Tag Archives: Gosoboronzakaz

Defense Sector Wages

Interesting item on wages in Russia’s defense industrial sector in NG on November 11.

Alina Terekhova reports average monthly pay in the OPK is 17 percent higher than the country as a whole.  However, defense industry salaries lag employee earnings in other key sectors (i.e. railroads, oil, finance).  Yet they are likely to grow while wages elsewhere will probably begin to fall.

Minpromtorg [rather optimistically] forecasts that the earnings of OPK workers will double over the coming five years.

Defense industry pay grew 13 percent last year [not entirely consistent with the table below] against almost 12 percent in other areas.

Average Pay in the OPK

Average Pay in the OPK

Earlier this year, workers in Russia’s mining industry made nearly 57,000 rubles per month, oil workers 83,000, railroads 41,000, and finance 67,000.  Pay in the defense industries averaged about 38,000 rubles per month during the first half of 2014, according to Rosstat.  Nationwide it was about 32,000.

That 38,000 seems to fit in the context of other salaries (e.g. 30-35,000 for junior officers and contractees).

Rising inflation, Terekhova reports, could reduce real earnings for everyone next year.

She quotes a couple experts, neither of whom expects a decline in OPK wages. Despite the stagnation evident in the economy, the Kremlin will likely continue funding the GOZ generously given increased tensions with the West.  This will keep upward pressure on defense sector salaries.

It’s interesting that the oft-mentioned “cadre famine” in defense industry hasn’t bid wages higher.  But some enterprises report the average age (and presumably the pay grade) of their workers is dropping with the arrival of new and younger employees.

What’s Been Bought

It’s usually challenging to discover what the Russian military bought in any given year.  But it’s somewhat easier now that procurement is increasing.

Shoygu in the Videoconference (photo: Mil.ru)

Shoygu in the Videoconference (photo: Mil.ru)

On January 14, Defense Minister Sergey Shoygu reviewed 2013 procurement in a year-opening videoconference.

He indicated that GOZ-2013 was fulfilled at 96 percent for RDT&E, 93 percent for armament and military equipment purchases, and 91 percent for repairs and servicing.  Purchases increased by 70 percent over 2012.

Beyond that no details.

If Shoygu’s scant and statistical, Topwar.ru’s Kirill Ryabov rescues us.

Ryabov says GOZ-2013 amounted to 1.45 trillion rubles, two-thirds more than 2012.  Roughly the same accounting as Shoygu’s 70 percent.  But Ryabov’s also tracked what was bought.  He doesn’t give full citations for his data.  But it’s a working list.

He starts with air defense:

  • 6 S-400 SAM battalions.
  • 6 Pantsir-S1 missile-gun systems (ZRPKs).
  • 24 Tor-M1-2U SAMs (SA-15 upgrade).
  • 12 Tunguska ZRPKs.

More than 300 combat and support vehicles for the Ground Troops, including:

  • 2 Iskander-M SSM brigades (107th in the Eastern and 1st in the Southern MD).
  • 54 BTR-82A APCs.
  • 12 BMO-T flamethrowers.
  • 90 Tornado and Grad MLRS.
  • 20 Khosta SP guns.
  • 40 Msta-S SP howitzers.
  • 16 Zoopark counterbattery radars.
  • 16 Leyer-2 EW systems.
  • 10 Redut-2US communications systems.

And reportedly more than 5,200 other vehicles and automobiles.

It gets murkier from here on . . . .

For the Air Forces, Ryabov indicates OAK, in 2013, got orders for 60 military aircraft for 62 billion rubles.  Only 35 were reportedly ordered in 2012.

  • 2008 contract for 36 [sic?] Su-34 fighter-bombers was completed in 2013, and Sukhoy started filling the 2012 contract for 92 more.
  • 12 Su-35S were delivered ahead of schedule.
  • 8 Su-30SM, 12 Yak-130 trainers, and an An-140-100 transport were delivered or will be soon (?).

For helicopters:

  • 19 Ka-52 / Alligator.
  • 8 Mi-28N / Night Hunter.
  • 3 Mi-35M.
  • 3 Mi-26.
  • 5 Mi-8AMTSh.
  • 7 Mi-8 (jamming variants).

