Military Forum for Russian and Global Defence Issues


    Status of Russian Military Industrial Complex (MIC)

    GarryB
    GarryB

    Posts : 22650
    Points : 23194
    Join date : 2010-03-30
    Location : New Zealand

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  GarryB on Wed May 29, 2019 11:29 pm

    Well the high price monopoly will really have to be dealt with now, though there must be more devices that need accurate timers... but isn't the 85RU anti-Rastrub-B missile system a bit obsolete?

    Isn't that the funky SS-N-14 anti sub torpedo carrying rocket that can also be used against ships... that is pretty out of date now that the UKSK and UKSK-M will be using the 91RE1 anyway.
    franco
    franco

    Posts : 3258
    Points : 3290
    Join date : 2010-08-18

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  franco on Thu Oct 10, 2019 9:08 am

    AST Center Director on the state of the Russian military-industrial complex

    The Russian military-industrial complex (MIC) against the background of many other branches of the domestic industry seems to be an island of prosperity. According to the state armament program (already the third in a row), fairly modern equipment is entering the troops. In terms of arms exports, Russia is firmly in second place in the world. But is the situation in the Russian defense industry so cloudless? Ruslan Pukhov, director of the Center for Analysis of Strategies and Technologies, spoke about the challenges that our defense industry has faced .

    On the "citizen"

    - Our defense industry today faces two challenges and one big problem. The first challenge is import substitution. Here the process is generally quite successful. The bulk of import substitution falls on products manufactured by Ukrainian enterprises.

    There was localized the production of, for example, gas turbine engines for ships of the Navy. Powerful turbojet power plants for large military transport aircraft (for example, D-18T for An-124 Ruslan and An-225 Mriya) were also produced only in Ukraine.

    In this part, the main task is not even to reproduce the old Soviet products, but to develop and produce their analogues immediately at a new technological level. That was done with helicopter engines, and with ship gas turbine engines. Gradually, there is also an import substitution of more high-tech systems that, until 2014, Russia imported from France (for example, thermal imagers for night vision tank sights) and other European countries, as well as Israel.

    The second challenge is diversification, that is, building up the production of dual and civilian products at the facilities of military enterprises. This is a very complex process, which requires both the defense industry companies themselves and the state to make large investments and tremendous organizational and marketing work. The goals here are ambitious - to achieve 30% output of the “citizen” by 2025 and 50% by 2030. As of last year, this share was 20.8%, according to the statement of the Deputy Prime Minister of the Government Yuri Borisov. It should be understood that for some sectors, diversifying production is much easier than for others. For example, in aircraft, helicopter or shipbuilding, this is easier to do, but it is much more difficult for developers and manufacturers of missile weapons and air defense systems. Nevertheless, at MAKS-2019, the Tactical Missile Arms Corporation, for example, demonstrated a number of interesting types of civilian products - medical equipment, simulators, and metallurgical products.

    What do finance sing?

    Finally, the most pressing defense industry problem today is the very difficult financial situation of a large number of enterprises and companies. The debt load of the industry is monstrous - 2 trillion rubles. Almost all the profit that the defense industry enterprises manage to get — and this is 135 billion rubles — goes to paying interest on the debt. At the same time, the body of debt itself is not repaid and, in general, can hardly be repaid without special measures.

    In part, this story is rooted in the 2012 decision to partially fund the State Armament Program for 2012–2020. due to state guaranteed commercial loans. Even then, opinions were expressed that the main beneficiaries of this decision would be banks, not defense industry enterprises or the state. But taking into account the fact that the rearmament had to be launched as quickly as possible, in general, such a decision was justified.

    The second reason is the too high cost of money in the Russian economy. Even now, with unprecedented low inflation, the cost of a loan is 8-10%. Moreover, the profitability of most defense industries and engineering enterprises as a whole is at best 4–5%, and often fluctuates around zero.

    And finally, about profitability. In general, according to the law, when fulfilling a state defense order, the customer must ensure such a price level that the profitability is at least 20%. In reality, as I said, it is good if 4%. The problem is that with such a profit, the development of a high-tech industry is impossible. There will not be enough funds for the purchase of new equipment, the construction of new, modern industrial sites, staff training and retraining. That is, such a low profitability for state defense orders dooms the defense industry to stagnate and lag behind competitors.

    Where is the exit?

    There is only one way out: to ensure higher profitability of orders of the Ministry of Defense. Moreover, the more high-tech products, the greater should be profitability. And the most high-tech branch of the military industry is the production of aircraft engines (these are generally the highest technologies in mechanical engineering) and air defense systems. You must understand that the Russian military receive world-class weapons at unbelievably low prices, especially if you take the dollar equivalent. If we compare the prices of all major weapons systems and assemblies, we will see that the cost of Western analogues is tens of percent, or even several times higher. But miracles do not happen, and this state of affairs cannot persist indefinitely. To maintain the high competitiveness of Russian weapons and military equipment, the defense industry needs to pay more. But now, defenders complain, the Ministry of Defense keeps the defense industry on a starvation diet.

