Tag Archives: Procurement

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.

Putin on Ground Troops and VDV

Meeting on GPV for Ground Troops and VDV

Kremlin.ru has the transcript of President Putin’s introductory remarks yesterday at a meeting on the land armaments portion of the State Armaments Program, the GPV.  This is his second review of where things stand.  Recall in mid-June he held a session on the Air Forces and the GPV.

Noting that “leading countries” are increasing the potential of their ground forces with new reconnaissance, C2, and “highly accurate” systems, as well as modern armor, Putin continued:

“I remind you in the framework of the state armaments program to 2020 it’s planned to allocate more than 2.6 trillion rubles to outfitting the Ground and Airborne forces.  We have to reequip units and sub-units, to fill the troops with new equipment with these resources.  By 2020 its share must be not less than 70 percent.”

“So 10 ‘Iskander-M’ brigade missile systems, 9 S-300V4 army brigade SAM systems, more than 2,300 tanks, nearly 2,000 self-propelled artillery and gun systems, and also more than 30,000 units of automotive equipment alone must enter the Ground Troops.  Besides this, it’s planned to introduce new communications, C2, advanced reconnaissance systems, individual soldier systems.”

As previously, the president stressed that complete fulfillment on schedule and at agreed prices is “very important.”

Then Putin turned to three problem areas.

First, fielding new weapons systems is complicated by the involvement of many sub-contractors.  A breakdown in one contract can cause an entire effort to fail.  Putin cited the VDV’s new BMD and YeSU TZ as examples:

“[BMDs] still haven’t gone through state testing and, as a result, haven’t been accepted into the inventory.  In turn, this is impeding development of practically all the VDV’s weapons sub-systems.  Today I’d like to hear, respected colleagues, why the task of the state program in the area of armor development and supply to the VDV hasn’t been fulfilled.”

“Creating a unified command and control system for troops and weapons at the tactical level [YeSU TZ] is another example.  The test model still doesn’t fully answer the requirements the Defense Ministry set out.  And I’d like also today to hear how this question is being resolved.”

Refer here and here for recent words on the BMD-4M and YeSU TZ.

Second, the Ground Troops and VDV spend too little on R&D (10 and 5 percent of what they spend on serial purchases and repairs respectively).  And the R&D money is put toward a small number of projects.  The president wants more work on advanced soldier systems, infantry weapons, individual protection, and comms.

Third, and finally, there’s a mess in Russia’s munitions industry.  There’s no long-term plan for ammunition makers, and this presents a problem for new arms systems.  The time has come, Putin said, to determine how the Defense Ministry and enterprises in this sector will interact.

President Putin has really seized on the GPV.  It seems near and dear to him.  Or perhaps it seems more tractable than Russia’s political and economic problems.  More amenable to his directive leadership and manual control.

The cases Putin mentioned are longstanding, well-known “poster children” for the problems of the OPK, i.e. easy and logical targets.  One wonders what more pressing and acute, if less publicly advertised, military-industrial difficulties were discussed.  Putin’s focus on R&D is also a bit odd when you consider it’s been blamed for waste and slashed.

Putin didn’t address strong rumors and denials of slipping the schedule for GPV 2011-2020 to 2016-2023.

Does the GPV Look Like This?

If Putin keeps on the GPV, perhaps we’ll gain a somewhat sharper picture of how it’s shared out.  It’d be interesting to learn where the RVSN and VVKO fit.

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.

Special Steel

Yasen Rollout in June 2010

On Thursday, Argumenty nedeli published a short article citing a source claiming Russia’s specialty steel makers aren’t very interested in supplying metal for new submarines planned for the Navy.

Argumenty’s record is interesting.  Sometimes they go out on a limb and don’t quite get a story right; other times they nail it or catch the gist of what seems to be happening.  Can’t say which it is this time.  But the paper has a tradition of looking closely at different parts of defense industry.

The story maintains Sevmash is trying to scrape together the specialty steel needed for new boats, and is short of what it needs for Borey- and Yasen-class hulls.  The paper’s OPK source notes, of course, that those boats already launched were assembled from existing sections of older submarine classes.

The source concludes rather direly:

“If the issue of steel isn’t resolved, then you have to forget about further production of our missile-carrying submarines.”

He continues:

“. . . it’s unprofitable for suppliers to produce.  Their own cost is high, but the Defense Ministry is buying a miserly quantity and trying to drive down the price on the finished item and, accordingly, on the components.”

Argumenty ends its short piece by reminding readers about the conflict between the Defense Ministry and United Shipbuilding Corporation (OSK) on the one hand and Sevmash on the other over pricing and contracts which lasted most of 2011.

That year-long battle ended in mid-November when Prime Minister Putin supervised the signing of seven submarine contracts worth more than 280 billion rubles in Severodvinsk.  There aren’t precise details on what the deal covered except nuclear-powered submarines — the modernized proyekt 955 Borey and proyekt 885 Yasen (or 955A and Yasen-M).