For the Navy, 12 large and 43 small ships were reportedly launched.  Thirty-five ships and craft of various types were commissioned into the fleet.

Anything more specific requires additional investigation. 

Two Borey-class SSBNs (which can’t perform their primary mission) were accepted for service.  Steregushchiy-class (proyekt 20380) FFL Boykiy joined the Baltic Fleet.

Steregushchiy-class FFL Boykiy (photo: Topwar.ru)

Steregushchiy-class FFL Boykiy (photo: Topwar.ru)

As if on cue, Deputy Defense Minister (armaments chief) Yuriy Borisov held a press-conference on January 16 to discuss last year’s GOZ.

According to him, the Su-35S has not been accepted, but it’s about to be.  Initial deliveries aren’t far behind.  More than 2,200 armored vehicles and other transport means were purchased, and 1,700 modernized.  He said the share of modern armor has reached 24 percent.

The year just past definitely continued the trend of more military procurement from 2012.  But is it enough to get the volume of weapons systems Russia’s military and political leadership wants before 2020?

Remember what procurement lists floated in 2010 looked like:

  • 56 S-400 “units.”
  • 10 S-500 systems.
  • 600 aircraft.
  • 1,000 helicopters.
  • Bulava SLBMs.
  • 20 submarines.
  • 15 frigates.
  • 35 corvettes like Boykiy.
  • Mistral-class amphibious ships.
  • Several new ICBMs.

Even relatively healthy acquisition like GOZ-2013 won’t get to these numbers.

Clean Slate

It took a brave man to tell the State Duma what department chief Aleksandr Piskunov said in the Audit Chamber’s annual legislative report in February.  Voyenno-promyshlennyy kuryer published excerpts of his remarks.

Piskunov’s a government official.  Not a powerful voice, but an authoritative one in his specialty.

Auditor Aleksandr Piskunov

Auditor Aleksandr Piskunov

To say he’s well-equipped for his work is an understatement. 

Sixty-one or 62 years old, Piskunov graduated from the RVSN’s Dzherzhinskiy Military Academy with a radio engineering degree.  He served on active duty to the rank of general-major, spending many years at the Plesetsk cosmodrome.  He later trained in the RF Government’s Financial Academy and a business school in London.  He has a PhD in economics.

Piskunov served in both the RSFSR Supreme Soviet and State Duma in the early 1990s, and was deputy chairman of the Defense Committee for each body.  He also chaired the Defense Ministry’s Military-Technical Policy Committee.  In the mid-1990s, he moved to the staff (apparat) of the RF Government and was deputy chairman of its Committee on Military-Industrial Issues.

He returned to the Duma briefly in 1999, and became deputy chairman of its “Regions of Russia” faction.

He went to the Audit Chamber in 2001, and is currently in his third term of service.

Piskunov thinks Russia can’t produce new, better, or more weapons and military equipment without modernizing its badly neglected defense industrial base.  But he has pretty much nothing but scorn for the current management of the state defense order.  And he sees little but failure in the GPV over the last 20 years.  In particular, Piskunov calls for incorporating life cycle costs into the GPV.  Ultimately, however, he says auditors and accountants can’t fix the GOZ or GPV, but lawmakers could.

Enough preamble.  Here’s VPK’s excerpt of Piskunov’s remarks.

“STRICT CONTROL OF FULFILLING THE ARMAMENTS PROGRAM IS NEEDED”

“I represent a department that performs strategic audits in the Audit Chamber.  We’ve done a lot of work in evaluating the condition of practically all 1,350 enterprises of the defense-industrial complex, their financial stability and real contribution to equipping the Armed Forces.”

“We looked at how balanced the program of defense-industrial complex modernization and State Program of Armaments were.  A gap of 700 billion rubles was observed.  At the same time, 1 trillion 200 billion is built into the budget to guarantee compensation to enterprise directors who go to commercial banks for credits.”

“Similar credit practices are leading to the growth of OPK enterprises with an unstable financial situation.  More than 30 percent are like this.  Only 20 percent come close to world standards in technical equipping.  More than half are in a condition where their restoration is already senseless — it would be better to build from a clean slate.”

