“MADE IN RUSSIA!”"Krasnaya Zvezda", 03.11.2005
Five years ago, on November 4, 2000 the RF President signed Executive Order No.1834 on establishment of the “Rosoboronexport” federal state unitary enterprise (FSUE). For this short period arms and military equipment have been exported most viably. The General Director of “Rosoboronexport” FSUE, Sergei Chemezov tells about the present and the future of the state intermediary in the field of export/import of products, technologies, military and dual-purpose services.
- Sergei Viktorovich, let’s make a historical excursion into the beginning of this century. What was the reason of establishment of your enterprise?
- At the turn of the century the competitive struggle has escalated at the world arms market. In order to compete with the leading companies we have to pool together all recourses, means and professional personnel under one command. It was impossible to compete adequately having three state intermediaries each struggling for their own survival. As a result, the export volumes of Russian armaments and military equipment were decreasing. The geography and nomenclature of deliveries were narrowed. This aggravated even more the difficult position of the Russian military industry complexes being on the brink of collapse.
Therefore, there was made a clear conclusion that if the military and technical cooperation systems are not subject to cardinal reformations, the domestic defense system will be irreversibly collapsed, while our position at the world armament market will be eventually lost.
Taking all these problems into consideration, the RF President V.V. Putin issued a number of orders at the end of 2002 for reorganization of the military and technical cooperation system with a purpose to strengthen the role of the state in activities of Russian special exporters and to increase their responsiveness and flexibility at the world market. Among those orders was Order No. 1843 “On Establishment of Federal State Unitary Enterprise “Rosoboronexport””.
The past yeas have proved correctness of the reform performed. It is suffice to mention that the total volume of export deliveries of domestic military products has doubled for the period. Russia recovered its leading positions at the world armaments market. So, the existing system of the Russian military and technical cooperation and the activity of the state intermediary are effectively enough.
- Nevertheless, within a month and a half the President has to issue another Order No.1062 “Points of Military and Technical Cooperation of the Russian Federation with Foreign States” …
- The new document shall be considered as a step in the framework of overall improvement of activity of all executive authorities in the country, including the military and technical cooperation system. We took into account five years of experience and took specific measures to eliminate some “bottle necks” connected with deliveries of military purpose products. First of all we mean factors affecting responsiveness and flexibility of work and elimination of numerous stages of approval while making decisions on export deliveries. The Order serves to strengthen coordinating and supervising role of the state in the activity of the military and technical cooperation entities.
Moreover, the current developments shall enhance attractiveness of Russian armaments and authority of domestic special exporters for foreign partners.
- The 5 billion is, undoubtedly, a breakthrough for the “Rosoboronexport”. How did you manage to achieve this figure taking into consideration tough terms of competition at the world arms market?
- The success of Russia at the world arms market is rooted in the presidential chain of command used in the military and technical cooperation systems. We are grateful to RF Presidential Administration, RF Government, RF Ministry of Foreign Affairs, RF Ministry of Defense, Federal Agency for Military and Technical Cooperation, other services and departments for their support and multifaceted help.
To some extent the market situation also helped us. At the turn of the century India and China have already launched largest rearmament programs. But about 60 countries are still among our partners and we must struggle for them.
We took advantage of the world tendency of many countries to diversify sources of armaments acquisition. But we have to assure customers to cooperate with us by offering more favorable terms, than our competitors do. Finally, one cannot forget that arms traffic is not just a business, but it’s an external policy of a state. Therefore, it is necessary to solve a full set of problems, including proceeding to advanced marketing methods, introduction of flexible types of payment while dealing with foreign customers, diversification of work with regard to geography of deliveries and nomenclature of products …
And, certainly, the keystone of success was strenuous work of the company’s employees. We formed a high-skilled team of like-minded persons working zealously and setting lofty goals. Besides, the staff of our company is young enough and you know, young people are full fervor and energy. It helps us to conquer markets.
- The “Rosoboronexport” FSUE as a state intermediary exports about 90% of all volume of Russian arms and military equipment. It is a unique phenomenon. How can you explain it?
- First of all the enterprise is a unique economic entity. On one hand, our company is fully governed by the state, but from the other hand it is, to some extent, economically independent and self-sufficient thus having commitments to foreign customers and industry enterprises.
The “Rosoboronexport” has unique potential capabilities. We can supply certain specimens of arms and military equipment and also offer scale and integrated military and technical solutions in the interests of customer. Thus, within last 2 to 3 years the share of complex orders for system projects has been doubled in “stock of orders”.
Not substituting federal executive bodies, the “Rosoboronexport” is actually an infrastructure for the entire system of military and technical cooperation and solves specific state tasks. These tasks include provision of conditions for effective realization of external political and geopolitical interests of Russia within military and technical cooperation, support of domestic defense industry complex, penetration to new arms markets.
- How do you estimate opportunities of region diversification of deliveries? Is it possible to expand geography of deliveries in the Middle East countries?
- All our marketing policy is aimed at expanding the geography of cooperation.
We continue to successfully explore dynamic market of the Latin America. Some contracts have been made with Colombia, Mexico, Peru, Brasilia and Cuba. The contracts for delivery of combat and military and transport helicopters, the Kalashnikov guns of the fourth generation to Venezuela were a real breakthrough. Russia also anchored its position in the region owing to contracts for delivery of automobiles of different purposes to Uruguay. There were provided conditions for entering arms and military equipment markets of Chile and Ecuador.
