Shamanov’s Replacement?

Izvestiya reports today that General-Lieutenant Andrey Serdyukov is set to replace General-Colonel Vladimir Shamanov as commander of the Russian Airborne Troops (VDV).

Shamanov, who will turn 60 in February, has commanded the VDV since early 2009.  But he could continue to serve beyond 60 at the president’s discretion under Russian law.

general-lieutenant-andrey-serdyukov

General-Lieutenant Andrey Serdyukov

The 53-year-old General-Lieutenant Serdyukov has been serving as first deputy commander and chief of staff in the Southern MD.  He reportedly played a key part in the seizure of Crimea from Ukraine in 2014.

A presidential decree on the personnel change has not been issued, but Kremlin press-secretary Dmitriy Peskov did not deny plans to elevate Serdyukov when asked by Izvestiya.

Russian media sources have reported that Shamanov’s retirement post will be a seat in the new State Duma and chairmanship of its Defense Committee.  Readers will recall that Shamanov is a member of the president’s United Russia party and served as governor of Ulyanovsk Oblast.

Dizzy with Success

On Topwar.ru on 15 September, Aleksandr Staver and Roman Skomorokhov asked whether President Vladimir Putin, like his predecessor Stalin, has decided to curb (at least temporarily) his key program.  Today it’s rearmament rather than collectivization.

The authors assess the program and its problems from a conservative viewpoint.

They assert the arms program is not being fulfilled and the MOD budget is being cut (whether admitted or not).  In particular, they contend, it is new weapons programs that are suffering, so they argue for cheaper modernization of existing armaments.

Debate over rearmament is a constant.  Staver and Skomorokhov don’t even mention that the start of the next arms program was delayed, or that the MOD and Finance Ministry are far apart on funding it.

For his part, Putin routinely says the current GPV will not be cut, and the armed forces will have 70 percent modern arms and equipment in 2020.

But 70 percent, according to the authors of this op-ed, is not enough.  More is needed.

Then they turn to corruption.  They allege that the ones who are “dizzy with the success” of the arms program are the ones who are stealing from it.  They say a return to 1937 would put an end to this, and to other problems with rearmament.

Recall that even Putin and United Russia once talked about bringing treason charges for non-fulfillment of the GOZ, but nothing came of it.

So much for preamble.

“Dizzy with Success, or ‘Alarm’ in the Russian Army”

“We are so used to the fact that our army is powerful that we almost don’t notice, or more precisely, don’t wish to notice that light ‘clouds’ threatening to turn into bad storms have appeared over Russia’s VS [Armed Forces].  We talk and write with satisfaction about our aircraft which, at a minimum, don’t lag behind Western ones. We ‘procrastinate’ with Armata and its offshoots, comparing it to the best models of Western armies.  We discuss the advantages of our new missiles and systems.”

“And now, today exactly, heard here and there are announcements by various government bureaucrats and army chiefs about delaying arms procurement to another time, so to speak.  About delayed launches of ships.  About adjusting the schedule for delivering something to the troops.”

“So what’s with this.  Why is this happening?  Recently all officials, including the president and the prime minister, together talked about fulfilling the defense order almost as a matter of honor for Russia. Don’t many remember Putin’s April statement about the unconditional fulfillment of the state defense order?  And can’t many say exactly how much it is fulfilled and whether it is fulfilled?”

“The entire thing is that the necessary money is not in the budget!  The crisis, which we are ‘successfully overcoming,’ still has us in its claws.  We’ve talked a lot about the fact that sanctions hurt Europe and the USA, and how they [sanctions] are going to benefit us.  We are developing, increasing output, winning markets…  On any analytical program on our TV it’s possible to hear a full assortment of such pronouncements.”

“The support of the president and the real successes of our servicemen in Syria inspire hope in us that all this will come true.  The government will find money both for us and for the army.  Industry will begin to work not only well, but both quickly and cheaply.  New ideas of [arms] designers will be realized in the shortest time.”