“In preparing the law on the state defense order we tried to correct this situation.”

“From my point of view, our system of administering the state defense order is uncompetitive.  The adopted law preserved the situation under which  management amounts to a lag in the state defense order.”

“The deputy prime minister, responsible for the defense-industrial complex, reported that the state defense order was fulfilled by 99 percent as in past years.  But almost one hundred percent fulfillment of state defense orders over the last 20 years has not prevented the failure of all arms programs or fulfilling them at 30, 40, 50 percent.”

“Dmitriy Rogozin himself noted that fulfillment happened because of the appearance of realization.  During the execution of the arms program 7,200 changes were introduced into it, that is the real result is being slanted to agree with this fact.”

“Meanwhile Rogozin recognized that the arms program has gotten old.  The task of preparing a new State Program of Armaments stands before him.  So the problem of forming a legislative basis and management of the State Program of Armaments is more acute than ever.”

“Our opponents in government, having considered it inexpedient to include the management of the acquisition program life cycle in the GOZ law, said it was necessary to include this management in the law on the State Program of Armaments.”

“To me it seems necessary in this instance to hold them to their word — to propose that the government prepare a draft law on the State Program of Armaments.  It’s possible this will allow us to compensate for not realizing it in the GOZ law, and meet the president’s demand to create essential management of the life cycle of weapons systems.  But today the state of affairs is seriously complicated by the fact that the life cycle is really torn into several parts in the Defense Ministry itself.”

“Those who’ve served understand:  you can’t modernize armaments without the experience of using them.  Who really tracks all this life cycle?  It would be logical if Rosoboronpostavka were occupied with this, but it is located at the junction of the functional orderer – a service of the Armed Forces and a contracting firm.  It would be more appropriate to subordinate this department to the government.  It’s perfectly clear that the main risks are connected not to corruption, but to the low qualifications of the orderer.  Someone needs to “hang” over the orderer from the point of view of its responsibility for how both the program and the contract as a unitary whole are being executed.  Juridical responsibility is not rebuilt only through the contract.”

“The level of project management in our ‘defense sector,’ unfortunately, is also very low, especially the quality management system.  We are all witness to what is happening now in space.”

“It’s frightening that it’s impossible to create new equipment without metrics.  We lost the project management culture and stopped training specialists in military academies and schools.  The very best on this plane is OOO ‘KB Sukhoy’ and it used the American experience-plan for metrics on developmental aircraft.  The Americans seized and simply closed the issue — this project is no longer being supported.  To rewrite project documentation now in some kind of domestic variant is complex, therefore the development of these systems is essential.”

“The participation of commercial banks in providing credit for the state defense order is an important question.  Now in the government they are discussing how these 23 trillion will go — through commercial banks, for free or for money?  It’s understood that banks simply don’t work that way.  There is a precedent – the government resolution on the Mariinka, the Bolshoy [theaters], the M-4 [highway].  If you calculate it, then 20 percent received from 23 trillion over these years, it’s necessary to take an additional amount from the taxpayers or cut the defense order by this sum.”

“Not less sensitive is the issue of intermediaries.  If the Defense Ministry and government don’t put transactions under the strictest control, then there are all the calculations on the defense order, life cycle and cooperation levels, we will mess up this program of armaments also.  This, undoubtedly, is one of the most dangerous questions for the Defense Ministry — too large lobbyist forces participating, too large sums going.”

“Questions of managing the life cycle and control of finances are the most fundamental.  The treasury is incapable of resolving this task.”

Putin, Aircraft, and the OPK

President Vladimir Putin met Thursday with Defense Ministry and aviation industry leaders to discuss military aircraft production.   Kremlin.ru covered his introductory remarks to the assembled group at the 393rd Air Base in Krasnodar Kray.

