Category Archives: Defense Industry

Thinking Twice

Is the Russian MOD having second thoughts about modernizing Kirov-class CGN Petr Velikiy?  Or its sole aircraft carrier Admiral Kuznetsov?  What about Kirov-class CGN Admiral Nakhimov already in the modernization process at Sevmash?

Kirov-class CGN Petr Velikiy

Kirov-class CGN Petr Velikiy

OSK President Aleksey Rakhmanov himself raised the issue in a recent interview, according to a recap by Militaryparitet.com.

Militaryparitet cites Vpk-news.ru (currently launching a Trojan called Web Attack: Venom Activity 3 blocked by Norton thankfully).

Vpk-news referred to TASS, which itself indicated Rakhmanov’s statements came on Ekho Moskvy.  In any event, the original transcript of his remarks has eluded your author.

OSK President Aleksey Rakhmanov

OSK President Aleksey Rakhmanov

As Militaryparitet puts it, the efficacy of repairing old, large surface ships like Petr Velikiy and Kuznetsov isn’t obvious.

The web resource quotes Rakhmanov:

“For us the existing approach toward the repair of large-tonnage ships — Admiral Kuznetsov, Petr Velikiy — isn’t quite straightforward and optimal for one simple reason — the scale of expenditures for the repair of ships which are already 30-35 years old approaches the cost of building a new ship, and their service lives are much shorter than that of a newly constructed ship.”

And, according to Rakhmanov, this is “being openly discussed with the MOD.”

He continues:

“And is it necessary to do this, and if it is, then under what conditions?  It’s a question of the general life cycle concept — if a ship’s service life is 30 years, then is it necessary to extend its life?  For us the question of repairing particularly large, technically complex ships isn’t obvious.  Therefore, before talking about where to do this, we need to ask why we are doing it.”

“There are exceptions, but even one-of-a-kind ships, for example, Kuznetsov, have limits to their lives.  There is metal and equipment fatigue.”

According to Vpk-news.ru, Rakhmanov feels contemporary approaches toward shipbuilding should take into account “economically justifiable” repairs and use of each ship and vessel.

Of course, OSK and its enterprises make money off repairs, modernization, and construction, but the conglomerate makes more off — and is therefore more interested in — building new ships.  For its part, MOD wonders if it can fund expensive construction projects, and whether OSK and Russia’s shipbuilding industry can actually deliver the new ships.

It’s interesting that there isn’t the same level of angst when it comes to modernizing older nuclear-powered submarines and not as much — although clearly a certain amount — in the case of building new ones. The real worry sets in when major surface forces are considered.

But it all comes down to this:  building and maintaining a navy is an expensive proposition.

Not OK in the OPK

OAO Radiopribor

OAO Radiopribor

Recent news reports indicate all is not well in Russia’s defense-industrial complex (OPK).  This despite several years of budgetary largesse in the form of an ever-increasing state defense order (GOZ).

Exhibit No. 1

Defense plant OAO Radiopribor in Vladivostok is officially bankrupt, but some remnant will be preserved in an 11th hour deal turning the company into a subsidiary of OAO Dubna Machinebuilding Plant (DMZ) in Moscow Oblast. How effectively DMZ can operate a money-losing business 6,500 km to the east is anyone’s guess.

Local press indicates that labor authorities in Primorskiy Kray are already working to place or retrain some Radiopribor employees (i.e. not all of them have a future at the old plant).

The industrial holding company AFK Sistema and its electronics subsidiary OAO RTI own DMZ.  DMZ makes components for military aircraft including external fuel tanks.

Radiopribor’s 1,500 workers hadn’t been paid in eight months, and the enterprise’s wage arrears amounted to 224 million rubles along with general debt of 3.5 billion rubles.

The figures on the salaries are interesting — the average employee may have been making a little more than 18,000 rubles per month. That was probably about two-thirds of average pay in Vladivostok last year.

Exhibit No. 2

Russia’s sole manufacturer of infantry fighting vehicles — BMPs, Kurganmashzavod (KMZ) in the Urals recently defeated a Moscow-based creditor’s attempt to have it declared bankrupt for failing to pay on 41 million rubles of arrears on its leasing contracts.

It defeated the effort because, as a subsidiary of Kontsern Tractor Plants, KMZ is a “strategically important enterprise” and can’t be bankrupt according to a longstanding presidential decree.

KMZ apparently also owes its gas supplier.

It has a state order for 200 BMPs in 2015-17 which should help it some.  It’s been a big supplier of civilian heavy equipment in the past, but that must not be going too well either.

Exhibit No. 3

Press from late March described OAO United Instrument-building Corporation’s effort to come up with an “anti-crisis” plan for its enterprises in Tambov Oblast southeast of Moscow.  OAO OPK is itself part of Rostekh.