“Prime Minister Medvedev’s decision, signed on 5 September, to adjust the GOZ for 2016 was only the first call.  It is understood that today there’s no clear data on this question.  Naturally, it’s possible to suppose that defense sector enterprises won’t receive some part of the promised resources.  And this, in its turn, means that GOZ plans for next year will be ruined.  A snowball of corrections will accumulate gradually from the details.”

“And not hiding the fact, by the way, does him credit, Putin himself already talks about the fact that by 2018 our army will be rearmed at 70%, and the state order will be reduced.  And he talks about what is needed to take the place of the defense order, but not pots and pans.”

“From the one side, one who is forewarned is forearmed.  But from the other?  It’s hard to guess with what enterprises will be occupied, with a miracle which drags them out of the debt hole.  And where will workers who turn out to be redundant go at this moment?  But we have already passed through such a scenario.”

“However, certain specifics have already ‘hatched.’ The Ministry of Defense plans to make the famous “Armata” the main battle tank by 2020.  With this aim, the purchase of more than 2,000 of such vehicles for military units has been proposed. According to the tank producer’s data, the order was already for 2,300 tanks.  But not long ago on the Ministry of Defense website an altogether different figure appeared: there is a plan to buy up to 70 “Armatas” in 2017-2019.”

“Naturally, the reasons for changing the [state defense] order aren’t named.  I think over some time versions about some shortcomings, about the modernization of what we already have, [and] some others.  Actually, the reason is banal.  They are cutting the military budget and will cut it.  It’s completely logical, you can’t take money from the shelf if there’s nothing on it.  So folks say.”

“The navy’s situation looks even more confused.  Even the blind see the necessity for modernizing the Russian fleet.  Ships, just like people, age, lose their striking power, and turn into respected veterans.  But we need warriors.  And these ‘warriors’ need to be built.  A lot of them.  The Soviet legacy can no longer guarantee a worthy answer to an aggressor.”

“It seems as though construction began from 2007.  Missile boats, small ships and even submarines began to leave the docks for testing.  New submarines, frigates were laid down at the wharves.  The rebirth had begun.”

“Our excessive belief in the ‘love and friendship of fraternal peoples’ became the first ‘obstacle.’  When construction was stopped by the Ukrainian side [sic].  They stopped supplying Ukrainian engines to us.  Actually, the question of ‘their’ components in combat equipment and armaments arose already in the last century.  And they successfully solved it in the USSR.  But in Russia they put it off ‘for later.'”

“Then the ‘rockslide’ of announcements by military and government bureaucrats on cutbacks in the needs of the fleet began.  I remind the readers about the project 11711 BDK [i.e. an LST].  A large assault ship which was needed to replace Soviet BDKs.  In 2004, a requirement for 6 of such ships for the navy was announced.  Then they decided to review the project.”

“Today we see two ships.  Two instead of six.  It’s been decided to shut down the project.  ‘Ivan Gren’ and ‘Petr Morgunov’ — that’s all that the fleet will receive after testing.”

“It’s possible to talk endlessly about the submarine fleet.  About new missile submarines.  But even they, alas, for the most part remain only projects.  The construction of boats of such a class is a very expensive undertaking.  And this means still unmanageable.”

“Even the Rocket Troops of Strategic Designation [RVSN] will not receive everything promised.  Although, for all times the priority was always right on these troops.  No, ‘Yars’ and similar systems will be supplied.  But land-based ‘Sarmat’ systems most probably won’t be deployed to the original plan.”

“I recall it was planned to replace by 2020 the already aged ‘Voyevod’ missiles (known to most by the NATO ‘nickname’ ‘Satan’) which have served out their time.  Today it’s understood that these plans aren’t being fulfilled.  Today already.  In the best case, such a replacement will occur in 2021.  Or a little later.”

“So where’s the way out of the situation which has been created?  Is there one generally?  I believe there is.  And today the way out is to use those developments which exist and have already been tested in combat.”

“When the VDV [Airborne Troops] commander announced the establishment of tank and BMP companies in units subordinate to him, what kind of vehicles did he mention?  He talked about T-72B3 tanks and BMP-2s.  I hope no one will chide General Shamanov for stupidity and a lack of desire to have the most powerful and modern weaponry?  So why exactly these vehicles?”

