strong dependence upon success of Sukhoi designers. Here goes his explanation: "Nowadays any foreign sale involves tailoring of aircraft to the specific needs of a particular customer. That is why the design bureau should be the core in the new VPK." When asked what would happen to the design bureau after VPK starts functioning, he answered, "Nothing - we will work in the same manner as we have been doing."
The way of escape?In early December, Sukhoi, Tupolev, Yakovlev and Mil design bureaus announced their intention to unite into a new aviation consortium. Although the reasons to unite differ from one developer to another, there is one they have in common - to become more independent of mass production factories and banks.Officially, the aim of the projected consortium is to unite financial resources of the aircraft developers in order to speed up development of promising designs and the preparation of them for mass production. It is claimed that the move would bring new projects to life and facilitate the technology exchange between the design bureaus. According to Simonov, a large and powerful union of aircraft developers could attract investors interested in financial participation in low-risk high-tech projects. The new consortium is understood to be based on the existing RAC, Russian Aviation Consortium. The latter was founded in 1995 under the appropriate Yeltsin's decree, with the Tupolev design bureau, Vnukovo airlines, Samara-based Aviacor production plant, Ulianovsk-based Aviastar production plant and Promstroibank as its members. In December, Mikhail Simonov, Valentin Klimov, Aleksandr Dondukov and Mikhail Vainberg, General designers at Sukhoi, Tupolev, Yakovlev and Mil respectively, sent a letter to Zinovy Pak, asking him to approve the idea of the proposed consortium. "Four friends got together to rescue one of them," was the comment of the Russian mass media. The response is still awaited. | |