Putin Addresses the Meeting

Putin touched on PAK DA, UAVs, and damping down industry expectations of funding above and beyond GPV-2020.  To the OPK reps present, the president again stressed timely deliveries of high-quality equipment at reasonable prices.  He took a pretty hard line with the industry, saying it agreed with the GPV last year and there won’t be more than the 19 trillion rubles promised to buy arms and equipment for the Armed Forces.  It seemed odd he didn’t dwell at all on PAK FA development, or Su-34 or transport aircraft procurement.

Putin began by noting that most in attendance were at last year’s meeting on the OPK’s readiness to fulfill the Gosoboronzakaz.  He mentioned aviation’s “decisive role” in modern operations, and once again said that the military (in this case, the Air Forces) have to be prepared to complete missions beyond Russian Federation borders to fulfill Moscow’s alliance obligations.

Putin said the VVS will receive 4 trillion rubles, almost a quarter of the GPV money, for their rearmament by 2020.

He acknowledged that developing PAK DA would not be easy, but:

“If we don’t start promptly, I have the time frames for completing separate elements of this program in mind, we could miss the chance, because it’s impossible to extend the service life periods of existing equipment forever.”

He noted that essential modernization of Tu-160 and Tu-95MS strategic bombers has taken place, and a new ALCM is entering the inventory.

Putin next discussed UAVs and their growing role in combat operations.  He said Russia must develop them, and he plans to spend 400 billion rubles on pilotless aircraft by 2020.

On that pesky issue of buying drone technology abroad, Putin said pretty definitively:

“I turn your attention to the fact that it’s necessary and possible to use the groundwork of our foreign partners, but having this in mind, you well know:  no one will give us the most advanced things, the cutting edge.  We have to do it by ourselves, we need to use what we have at our disposal, and it’s necessary to use what was developed abroad, but we also have to make new advances ourselves.”

The president claimed 30 squadrons have already received new aircraft, and he repeated the familiar goal of providing the VVS 70 percent new equipment by 2020, including 600 new airplanes and 1,000 helicopters.

He mentioned work on Russia’s military airfield network.  During the last four years, four new airfields were built and 28 were reportedly modernized.  Work to the tune of 40 billion rubles is planned for nine more over the coming four years.

Putin took pains to emphasize that “everything” was agreed with the OPK last year.  The government will “support” enterprises and design bureaus as they modernize factories and facilities.  But, he again said, the demands will be severe.  Defense orders must be fulfilled fully, on time, with high quality, and at economically justified prices.  As earlier agreed with the Defense Ministry, profitability will be 15, 18, or even 20 percent.  And the military is supposedly paying Gosoboronzakaz contracts 100 percent in advance, he added.

Putin was particularly emphatic on his next point:

“There won’t be other money, greater than the amount allocated to 2020.  I’ve already talked about this 100 times.  At one recent conference, proposals were again heard to increase it.  We would be happy to increase it, perhaps, but there’s no money!”

He reminded participants most of them were present when Air Forces procurement plans were set, and most VVS contracts are long-term ones running out to 2015-2018.

Putin mentioned that long-term VVS procurement contracts are relying on government-guaranteed credits (i.e. not necessarily money out of this year’s budget).  Aircraft contracts for GOZ-2012 already amount to 2.5 billion rubles.

But isn’t that a very small amount?  The VVS will need to spend upwards of 450 billion a year for nine years to spend their 4 trillion, won’t they?  And 45 billion rubles for UAVs alone.  Ten billion will be spent on airfields annually through 2016. 

Defense Policy Reset?

RF President Vladimir Putin last week held the first meeting of his third term to discuss military priorities with senior uniformed officers.

President Putin

He looked less impressive, and less in command of his brief in the video of his introductory remarks than on similar past occasions.

But he clearly laid out his main concerns for Russia’s top Armed Forces leaders:  training, Aerospace Defense Troops, rearmament, contract manning, pay, and housing.

He seemed confounded by the Defense Ministry’s failure to pay new, higher military salaries on time, and by the continuing lag in providing housing to servicemen.  He said his Control Directorate is investigating both situations.

Taking it from the top, Putin said the state of military training and exercises today is completely changed from past years when the Armed Forces were rarely active.  The president twice emphasized conducting joint exercises with Russia’s allies in the CSTO, CIS, and SCO.