OAO OPK’s Revtrud factory has 1 billion rubles worth of debt.  Revtrud’s wage and tax arrears come to about 150 million rubles.  It makes communications and electronic warfare systems.

OAO OPK says it plans to amalgamate affiliates Revtrud, Oktyabr, Tambovapparat, and Efir into a single production complex.  It will spend 4 billion rubles to recapitalize and reequip these enterprises.  Tambovapparat doesn’t seem to be doing too well either. Efir is doing the best; the MOD is buying its Borisoglebsk-2 jamming system.

Exhibit No. 4

On 22 March, TASS quoted Jan Novikov, general director of S-400 maker Almaz-Antey, who indicated he was considering a 30 percent cut in his workforce for economic reasons.  A week later, he walked this back saying savings might come through other means, according to a TASS report of an interview he gave Rossiyskaya gazeta.  Novikov stated that cost-cutting is needed to pay the bills for financing and starting up production at new plants in Nizhegorod and Kirov.  This from what is arguably Russia’s best-performing arms producer.

On top of these reports from various corners of the Russian OPK, we have interesting news from important characters in Moscow.  They seem to agree that the GOZ is turning downward, and taking the fortunes of these companies with it.

On 5 March, Deputy Defense Minister Tatyana Shevtsova, who oversees the military’s budget, said its financing would be trimmed by 5 percent this year, but claimed weapons procurement would be untouched.

A week later, Rostekh Chief Sergey Chemezov told The Wall Street Journal that the GOZ could be slashed by 10 percent in 2016.

On 26 March, Deputy Prime Minister Dmitriy Rogozin — tsar of the arms sector — told TASS that Russia needs “patriots of industry” ready to do everything necessary to renew not just the armed forces but industry too.  He continued:

“Then we won’t depend on the oil and gas needle, because we’ll rely on industry.”

President Putin’s administration chief Sergey Ivanov traveled to Tula on 29 March to preach about a time when the GOZ will decline and defense enterprises will have to diversify.

On 31 March, the chairman of the Federation Council’s Defense and Security Committee Viktor Ozerov admitted there could be problems financing military procurement in 2017, but insisted the Defense Ministry would not abandon its goal of 70 percent modern weapons and equipment by 2020.

At the outset of the armaments program in 2011, more than one or two wise observers said Russia’s industrial obsolescence and its reliance on hydrocarbon rents needed fixing before making heavy investments in defense industry.  Why?  Defense industrial investment has a smaller multiplier effect in the overall economy.  The time and money to make these changes has been wasted, and now is an inauspicious time for them.

What’s It Cost? (Part III)

48N6E2

48N6E2

We might never be done with this topic, and that’s OK.

On 17 March, TASS reported that Russia will sell China two “regimental sets” of S-400 Triumf surface-to-air missiles in a deal reportedly worth $3 billion.

The first will be delivered in December 2017-January 2018 and the second in May-June 2019, according to the news agency’s “military-diplomatic source.”

Moscow and Beijing signed the S-400 contract in September 2014.

Each “set” has two battalions of four S-400 launchers.  Or a total of 16 launch vehicles.  Or 64 missiles and an unreported number of reloads.

Recall that previous reports claimed China was after no less than six S-400 battalions for that same $3 billion price.

The September 2014 deal includes training for Chinese personnel beginning in the last quarter of 2017, according to TASS.

Its source also stated that the first “regiment” will have the same missiles as the S-300PMU-2 SAM systems China already has.  The 48N6E2 with its 200-km range.

The second will have missiles “with improved characteristics.”  Presumably, the newer 400-km 40N6E.

But it’s not clear that the 40N6 (or export-version 40N6E) missile is fully out of testing, if some press reporting is accurate.

China is, of course, the first foreign customer, but India will apparently be the second.  According to RIA Novosti, India is negotiating for five S-400 battalions for a reported $5.8 billion.

However, it seems unlikely New Delhi would pay that kind of premium for a fifth battalion, even with all 40N6E missiles.

But We Make Rockets

Yes, Russia is making rockets now.

Vladimir Putin came to power on the eve of the 21st century promising (among other things) to remake Russian military power.  But progress was slow.  The economy struggled to emerge from the default and devaluation of 1998.  A poor, unready army found itself mired for several years in the Second Chechen War.

Not until after an uneven military performance in the August 2008 five-day war with Georgia — and not until after the 2009 economic crisis, perhaps in 2012 or 2013 — did the funding necessary for significant improvements in combat readiness and larger procurement of weapons and equipment reach the Russian Armed Forces.

Then came war in Crimea and eastern Ukraine and Syria.  Blowback from Syria could make Central Asia or the North Caucasus Russia’s next front. But questions about recent Kremlin bellicosity already bear close to home — on Russia’s domestic political and economic circumstances.

Consider a Gazeta.ru editorial from October 26.