If Argumenty’s story is accurate, it suggests future disputes over submarine production and profit margins for Sevmash’s sub-contractors and suppliers.  Perhaps Putin’s deal was only a temporary end to the government-industry conflict.

Year Two

This blog completed its second year yesterday.  There were 288 posts in year two (a few less than last year).  Just a couple to go to reach 600 posts since December 10, 2009. 

One hopes the reading was half as worthwhile as the writing.  But frustration lingers.  It’s impossible to follow everything.  Adding Twitter provided a “release valve” for overflowing news.  Still there’s tension between posting short items and writing more detailed pieces drawing together many different sources. 

In 2011, Defense Minister Anatoliy Serdyukov and General Staff Chief Nikolay Makarov had plenty of interviews, official appearances, and other public utterances to cover.  There were a large number of high-level personnel changes, retirements, and dismissals to report.

Serdyukov eased a little on cutting the officer corps.  The Defense Ministry readied its new higher pay system while scandal plagued the stopgap premium pay scheme.  Military housing remained a major headache as always.

Moscow hit a wall on manpower and had to accept undermanning.  After acknowledging there aren’t enough potential draftees, the military is starting over (yet again) with an effort to create professional enlisted and NCOs through contract service.

This year began with questions about the GPV’s feasibility, but devolved into immediate problems with GOZ-2011.  The Russians threw money at the OPK without looking at the defense sector’s (and the procurement bureaucracy’s) capability to turn financing into the kind of weapons and equipment the military requires.  Difficulties ramping up production of naval and missile systems occupied media attention.  The public debate over the relative merits of buying Russian or foreign weapons made several headlines.     

So where is Russia’s military?

To this observer, the Russian Armed Forces are improving and beginning serious rearmament.  But the hour is late.  Significant future problems could derail recent positive changes.  These include new and old, unsolved economic, budgetary, social, demographic, and possibly even political challenges.  Not to mention purely military obstacles to modernizing the army and navy.

Your visits and page views grew significantly in year two.  Page views are about 400 a day, 2,000+ a week, and 9,000-10,000 a month.  We’ll see if this is the ceiling for this rather specialized topic.

Your views, opinions, and arguments are always appreciated.  Those sharing or highlighting data and evidence on issues are particularly valuable.

Innovation Locomotive or Brake?

Maksim Blant

Newsru.com economics commentator Maksim Blant wrote on an interesting subject this week:  is spending on the OPK an engine or drag for Russia’s innovation economy?

Blant has two primary arguments against military Keynesianism in Russia’s context.  First, more money for the OPK will further tighten an already taut market for certain labor.  Second, OPK spending’s multiplier effect will benefit raw materials producers more than consumers.

His article appears against a backdrop of questions about Russia’s ability to meet increasing pension obligations over the next 2-3 years without raising taxes, and former Finance Minister Kudrin’s contention that it could, but for the 20 trillion rubles going to the military’s rearmament program.

The problem, Blant concludes, is not that President Medvedev intends to rearm by depriving pensioners of their last bread crusts.  No, Medvedev defends rearmament as a means of stimulating growth in manufacturing, and turning the defense sector into an innovation development “locomotive.”

Blant allows that a majority of experts are inclined to agree that increased military spending can stimulate economic growth, and large defense industry orders can have a multiplier effect causing expansion in other sectors.  The argument is familiar.  State orders lead to job creation and greater consumer demand.  Defense enterprise orders to suppliers spur the process in other sectors.  The jolt causes the economy to turn around.

Blant says there are cases where military spending has brought an economy out of crisis, but asks will it work in Russia? 

He doubts creating jobs in the defense sector will increase consumer demand.  Even discounting how much procurement money will be stolen in the military or OPK, he says relatively little of the trillions will go for wages.  It would be easier to increase consumer demand by raising pensions.

Blant says this job creation effort will occur in the midst of a demographic crisis — not an excess, but rather a relative shortage of labor.  With state orders in hand, defense enterprises will compete against private businesses for engineers and skilled workers.  Faced with this, civilian producers can either raise wages and lose competitiveness, or “escape” to countries where the labor market isn’t so tight.  This, concludes Blant, makes the OPK not a “locomotive” of innovation development but rather its gravedigger.

Blant turns to the multiplier effect in adjacent sectors.  Yes, OPK money supports them, but raw materials suppliers and processors most of all.  Together the two sectors form a “closed loop,” only weakly connected to other industries.  In the end, he foresees a repeat of the 1980s, where the USSR’s defense sector, heavy machinebuilding, and raw materials producers sucked up the lion’s share of labor and other resources, leaving nothing for the consumer sector.

Death of Mikoyan

On October 21, the labor union of the Engineering Center of the Experimental-Design Bureau (OKB) named for A. I. Mikoyan went public with its claim that  well-known aircraft maker RSK MiG is in a catastrophic state.  Metronews.ru published part of the union’s open appeal as well as MiG’s official reaction.  The union’s letter is addressed to the president, prime minister, and heads of political parties, and dated October 11.