“Simply because both the tank and the combat vehicle have huge modernization potential.  And in the coming decades this potential will be used.  And mass serial production has reduced the cost of this equipment in the extreme.  And long use in the troops has revealed practically all ‘minuses’ of these vehicles.”

“Modernization of the T-72 to the T-72B3 level costs a bit more than 50 million rubles.  In other words, for one ‘Armata’ we can have several T-72B3s right away.   Naturally, the T-90 would be more desirable, but it is cost prohibitive.”

“It’s exactly the same situation with the famous T-50 system.  The aircraft is ready. Moreover, it’s been put in series production.  And in the plans it’s supposed to be the main fighter.  This ‘hulk’ looks impressive in our plans.  In 2020 we should already have 60 fighters in the force.  And in the future their production should increase.”

“In reality we’ll get exactly the same as ‘Armata.’  We want to do a ‘split,’ but our britches get in the way…  It will be good if we have a regiment of such aircraft in 2020.”

“But we have the fully combat capable, even compared to the American F-22 and F-35, Su-30MK.  And, according to the assertions of its builders, the potential of these aircraft is far from used up.”

“And what’s the result?  As a result, we see the famous ‘half-full glass.’  Part of the readers are now sighing sadly.  The army is ‘penned up.’  Another part thinks that the Russian Army, in the shape which we have it, can really confront the enemy.  The third part giggles happily.  They have failed to modernize.  Oafs.  We told them…”

“It’s not for nothing that I called this article by a Stalinist name.  This isn’t a greatness mania or a wish to show off knowledge of the works of the ‘leader of peoples.’  We truly have become a little ‘dizzy.’  Not everything has succeeded right away.”

“I generally believe that the right way to move is walking or running.  But not ‘leapfrog’ jumps.  Movement should be measured and in one direction.  Therefore, the modernization of the army should continue.  Continue, no matter what.  But not by busting a gut.”

“I would be wary of talking about our weapons and combat equipment like junk.  Particularly after what this equipment showed in Syrian battles.  Just the same to talk also about the superiority of Western armies in some components.  But if we view the army like the world, a ‘gap’ will always be found.  But this gap is always ‘plugged’ by something else.”

“The dizziness quickly passes if you leave the centrifuge or wheel.  If, of course, you have a properly functioning outer office staff.  I think healthy people serve in our Ministry of Defense.”

“But just one moment.  No one needs to have the fact that our bureaucrats are not simply greedily stealing everything possible explained to them.  It’s a rare day when the Internet and television don’t report about the latest stuff that’s ‘flown off.'”

“It’s necessary to stop those who ‘have become dizzy with success.’  With the methods of the person I quoted.  Severe and long-term.  Take that Zakharchenko.  9 billion rubles — that’s a great deal.  The T-90, for example, today costs about 120 million rubles.  That is 75 tanks laid in the brute’s hidey-holes.  Two battalions.  Not bad…”

“And this is one of the deputies…”

[Colonel Dmitriy Zakharchenko is, or was, deputy chief of Directorate T in the MVD’s Main Directorate of Economic Security and Countering Corruption until his arrest in early September.  The foreign currency equivalent of 8 billion rubles was found in his apartment.  See RIA Novosti for an early report on his case.]

“And if they search his relatives, it’s certain it would be possible to scrape together a brigade easily and without effort.”

“‘Effective managers’ of our times have shown that they can only steal effectively.  From the budget just the same as from the GOZ.”

“It’s necessary to change the situation really at the root.  And tear this root with a crunch and snap on the image and likeness of ’37.  With the confiscation of everything that’s possible.”

“Only then will the state defense order be fulfilled on time and without problems.  And the president won’t have to shuffle, talking about how 70 percent is sufficient so we should relax.”

“So isn’t it?”