    Large microchips

    The defense industry also has other problems, both inherited from the Soviet past, and those that appeared relatively recently. The main of those that arose during the USSR is the elemental base. Remember the joke that our chips are the largest in the world? Since the time of the USSR, things were not well with the elemental base. A short-term cooperation with the United States in the 1990s, including on the ISS, when we were eagerly sold electronics for both space and defense, finally ditched it. Then they imposed sanctions on Russia, blocked the faucet - and we were left without radio electronics at all.

    Speaking of sanctions. One point of view is that weaning industry from high Western technology kills this industry. The exact opposite claims that, on the contrary, it forces them to develop more intensively. Both opinions are true and false in their own way. On the one hand, sanctions are really very painful. On the other hand, this is a chance to break the vicious circle in which the defense industry has been for more than a decade. I mean a shortage of new ideas and projects. Say, it is known that the Russian Su-30 and Su-35 aircraft are a further development of the Soviet Su-27 fighter. And so, not only in aviation. Until Armata began to enter the army en masse, the main tank remained the T-72, which was put into service in 1973. There are many examples. The plus from sanctions can be this: if you adapt to them faster than they are introduced, they will not cripple you. Everything that does not kill you makes you stronger.
    Viktor
    Viktor

    Posts : 5716
    Points : 6349
    Join date : 2009-08-25
    Age : 39
    Location : Croatia

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  Viktor on Thu Oct 10, 2019 9:36 pm

    I have read today but am unable now to find the link article where it is stated that Nabulina supports idea about writing off huge parts of debt Russian MIC has accumulated. Problem is described that because Russian MIC rise lots of credits now all the profit goes to Russian banks which produce nothing stalling further expansion and investment. It was stated that one third of all MIC debt should be written off which would than leave nice sum of money annually meant for its investments. Will certainly hear about it more if it gets to it.
    miketheterrible
    miketheterrible

    Posts : 3941
    Points : 3921
    Join date : 2016-11-06

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  miketheterrible on Fri Oct 11, 2019 4:00 am

    She seems to have lightened up a bit. I also read that too. She said she also wants to drop interest rates even more.

    It would be overall good.
    Cyberspec
    Cyberspec

    Posts : 2729
    Points : 2884
    Join date : 2011-08-08
    Location : Terra Australis

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  Cyberspec on Fri Oct 11, 2019 4:11 am

    Viktor wrote:I have read today but am unable now to find the link article where it is stated that Nabulina supports idea about writing off huge parts of debt Russian MIC has accumulated. Problem is described that because Russian MIC rise lots of credits now all the profit goes to Russian banks which produce nothing stalling further expansion and investment. It was stated that one third of all MIC debt should be written off which would than leave nice sum of money annually meant for its investments. Will certainly hear about it more if it gets to it.

    Borisov was talking about this recently as well

    There seems to be a struggle between the Defence lobby and the Economic "team" for the allocation of funds...here's another report on the subject


    The head of the Duma Committee on defense Vladimir Shamanov commented on the draft Federal budget for the year 2020 and the targets of the budgets of 2021 and 2022. The General subjected the project to harsh criticism.


    According to General Shamanov, the Cabinet continues to ignore the requests of the defense Committee of the state Duma to index military pensions, and also to allocate additional funding for housing subsidies for military personnel.

    Shamanov also noted that the Committee of the lower house of Parliament urged member governments to take the decision to increase wages for civil employees of the Armed forces of the Russian Federation. But in the draft budget, prepared by the economic block of the government, there is no reaction

    According to the assessment made by the Deputy of the State Duma is ignoring initiatives. The Committee invites the government to return to discussion of such norms. Otherwise, the queue for housing from the military will grow, additionally erased the distinction in the wages of employees with low and high qualifications. About it writes RBC, noting that in the document the term "the government of ignoring the initiatives of the Committee on defense and needs of the Russian army" is used five times.

    The Committee of the state Duma, headed by Colonel General Shamanov, "strongly recommends" the Cabinet of Dmitry Medvedev to take into account all the remarks made on the draft budget for the next three years.

    https://topwar.ru/163376-deputat-gd-rf-general-shamanov-obvinil-kabmin-v-ignorirovanii-potrebnostej-armii-rossii.html
    GarryB
    GarryB

    Posts : 22650
    Points : 23194
    Join date : 2010-03-30
    Location : New Zealand

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  GarryB on Fri Oct 11, 2019 4:33 am

    The Russian government should step in an use its budget surplus to pay off the debts so the Russian government takes the place of the banks and receives the benefits instead of the banks.

