Russian defence industry to get 50 billion roubles
Alexei Nikolsky
Prime Minister Vladimir Putin told the United Russia party's congress that the defence industry would receive 1% of allocations, or 50 billion roubles ($1.8 billion), under the federal economic bailout plan. However, this amount is too small to solve the problems even of the major companies.
The allocations will subsidise interest rates, will be invested in corporate statutory capital and will also help prevent defence company bankruptcies, Putin said.
The 2008 federal budget and the draft 2009 budget stipulate 9.7 billion roubles' ($354 million) worth of bankruptcy prevention subsidies.
A Defence Ministry official said the amount would be increased after the Government assessed funding volumes, and that it would total the 50 billion roubles together with interest rate subsidies and other Vnesheconombank financial instruments.
President Dmitry Medvedev told a State Council meeting in Izhevsk that the Russian economy would receive 5 trillion roubles ($182 billion) or more under the federal bailout plan.
However, the funding promised by Putin may not be enough to help even the major defence companies.
For instance, the Moscow-based Chernyshev plant, which manufactures RD-33 and RD-93 engines for Russia's Mikoyan-Gurevich MiG-29 Fulcrum air-superiority fighters and China's FC-1 delta-winged multi-role fighters, owes over 22 billion roubles ($800 million) in debts and plans to earn only 4.5 billion roubles ($164.2 million) this year, an aircraft plant manager told the paper.
The plant may go bankrupt and torpedo several highly important Russian and Chinese export contracts worth over $6 billion, said Konstantin Makiyenko, deputy director of the Centre for Analysis of Strategies and Technologies.
The Russian Aircraft Corporation MiG owes more than 43 billion roubles ($1.5 billion), or a fraction of the aircraft industry's debts. The Government's measures will produce no results unless we use other methods and primarily streamline the irregularly financed system of the state defence order, expected to total 500 billion roubles ($18.2 billion) next year, Makiyenko said.
The state-owned Russian Technology Corporation growing into an industrial behemoth with assets in many sectors, from defence to automotive to civil aviation, proposed financing 80%, rather than the current 40% of the state defence order, a Defence Ministry official said.
Although the Government is now examining this issue, the problem is unlikely to be solved soon.
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Bailout plan in action
The Government has already allocated 700 million roubles ($25.5 million) for the Samara-based Kuznetsov Research and Technology Complex. A local aircraft engine manufacturer Motorostroitel will receive another 1.3 billion roubles ($47.4 million).