Contractees in BTGs

General Staff Chief, Army General Valeriy Gerasimov held a press conference with Russian news agencies on 14 September.  The just-completed Kavkaz-2016 strategic exercise was the main, but not the only, topic.

gerasimovs-press-conference

Gerasimov’s Press Conference

Interfaks-AVN captured Gerasimov’s comments on one particular subject of interest.

Army General Gerasimov said:

“Contractees are substantially increasing the combat capability of sub-units and military units.  In our districts, including the Southern Military District, battalion tactical groups [BTGs], which are fully manned by contract service soldiers, have been created.  There are now 66 of such BTGs, at the end of 2016 there will be 96, next year 115, and the year after [2018] 125.”

Every BTG, Gerasimov noted for the media, has 700-800 men, and reinforced BTGs have 900.  As a rule, each Russian regiment and brigade has two BTGs, he said.

What is a BTG?

A BTG is a motorized rifle or tank battalion of 2-4 companies with attached ATGM, artillery, reconnaissance, engineer, and rear support platoons making a fairly self-sufficient ground combat unit.

These were some brief but significant comments from Gerasimov. What do they tell us?

BTGs are supposed to be completely manned and fully combat ready. Gerasimov didn’t say that regiments and brigades typically have at least a third maneuver battalion which may not be completely manned or combat ready.

To simplify our math, let’s say Russia’s Ground Troops today comprise 36 maneuver (motorized rifle and tank) brigades.  We’ll leave out the longstanding 2nd Motorized Rifle Division and 4th Tank Division, as well as the future 150th MRD.

Those 36 brigades equate to a nominal 108 (36 x 3) maneuver battalions.  If there are 66 BTGs now, then two-thirds of the 108 are organized in essentially ready-to-fight packages.

Ninety-six would get close to 100 percent BTGs by the end of this year.  But adding another 30 (66 + 30 = 96) in less than four months seems almost ridiculously difficult.

The 115 (96 + 19) and 125 (115 + 10) figures for 2017 and 2018 would be much easier.

Battalions composing current divisions (or new divisions and brigades in the process of forming up) certainly account for some number of BTGs above 108.

It’s unclear how many airborne (VDV) or naval infantry BTGs there might be. Gerasimov seemed to be talking strictly about Ground Troops.  Between them, VDV and naval infantry might have 30+ battalions already organized into BTGs, or candidates to become BTGs.  But we don’t know if or how they factor into Gerasimov’s current or future number of BTGs.

Gerasimov’s comments have value with regard to contract service.  Sixty-six BTGs at 800 men each account for 52,800 professional enlisted.  And 125 would be 100,000. Those numbers represent a fair portion of a Russian Army of 300,000 considering that there might be 60,000 officers, and there will always be conscripts.

Russians in the Top 100

Defense News has released its list of the world’s Top 100 defense companies for 2015.  By its methodology, it put seven Russian firms on the list for 2015.  They include:

Almaz-Antey held its 11th position from 2014 with nearly $7 billion in defense revenue.  But that amount represented a 25 percent decline against 2014.

Four firms dropped in the rankings with earnings down between 20 and 34 percent: Helicopters of Russia, OAK, RTI, and Uralvagonzavod.  The tank maker’s military revenue fell more than 34%.

Tactical missile maker KTRV held pretty steady.

KRET broke into the rankings in 48th place with nearly $1.7 billion in earnings. With Moscow’s emphasis on EW during the past year, it wasn’t hard to guess KRET would get paid.

Interesting that government aircraft manufacturing holding company OAK stays on the list, but Sukhoy and Irkut have fallen out.  Generally though, Russian aircraft producers still fare pretty well.

Early warning radar maker RTI manages to stay on the list each year.

Has anyone seen OSK — the government shipbuilding holding company?

Engine-building holding company ODK fell out of the list likely because of its inability to get components and parts from Ukraine (or make its own successfully yet).

Weak Light at the End of the Tunnel

In recognition of Navy Day several weeks back, Mikhail Khodarenok examined the current state of the Russian Navy for Gazeta.ru.

Khodarenok offers a pessimistic assessment of the navy’s shipbuilding program.  He notes there is still significant disagreement over what to build.  The navy, he argues, has also lost some of its bureaucratic heft when it comes to planning for shipbuilding as well as for the operational employment of naval forces. 