    Much of the MIC is government owned so the debt can be seen as an investment in a government company rather than an income for the bank that initially supported the company...
    miketheterrible
    miketheterrible

    Posts : 3941
    Points : 3921
    Join date : 2016-11-06

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  miketheterrible on Fri Oct 11, 2019 4:43 am

    Majority of MiC falls under Rostec and Rostec has their own bank. So technically Rostec is profiting from its own loans to its own entities.
    Hole
    Hole

    Posts : 2383
    Points : 2381
    Join date : 2018-03-24
    Age : 43
    Location : Merkelland

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  Hole on Fri Oct 11, 2019 11:17 am

    Even if bankrupt these companies won´t die. Look what happened to the to companies producing the Kalashnikov rifles. They went bankrupt and were re-organised into one single company which is now bigger and better then ever.
    miketheterrible
    miketheterrible

    Posts : 3941
    Points : 3921
    Join date : 2016-11-06

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  miketheterrible on Fri Oct 11, 2019 11:24 am

    Hole wrote:Even if bankrupt these companies won´t die. Look what happened to the to companies producing the Kalashnikov rifles. They went bankrupt and were re-organised into one single company which is now bigger and better then ever.

    What a lot of people don't know but I paid much close attention to is how Rostec obtains the companies.

    Essentially, they convince the government to let them go bankrupt. So that they don't have to pay the banks a large sum in order to obtain said companies. Rostec will not fully take a company until it either resolves debt issues or it completes it's bankruptcy. The latest ones of this year were Kurganomash and Uralvagonzavod, both of which where eventually added to rostecs company profile but it took a couple of years for Kurganomash to declare bankruptcy. They plan to now merge the two companies into one armor holding company.
    franco
    franco

    Posts : 3258
    Points : 3290
    Join date : 2010-08-18

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  franco on Mon Oct 14, 2019 1:27 pm

    The development of the Russian defense industry: two challenges and one critical problem

    One of the most important achievements of state building in the last ten years has been the creation of a qualitatively new Armed Forces of our country. The troops, which forced Georgia to peace in 2008, had only one (though fundamentally) advantage. The 58th army was for the most part staffed by officers and soldiers fired upon during the Chechen wars. In all other respects, the situation was catastrophic. Our Armed Forces not only remained at the technological level of the eighties of the last century, but were equipped with equipment on the verge of complete physical deterioration: they operated with primitive and archaic control systems, communication at some point was carried out by mobile phones. There was practically no intelligence at the tactical level, the troops were blind and deaf, no one in the army had heard of drones ten years ago, says Ruslan Pukhov , director of the Center for Analysis of Strategies and Technologies, in an article for Expert magazine.....

    Full article: https://bmpd.livejournal.com/3807879.html


    franco
    franco

    Posts : 3258
    Points : 3290
    Join date : 2010-08-18

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  franco on Fri Oct 25, 2019 8:04 am

    Some useful OPK details from Promsvyazbank's Igor Nuzhdin. He said OPK enterprises in 2018 sold 4.8 trillion rubles worth of products, 48% as part of the the state defense order, 31% from arms exports, and 21% from civilian products.
    He said total OPK debt is between 1.8-2 trillion rubles and 700 billion rubles of that requires restructuring (Borisov gave the same figure), which enterprises can only repay the interest but not principal. Only 0.9–1% of the loan portfolio is overdue (~18–20 billion rubles).
    The defense industry register contained 1,319 enterprises at the end of 2018. Of these, 140 enterprises had an operating loss, accounting for 9% of OPK's revenues and 23% of the OPK's debt, and they have a high risk of defaulting on their loans.
    Another 142 enterprises had an operating profit, but their Net Debt-to-EBITDA Ratio exceeds 5.2. Those 142 enterprises account for 17% of the OPK's revenue and 33% of its debt. They face restrictions on attracting new loans and a risk of defaulting on their loans.
    Less than half of OPK enterprises, 583 of them, are in a strong position with a net debt-to-EBITDA ratio below 2.3 on average The account for 51% of the OPK's revenue but only 12% of its debt. Officials are still discussing how to restructure 700 billion rubles of this debt.
    The more radical options like writing off this debt or paying it off from budget subsidies have been dismissed. The main creditors, Sberbank, Gazprombank, VTB, and Novikombank, were against the 1st option and the Ministry of Finance against the 2nd.
    Putin has given the goal of increasing the OPK's share of civilian production to 21% in 2018, 30% by 2025, and 50% by 2030, but debt is hindering the OPK's efforts. Promsvyazbank says the OPK should increase civilian sales by 2.2 times by 2025 and by 6.3 times by 2030.
    State orders, national projects, and state support measures: like a ban on extending the service life of old train cars, renewal programs for the fishing fleet, a medical helo program, etc. But Promsvyazbank believes the OPK needs 1.9 trillion rubles in investment too.
    The OPK is making 145 billion rubles worth of interest payments annually. Promsvyazbank said Rostec accounts for 42% of the defense industry, Almaz-Antey for 14%, United Shipbuilding Corporation for 9%, Roskosmos for 8%, and Rosatom for 5%.

    NOTE: doing the math that would leave 454 enterprises in the middle with 23% of OPK's revenue and 32% of it's debt.

    https://www.vedomosti.ru/business/articles/2019/10/17/813972-oboronnie-predpriyatiya

    Sponsored content

    Status of Russian Military Industrial Complex (MIC) - Page 11 Empty Re: Status of Russian Military Industrial Complex (MIC)

    Post  Sponsored content


      Current date/time is Mon Dec 16, 2019 11:34 am