Union chairman Yuriy Malakhov says:

“The situation taking shape in our engineering center forced me to write this letter.  We’ve always been the brain of the company, it’s right here that new aircraft models were developed.  For a long time, we’ve had no new orders.  In the past five years, six general directors have been replaced, they all come from the Sukhoy company, and the impression’s created that they are strangling us, they want to close our company.  All the best orders go there [Sukhoy].  For example, we aren’t even allowed to participate in developing unmanned aerial vehicles.  Sukhoy is working on them, but this aircraft company doesn’t have our experience.  They focused on heavy fighters.  The pay of our colleagues is lower than in the trolleybus yard next door.  Lead engineers get 8-10 thousand rubles [per month].  Sometimes with occasional bonuses they get 30 thousand.  Talented young specialists leave for other firms, for example, Boeing, where they get two-three times more.  Now 10 percent of orders come from Russia, the rest from abroad.  In the course of several years we tried to get a response from our leadership, but no one wanted to start negotiations with us.  And the engineering center’s director decided to meet with employees only after this letter.  We are very much hoping for this meeting.  We expect new orders and increased wages.”

 MiG’s press-secretary offered this response:

“The absence of the Gosoboronzakaz in the 1990s was a serious blow to the country’s defense industry, including to RSK MiG.  Only those companies that had large export contracts could develop successfully, for example in that period the Sukhoy company managed to conclude contracts with India and China.  At that moment, MiG had only a contract with Malaysia.  In recent years, RSK MiG’s been headed by directors from Sukhoy corporation – Nikitin, Fedorov, Pogosyan, Korotkov.  From outside this could look like a raider’s seizure of MiG.  But who needs to seize debts and problems?  A positive dynamic began precisely with the arrival of these people – large foreign contracts were signed, the contract with the Defense Ministry to supply MiG-SMT.  Aircraft were supplied against this contract and they’re being successfully employed in the RF VVS.  Presently, a contract with the Defense Ministry to supply the MiG-29K is being discussed.”

“Today RSK MiG’s order portfolio is more than $4 billion, serial production of new aircraft is unfolding. There is a positive dynamic, maybe it’s not as quick and wages not as high as all of us would like.  Some young specialists come and stay, some leave.  But on the whole the company has good prospects.”

A couple points on these claims.  We know raiders take and sell what’s good, and leave “debts and problems” behind.  The Defense Ministry’s acceptance of the Algerian MiG-SMTs was more a financial bailout for the company and face-saving maneuver for Russia writ large than a real contract.  Not mentioned is Aleksandr Sukhorukov’s October 11 statement that MiG-29K procurement won’t come until 2013-2015.

The text of the union’s letter says MiG is simply dying.  It cites many problems and complaints, including a 48-billion-ruble debt, losses and delays in contracts, moving engineers to Zhukovskiy, closing MAPO, etc.  It says crucial pay bonuses can’t always be paid, and MiG is just supplying skilled people to Sukhoy and Irkut.  The letter calls OAK an incomprehensible middle layer blocking competition, but allowing personal lobbying.  Finally, it blames Mikhail Pogosyan for closing MiG’s promising future projects.

Scanning other recent MiG headlines – the Indian tender wasn’t the only blow to the MiG-35, its chances with the Russian Air Forces didn’t look too rosy anyway, and the early September MiG-31 crash indicated again what dire straits that old airframe is in.

Izvestiya’s Ilya Kramnik published recently on the MiG-29’s fate.  He wrote that (unlike the Su-27 or Su-24) the Defense Ministry doesn’t plan to modernize the MiG-29.  His military source says replacement of these worn-out aircraft in the future is deemed more cost-effective.

Kramnik’s source describes production of the generation “4+++” (?!) MiG-35 as an unavoidable but not yet decided step.  He sees the MiG-29 variant line ending since it’s outclassed by updated Su-27s.

Kramnik’s OPK source sees 20 or 24 MiG-35s being produced each year, for about 25 billion, to replace 150 or 160 MiG-29s in Russia’s inventory.

He cites Konstantin Makiyenko who sees the MiG-35 as important not just as a MiG-29 replacement, but also to keep Russia in the light- to medium-, $60-million-range fighter export market and not leave this industry segment to China and its J-10.

But Konstantin Bogdanov tells Kramnik he thinks the MiG-35’s loss in the Indian tender hurt its chances at home because it raises questions about MiG’s ability to support a production program for the Russian Air Forces.

One also wonders how much MiG-35 and MiG-29 will be needed with T-50 / PAK FA, with Su-35, and with Su-27 upgrades out there.

It’s hard to see the MiG story as anything but another chapter in the painful and necessary process of post-Cold War industrial downsizing and restructuring.  After all, the U.S. is down basically to Boeing and Lockheed Martin.  In MiG’s case, one can question whether the selection is really natural and the fittest are truly surviving.  The answer is probably yes.  However they managed it, Sukhoy and Irkut played their post-Soviet hand better, and it shows today.  The Russian aviation sector will be better off with further consolidation.  Still it doesn’t need Sukhoy to be a monopolist.  Managing that outcome will be tricky.