Guy Anderson Jane's Defence Industry Editor

Additional reporting Nikolai Novichkov JDW Correspondent

Russian consolidated helicopter group Oboronprom will take a majority stake in rotary wing export specialist Rostvertol in 2007

Oboronprom's position as an engine of defence consolidation has been underlined by plans to Russian corral electronic-warfare companies under its control.

Russian consolidated helicopter manufacturing group Oboronprom is preparing to take a controlling stake in rotary- wing export specialist Rostvertol in 2007: a move that continues a tactic of corralling strategic ventures into state-controlled organisations.

The Russian state, which currently holds 3.44 per cent of Rostvertol, will increase this to a 25 per cent (plus one share) "blocking stake" by the end of 2006. Rostvertol - which holds the export rights to the Mi-26T and Mi-35 helicopters - currently holds a 2.79 per cent share of Oboronprom. The deal is expected to be concluded in 2007, according Oboronprom Director General Denis Manturov.

Oboronprom, a closed joint stock company created in 2002, has been used as a vehicle to consolidate Russia's helicopter interests. The venture includes Kazan Helicopters, Ulan Ude Aviation Plant (which is behind the Su-25 and the export variant of the Su-39, plus the Mi-171), Rostvertol, Vpered Moscow Machine Building Plant (which makes tail rotors and blades for Mil helicopters), and the Stupino Machine-Building Production Enterprise (which makes helicopter drive mechanisms).

Furthermore, it emerged in August that Oboronprom will be used to consolidate Russian companies involved in electronic warfare. Manturov announced that moves are afoot to incorporate Rostov-on-Don defence complex ventures Gradient FSUE, Taganron Research and Development Institute for Communications, plus the Research and Development Institute for Special Information and Measuring.

Bringing the companies under the Oboronprom umbrella will give them de facto protection from foreign takeovers. Oboronprom was added to Russia's list of 550 "protected companies"- in which foreign entities are prohibited from taking a controlling stake - earlier in 2006. The Russian government controls 82.13 per cent of Oboronprom through its own 51 per cent share and state-owned export body Rosoboronexport's 31.13 per cent stake. The Republic of Tatarstan holds 15 per cent, while Rostvertol has 2.79 per cent.

Indeed, Moscow has made no secret of its strategy of bringing strategic ventures under state control and to limit the access of foreign investors. "It is about time we precisely identified the economic spheres in which Russia's independence and security interests dictate the necessity of primary control on the part of national and state capital," President Vladimir Putin said in 2005.

The government proceeded to cement state control in the sector in February, with the establishment of the majority-state-owned United Aircraft Building Corp, which will initially include MiG Aircraft Corporation and the Gorbunov Kazan Aircraft Production Association. Both Putin and Russian Defence Minister Sergei Ivanov and have hinted that they would like similar consolidation in the naval industries.