His second priority is developing the newly created and reformed Aerospace Defense Troops.

His third is rearmament.  He repeated the familiar goal of replacing 30 percent of weapons and equipment with new generation systems over the next three years (2015), and 70, or in some cases 100, percent five years after that (2020).  And he added:

“I ask you to report promptly about all instances of breakdowns or incomplete deliveries, if you identify them.  Everyone participating in Gosoboronzakaz work must bear personal responsibility.”

The fourth priority is manning, and the earlier announced effort to increase professional soldiers in the ranks to 425,000.  This, he says, would increase their numbers two and a half times, reportedly from 170,000 today.  Putin made the customary comments about carefully screening and selecting enlisted troops, and giving them incentives to serve well.

Fifth and finally, Putin emphasized efforts to provide better social support for servicemen, specifically, this year’s increase raising military pay by up to three times, and his attempt to provide all military men permanent housing in 2013 and service housing by 2014.  He said:

“Sufficient resources have been allocated for this, the necessary amount has been reserved.”

“But I have to note that, to this point, there are many problems in the provision of housing and calculation of pay, unacceptable breakdowns and procrastination, open professional negligence by officials.  And even if on paper and in reports everything is normal, in fact in real life servicemen and their families at times encounter various kinds of bureaucratic procrastination, often with a formalistic indifferent approach.”

“I’ve directed the Russian Federation President’s Control Directorate to conduct a corresponding check in all these areas.  Unacceptable facts are being encountered, already in the first stages of this check this is clear:  this is both delays in the transmission of pay, and the impossibility of normally finalizing the paperwork for an apartment.  Fitting conclusions will be drawn according to the results of the check, and instructions will be formulated.  But today already I’m asking Defense Ministry representatives to report what measures are being adopted to correct the situation.  May is ending, and normal work with pay still hasn’t been smoothed out.  We already talked about these issues more than once.”

Where are outside observers left?

  • Training and exercises have increased as a function of more budget and fuel, but this didn’t happen until the late 2000s.
  • Aerospace Defense Troops are another structural reorganization, potentially a good one, not unlike other reorganizations since the 1990s.
  • Rearmament is a serious downfall.  Despite the Putin factor, nothing really happened on this score until late 2009.  It’s complicated by the difficulties of fixing a dilapidated OPK.  And, although there may be some favorable signs, success here remains to be seen.
  • Contract service is a second serious downfall.  Putin’s first effort to professionalize the army started in 2002.  The General Staff Chief declared it a dismal failure eight years later.  The Defense Minister revived it on an enlarged scale one year after that.  Demographic reality and draft problems leave Moscow no other choice.
  • Low military pay is a downfall.  It became more of a realistic priority with Serdyukov’s arrival in the Defense Ministry, but it was still five long years before the new, higher pay system was implemented.  And Putin admits how poorly it’s functioning.
  • Housing is also a downfall.  Despite progress since Putin first really addressed the issue in 2005, it’s still problematic.  And the president publicly moved back his timetable for a solution.

The downfall areas are problems requiring a long-term, sustained commitment to resolve.  Putin 2.0 is wrestling with the same military issues he identified back in 2000.  It’s still far from certain he can or will bring them to a successful conclusion.

This author believes there’s been progress on Russia’s military issues during the 12 years of Putin’s time as national leader.  But future economic or political challenges could derail progress toward rebuilding the country as a full-scope military power.

Is Putin resetting or rebooting defense policy?  Yes, at least jumpstarting it on key issues.  But a restarted or jumpstarted computer, car, or policy usually works (or doesn’t work) the same way it did before it stalled.  So this isn’t necessarily the path to a successful finish.  But no one ever said making and implementing policy was easy.

A Fuller Picture of the GOZ

Yars ICBM (photo: RIA Novosti / Ilya Pitalev)

It’s been customary for some time to get press information on what the Russian military expects to acquire each year.  Rare, however, are occasions when we receive a report on what they procured to compare with the plan from the year before.

This year is one of those occasions.