Black Sea Fleet Nanuchka III-class PGG Shtil in the Navy Day Parade

Black Sea Fleet Nanuchka III-class PGG Shtil in the Navy Day Parade

Late of Voyenno-promyshlennyy kuryer, Mr. Khodarenok — you’ll recall — is an ex-General Staff officer and serious military journalist.  He shares interesting and credible opinions from several well-placed former naval officers in his article.

According to him, all observers agree that the start of serial construction of ships after more than 20 years is “one of the most important vectors of the fleet’s current development.”  This might seem obvious, but it’s not widely appreciated.

Khodarenok walks quickly through the current construction program:

  • four proyekt 20380 corvettes in the fleet with eight on the buildingways;
  • three proyekt 11356 frigates delivered, others uncertain;
  • proyekt 22350 frigates under construction;
  • six proyekt 636.3 diesel-electric submarines complete, six more for the Pacific Fleet to be built in 2017-2020;
  • proyekt 955 Borey-class SSBN is a success with three delivered;
  • a single proyekt 885 Yasen-class SSN has reached the fleet, others will likely not arrive until after 2020.

One can quibble with his points.  For example, it’s premature to declare Borey a success when its Bulava SLBM still hasn’t been accepted into the navy’s inventory (NVO made this point flatly on 12 August).  Perhaps Borey is a success, but only in comparison to Yasen.

Khodarenok doesn’t dwell on these points, and his general themes are of greater interest.

He quotes former deputy chief of the Navy Main Staff, Vice-Admiral Vladimir Pepelyayev:

“Serial production is generally a very big deal.  It has big pluses in the deployment plan, lowering costs of subsequent ships in the series compared with the lead unit, and simplification of training personnel for new ships.”

According to Khodarenok, Pepelyayev feels there is light at the end of the tunnel for the navy, but it’s dim and flickering because navy ship construction “fully reflects the realities and condition of the Russian shipbuilding industry,” and not just shipbuilding.

Pepelyayev continues:

“A ship is a visible and material reflection of practically all the technological capabilities of the state.  In a word, we build that which we can build.”

Khodarenok adds:

“Specialists believe that another fifteen years are still needed to recover after many types of restructuring, the 1990s, and the hiatus in fleet construction at the beginning of the 2000s.”

Turning to the sore point of gas turbine engines, Khodarenok writes that Rybinsk may well be able to make them for the Russian Navy by 2017-2018, but someone still needs to replace the reduction gears also once made for navy ships in Ukraine.  This is a more difficult task.  The Zvezda plant in St. Petersburg has gotten the job.

Ex-deputy CINC of the Navy for Armaments Vice-Admiral Nikolay Borisov says:

“This is a highly complex task — highly complex and modern equipment, particularly gear cutters, are needed to work with high-alloy steel.  Whether this task will be completed at Zvezda is an open question.  Many specialists doubt the enterprise’s capability to handle the task in the established timeframe.”

Khodarenok turns to the proposed nuclear-powered destroyer Lider (proyekt 23560), concluding there isn’t agreement among specialists whether the fleet even needs this ship.  An unnamed highly-placed source tells him the fleet needs 20 frigates more than 15 frigates and five Lider destroyers.  The source continues:

“Lider will be a ship of the second half of the 21st century.  However, there are no new weapons which correspond to the second half of the 21st century for it.  There’s just no sense in building a hull and power plant.”

Retired Rear-Admiral Yuriy Gorev, who was involved in ship acquisition, tells Khodarenok that the navy should continue building corvettes and frigates while continuing development of Lider.  But the new destroyer shouldn’t be a goal of the fleet’s near-term plans.

Next, the always-pregnant question of aircraft carriers…

An unnamed Navy Main Staff source says:

“Today there are no conditions for the construction of a ship of such a design.  No buildingway, no drydock.  There is simply nowhere to build an aircraft carrier.”

“The construction of such ships should be realized for concrete tasks, but today the Russian Navy simply doesn’t have such missions.”