We also strengthen our positions in other regions. There appeared real opportunities to increase sales volumes of arms to a number of countries, including Algeria, Vietnam, Iran, Lithuania, Malaysia, Morocco and Thailand.
As for Middle East countries, this market is well-known for us and we have fully explored it. Some countries of the region have launched rearmament programs and schedule serious sales projects. We, certainly, trace them through, but we do not feel like bit players.
- Don’t you (as the head of the sole state intermediary in the field of military and technical cooperation) worry of the fact that the exported military products are mainly aircraft equipment?
- For a long time aviation has made 60% to 70% of all our deliveries. These products are still in high demand. But the market sets its own requirements to us and structure of deliveries is changing. In current year the balance has been for the first time weighed down in flavor of marine equipment. In 2005 aviation equipment made 30% to 32 % of total sales volume under the “Rosoboronexport”, while marine equipment made 56% of the volume. All in all, we aim at expanding the export spectrum of military products and services. Export of land and special equipment is likely to increase.
- It is a tradition to discuss quality issues and prompt service support at the meetings of the Commission for military and technical cooperation. Are there any changes for the better?
- No matter what structure of export deliveries we have, it is necessary to proper organize after-sales support of defense products delivered, their repair, especially, on urgent requests. Moreover, this market sector is quite attractive and promising from the financial point of view. If we manage to develop this market, Russia will strengthen its positions at the arms market.
We render expert assistance to enterprises of defense industry complex entitled to supply autonomously spare parts and SPTA sets. While doing so, we also improve our own service programs. Within the structure of our company there has been recently established a department for after-sales support and supply of SPTA sets for arms and military equipment. We also participated in setting up service facilities in India, Malaysia, Mexico and Belarus. For instance, there was established a Center for helicopter maintenance and repair at air base of Mexican Navy, Veracruz. We think to make it a regional center.
On request of our partners we can establish maintenance centers in their territory to maintain units, for example, on-board radars for Su-30MK aircraft in India and Malaysia or training centers, as for example, being established in India by the joint Russian-Indian enterprise “Rosoboronservice” for training naval technical personnel to perform maintenance and scheduled maintenance of 11356 ship-mounted systems and complexes.
We also develop data bases. Thus, for data support of exported products throughout their entire life cycle, “Rosoboronexport” jointly with “Admiralty Shipyards” has established a single data base of spare parts, mechanisms, equipment, materials and systems for exported submarines 877EKM and 636 within two years. Such bases will help to reduce application handling procedures, to improve the nature of execution of commercial proposals, to provide conditions for system catalogs of spare parts. The same work is done for other samples of armaments and military equipment.
- The “Rosoboronexport” is a supplier of the UN. Are there any evident results of this cooperation?
- Next year we celebrate ten years since the Russian intermediary has acquired a status of official supplier of the main international organization. The UN annually buys equipment in the amount of $1 BLN. The arms share is, however, small. It acquires mainly clothes, warm clothes, and automotive vehicles. We are also ready to supply satellite means of Earth remote sensing, mobile satellite transmission facilities, armored vehicles. The UN customers usually announce tenders, the conditions of which are rather tough. It is not easy to meet the requirements, but we have already made some achievements.
Our company managed to conclude some contracts with the UN for supply of armaments and special equipment. For example, we supplied a large lot of armored fighting vehicles to Bangladesh. The military “Ural” cross-country trucks bought by Uruguay proved themselves the best not only in various road conditions of this South-African country, but also in cross-country conditions of the Democratic Republic of Congo. In Congo these vehicles are successfully used by Uruguayan UN peace-keeping forces.
We offer the UN to use Russian defense satellite systems for civil purposes. We have recently presented the capabilities of military satellites of Earth remote sensing to successfully locate illegal drug crops.
We would like to expand our contacts with the Counter-Terrorism Committee of the UN Security Council. Such relations provide us with a large field of activity aimed at equipping multinational counter-terrorism formations and developing versions of compatibility between reconnaissance, communication and control systems, logistic means, uniform valuations of battle readiness and force performance in different countries.
- Time proves that only large dynamic structures will survive in the future. The integrated holdings are being established and the process is growing in strength within the framework of the Russian military industry complex. What is the future of “Rosoboronexport” FSUE in your opinion?
- By its nature and scope of activity the “Rosoboronexport” FSUE has already exceeded the limits of a federal state unitary enterprise and it actually has all features of export military industry corporation. The “Rosoboronexport” actively works with enterprises of the military industry complex, participates in management of leading enterprises (armaments producers) through its representatives in the Board of Directors and forms an export image of their products together with the enterprises. Meanwhile, we do not need funds of these enterprises; we are interested first of all in developing a flexible and effective structure of domestic military and industry complex capable of designing and producing competitive articles of armaments. The “Rosoboronexport” initiated establishment of some core enterprises, including integrated structures – “Oboronprom” defense industry corporation, which is the managing company of the helicopter holding.
There is a long overdue necessity to adapt organizational structure of the enterprise to modern realties. Now we are thrashing over issues concerning establishment of a state corporation vested with functions of an economic entity of military and technical cooperation and with rights of a state customer for some types of export defense products. I am sure that in this new status the “Rosoboronexport” will mange to raise effectiveness of the Russian military and technical cooperation system and it will do a world of good for the country.
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