Why is anybody’s guess.  But the release of this information — which came from the new armaments tsar First Deputy Defense Minister Aleksandr Sukhorukov – could be a Defense Ministry weapon in its running skirmish with the OPK.  Information on how the defense sector performed could bolster the ministry’s somewhat beleaguered position on what it buys, from whom, and for how much.

RIA Novosti covered Sukhorukov’s remarks on GOZ-2011 yesterday.

According to him, in 2011, the military received 30 Topol-M and Yars ICBMs, two special designation satellites, 21 aircraft, 82 helicopters, one proyekt 22380 Steregushchiy-class corvette, and 8,500 KamAZ and Ural vehicles.

The price for GOZ-2011 was about 550 billion rubles.

Now, for comparison, in mid-March, Lenta.ru recapped Defense Minister Serdyukov’s statement to RIA Novosti on 2011 procurement plans.  He said the military planned to obtain 36 ballistic missiles, two SSBNs, 20 strategic ALCMs, five satellites, 35 aircraft, 109 helicopters, three SSNs, one surface ship, and 21 SAM systems.  The media outlet itself noted the submarine plans sounded garbled since two SSBNs and an SSN were more likely.

So what was acquired very roughly approximates what was anticipated.  And these are just high-profile systems rather than an exhaustive list.  As indicated at the outset, it’s a fuller picture not a full one.  There could be an official assessment later of what percentage of GOZ-2011 was completed.   

Sukhorukov also said late last year a contract for Bulava SLBM production out to 2020 was signed, but no acceptance date for the missile or the first Borey-class SSBN was established.

He added that 84 contracts worth 42 billion (8 percent of the money) were not fulfilled, and the Yasen-class SSN schedule was not met.  And defect claims reached 7,100, up from 6,800 in 2010.

Barabanov’s Top 20

Defense commentator Mikhail Barabanov published his annotated list of the top 20 military stories of 2011 in yesterday’s Voyenno-promyshlennyy kuryer.

Some we’ll just note, but Barabanov’s provided interesting details for others.

1.  The continuation of military reform.  The start of the next phase of reforming the Air Forces and Navy.

Barabanov says Air Forces’ reform included the formation of VVKO and the enlargement of Russian air bases.  The reform of the Navy started December 1 and it will soon be restructured into a “new profile.”

2.  Establishment of VVKO.

He comments, “The given construct essentially looks fundamentally like a return to Soviet Voyska PVO Strany (National Air Defense Troops) in the form of a separate service [well, branch] of the Armed Forces.”

3.  The new pay system effective this year.

4.  GPV 2011-2020.

5.  The increase in the Gosoboronzakaz.

Barabanov puts GOZ-2011 at 460 billion rubles, 570 if RDT&E is added.  This was 20 percent more than GOZ-2010, and allowed for the series production of weapons and equipment.

6.  The war between industry and the Defense Ministry.

7.  Development of the PAK FA.

8.  Large helicopter procurement.

Apparently a post-Soviet record.  About 100 new helos, including Mi-28N, Ka-52, Mi-26, and Mi-24 (Mi-35M), were expected to reach the troops.

9.  Bulava began to fly.

10.  OSK “megacontracts” for submarines.

About 280 billion rubles for modernized proyekt 885 and 955.

11.  Ending serial procurement of many ground systems and equipment.

The Defense Ministry said it didn’t need the T-90, BMP-3, or BMD-4 (!?).  Development of an entire spectrum of new armored vehicle platforms began for procurement after 2015.

12.  Domestic space sector failures.

They evidenced the decline of the OPK’s production capability in the space sector.

13.  “Tsentr-2011″ exercises.

They checked the “new profile,” and the greatly enlarged military districts.

14.  Importing arms.

Mistral, Rheinmetall’s training ground in Mulino, foreign sniper rifles, and Israeli UAVs.

15.  Continued growth in Russian arms sales.

$11 billion as opposed to 2010′s $10 billion.  This despite the revolutions in the Arab world.  Rosoboroneksport’s order portfolio is $36 billion.

16.  Arab revolutions.

17.  NATO intervention in Libya.

18.  Military actions in Afghanistan, American troops leave Iraq.

19.  Deadend in missile defense negotiations.

20.  Start of reduced U.S. military spending.