“And with further development of aviation, aircraft carriers could even die out altogether as a class.”

Recall that MOD armaments tsar Yuriy Borisov said an aircraft carrier contract won’t be signed until late 2025, and there are three existing “not bad” designs for it.

Former chief of the naval “direction” (department, i.e. not a major bureaucratic entity) of the General Staff’s Main Operations Directorate (GOU), Rear-Admiral Arkadiy Syroyezhko believes there are no insurmountable obstacles to the construction of a nuclear-powered strike carrier in Russia.  He thinks Sevmash could handle the job since it was originally conceived as a yard for major surface combatants and later concentrated on submarines.

But Syroyezhko admits, without preparation to support carriers, Russia could end up with extremely expensive, sporadically constructed carriers.  Today, he concludes, Russia is able to fulfill combat missions typically placed on carriers by other means.

Changing gears, Khodarenok covers the state of play in the Russian Navy’s Main Staff.

According to him, specialists unanimously report that the operational-strategic component has disappeared from the Main Staff’s work.  It no longer plans for the fleet’s employment — for strategic operations in oceanic theaters of military operations.  The naval planning job has gone to Russia’s operational-strategic commands (military districts) and the four geographic fleets (as the operational-strategic large formations of those MDs).  

A Main Staff source tells Khodarenok that the MD commanders have come up with disparate rules for directing the fleets subordinate to them.  The source says the disappearance of a naval component in GOU planning began with the downgrading of the GOU’s naval directorate to a “direction,” and with the concomitant reduction in the quality of its naval staff officers.

Khodarenok writes there is confusion today over what ships to build, how many, what tactical-technical capabilities they should have, and what missions they should perform. The Navy CINC has “no rights” but many demands made of him in this regard.

Russian Navy CINC Admiral Vladimir Korolev

Russian Navy CINC Admiral Vladimir Korolev

The Navy CINC’s responsibilities for procurement intersect with those of the MOD’s state defense order (GOZ) support department.  It’s unclear exactly where their respective authorities begin and end.  The Main Staff source says all sorts of nonsense result from the confusion.

Still, the CINC has to answer for almost everything that happens in the fleet, according to Khodarenok.

The Navy Main Command’s (Glavkomat’s) move to St. Petersburg was a big mistake, but a return to Moscow would be equally disruptive.  A Glavkomat source tells Khodarenok, as long as the leadership sends people to Vladivostok or elsewhere twice a week over the littlest issues, it really doesn’t matter where the headquarters is.

Khodarenok sums everything this way:

“In other words, there are more than a few problems in the fleet today.  It undoubtedly won’t do to put their resolution on the back burner.  They won’t disappear somewhere from there.”

JO Shortage

Russia’s Eastern Military District (MD) is apparently experiencing a junior officer shortage.

The district headquarters in Khabarovsk announced this week that 227 of its contractees are set to receive lieutenant’s shoulderboards in the near future.

Eastern MD Contractees in Basic Training

Eastern MD Contractees in Basic Training

The Russian MOD site indicated that these contractees already have a higher education, and 39 have a military specialization.  Apparently, they will start serving immediately as junior officers.  The other 188 have been enrolled in military training establishments (VUZy) for an unspecified period.

Another 85 will soon be sent off for similar training.  The MD is already selecting well-prepared contract servicemen who have a higher education.

The district also intends to send representatives from its personnel directorate and military commissariats to western and central Russia to recruit individuals to serve as officers in the Eastern MD.

The MOD site reminded readers that, in May, MD commander General-Colonel Sergey Surovikin said the district needed to find officers “who were forced to resign during the optimization of the structure and size of the Russian Army” as well as contract servicemen with higher education who want to be officers.

The “optimization” of course was that of former defense minister Anatoliy Serdyukov.  His effort to cut bloat in the officer ranks began in earnest in 2009. While focused mainly on senior officers, Serdyukov’s knife also slashed lieutenants and captains at the base of the TO&E pyramid.  At the time, commentators reported complaints from units saying they had trouble keeping order and fulfilling routine requirements due to a lack of platoon and company commanders.

In some sense, the news about a JO shortage is surprising given that each spring the MOD gushes about young lieutenants graduating from VUZy and taking up their responsibilities in the nation’s far-flung armed forces.  It also brags about stiff competition to enter those VUZy every year. 

In another, it isn’t surprising.  Serving in the military in Russia’s harsh and underpopulated Far East is no more popular than living there for other reasons.  It’s a hardship post with little attraction for 22-year-old.

Lastly, each contractee taken to become an officer means another enlisted soldier has to be signed up for the Eastern MD.  And that’s a more difficult sell.  One is left wondering if the recruitment of contract servicemen for the Far East isn’t going so well either.

Sufficient numbers of young Russian men are just getting harder to find.  It’s hard to get them to go where the military thinks they’re needed.  Meanwhile, Moscow is trying to expand its force structure. And the very bottom of Russia’s demographic hole won’t be reached until 2018. 

Tough Times at UVZ

Maybe Russia’s economy is muddling through its downturn.  But for some major enterprises, the situation seems somewhat worse.  Tank and railcar maker Uralvagonzavod (UVZ) is a case in point.

Uralvagonzavod

Uralvagonzavod

In early August, RBK reported that Gazprombank is prepared to refinance UVZ’s 200-billion-ruble ($3 billion) debt.  The Russian government may kick in nearly 15 billion rubles ($230 million) of loan guarantees.

The 100-percent state-owned UVZ would use state guarantees to refinance part (most, all?) of 21 billion rubles ($325 million) in bank credits due this year.  Alfa-Bank, Sberbank, Gazprombank, and Svyaz-Bank are its primary creditors.

In June, Alfa-Bank went to court to have the tank producer declared bankrupt over 9 billion ($140 million) of a 16-billion-ruble debt.  The case was to be heard on 8 August, but UVZ needed to stop the bankruptcy case – by reaching agreement with Alfa-Bank – to receive the state loan guarantees.  With the guarantees, Gazprombank decided to refinance UVZ’s debts on 9 June.

Now Alfa-Bank denies it ever filed a bankruptcy suit against UVZ.  But a Minpromtorg official told RBK that the bank and tank maker reached “certain agreements,” and the former will soon lift its case against the latter.

According to RBK, UVZ reported record losses in 2015, mainly due to reduced sales of railcars and higher interest rates.  The corporation indicated that 58 percent of earnings came from military sales and 15 percent from civilian sales, with the balance from freight handling operations.

UVZ Deputy General Director Aleksey Zharich said the state cut the advance payment for its GOZ deliveries, forcing the company to turn to the banks.  It also needed to import equipment which doubled in price thanks to the weak ruble.

Overall, the Minpromtorg official said, “Indicators like these [for UVZ] haven’t been seen since the 1990s, the economic crisis has brought a fall in the volume of rail transport.”  But UVZ is hopeful for improved results in 2016.

The New York Times covered UVZ’s situation in February when it reported that the plant’s railcar workers had their wages cut by one-third while its military side was still “humming” on full pay.  One employee said then that workers on the civilian side had been showing up, getting paid, but actually doing little work for a year.  In June, RBK reported that UVZ furloughed 3,000 workers from railcar production.

What does UVZ’s situation mean for Russian defense?

In the short run, it means the T-14 Armata tank is likely to come out of UVZ slowly.  UVZ sent 20 tanks to the army for “troop testing” in the spring.  General Director Oleg Siyenko said in June that UVZ will deliver 100 tanks to the MOD in 2017 and 2018.  That’s a far cry from the 2,300 Armata tanks expected under GPV 2011-2020.

T-14 Armata

T-14 Armata

Meanwhile, Siyenko has been asking the Russian government for much larger loan guarantees – 60 billion rubles ($940 million) – to repay bank credits coming due in 2017 and 2018, according to RBK.  Some portion of this may be needed to retool the lines for serial Armata production.

It’s entirely possible UVZ might require a full-scale Kremlin-ordered bailout to be in position to produce Armata tanks by the hundreds.