“But we make rockets”

“Can the army and navy replace everything else for citizens”

RS-24 Yars ICBMs on Parade (photo: AP / Ivan Sekretarev)

RS-24 Yars ICBMs on Parade (photo: AP / Ivan Sekretarev)

“Often it’s easier for people to accept growing financial hopelessness to the sound of bold military marches.  Not for the first time in Russian history the army is beginning to replace the nation’s economy, life, general human values, and becoming the new old national idea and practically the only effective state institution.”

“Not everywhere in Russian industry are orders shrinking and demand falling.  There is production that is very much in demand.  In the ‘Tactical Missile Weapons’ corporation, for example, they’ve gone to three shifts of missile production for the Syrian front, a source in the defense-industrial complex has told the publication ‘Kommersant-Vlast.’  Against this backdrop, an article appeared in The Independent newspaper about how in Russia, after the events in Crimea and Syria, the army is again becoming the ‘departure point of Russian ideology’ — that very national idea for which they searched so long and unsuccessfully in post-Perestroika Russia and here now, finally, have found.”

“‘Russia has only two reliable allies — the army and navy.’  These famous words of Emperor Aleksandr III (who, incidentally, went down in history we would say now under the nickname Peacemaker) have once again in our history acquired a literal meaning. Other reliable allies of whom Russia was evidently sure over the last year-and-a-half or two years clearly no longer remain with us.”

“In a time of economic crisis, the temptation among Russian authorities to make the army one of the leading state institutions grows even greater.  The remaining institutions are emasculated or work as badly as ever.  In the end, to do this is sometimes simply useless:  the impoverished voter will say — why are your institutions here, is my life improving?  The expenditures are great, but the effect will be, probably, negative.”

“How much better the army is:  there is discipline, and pay, and achievements, and a plan of development.  The share of military expenditures in the budget is growing, but a cut in its absolute size has affected it to a lesser degree than civilian sectors like education and health care.”

“All hope is now on defense — as in ‘peace time’ we placed hope on oil and gas.”

“The army again is a lovely testing ground for demonstrating one more innovation — import substitution.  Not all Russians can understand why it’s necessary to burn up high quality foreign goods. But hardly anyone would object that Russia didn’t buy any aircraft, tanks or missiles abroad.  The president at a session of the Commission on Military-Technical Cooperation Issues announced that thanks to import substitution the country’s defense industrial enterprises are ‘becoming more independent of foreign component supplies.’”

“In general, we found by experience that we didn’t quite succeed in finding any other nation-binding idea over 25 years of not very consistent attempts to draw close to the Western world.  The simple national idea ‘state for the sake of man’ didn’t take root, including, alas, because man somehow didn’t value it very much; attempts to raise free citizens and form a civic nation, bound by common human values, failed.  There were neither citizens, nor values…”

“Being that there wasn’t demand for a free citizen not only above, but even below.  It is precisely therefore that we don’t have normal trade unions, strong nongovernmental organizations, and independent civil initiatives.  It’s not just the state that doesn’t need ‘all this.’  It’s society too.”

“Therefore one year before State Duma elections there isn’t even opposition in political parties to the openly military-oriented budget.”

“Distinct from this is that America which we love to accuse of aggressiveness, but in which military expenditures and their share in the budget are steadily falling in recent years.  In fact, legislative control over the military budget is one of the main forms of civilian society’s control over the army in the USA.  Though in America there were times when the military tried to decide both for society and for politicians.  Considerable force and time was required to put the military under control, but the States succeeded in this.”

“In Russia the easiest and quickest means of unifying the nation turned out to be the bloodless victory in Crimea and the somewhat bloody events in the Donbass.  The idea of abstract imperial power, and the image of ‘the country rising from its knees’ were substantiated, as the man in the street perceived it, and they were near and comprehensible to him.  Like, we lead a miserable life ourselves (when was it otherwise?), but we are a ‘great power’ again.”

“Polite green people, capable quickly without noise and dust of ‘deciding questions,’ create in the multimillion-person army in front of the television an illusion of their own significance.”

“It’s not only the missile corporation that’s working ‘in three shifts’ now, but also the factory of national pride, based exclusively on military victories.”

“Firstly, we are proud of past victories, in which, besides the live heroes of that war, there is no one alive today who isn’t, in essence, a participant:  St. George’s banners and inscriptions on foreign-made cars ‘To Berlin!,’ ‘Thanks granddad for Victory,’ ‘Descendant of a Victor’ flash at every step.  Secondly, they actively urge us to pride in new military victories.”

“Meanwhile the war in distant Syria works for such military-patriotic PR even better than the war in Ukraine.  And further from the borders, pictures of Russian aircraft bombing terrorists a world away inspire the people more than the sullen ‘militiamen’ of which the masses have had enough already.”

“What’s fashionable in war and militancy also enters official political discourse.  Defense Minister Sergey Shoygu has firmly become the second most popular politician and most successful top-manager in the country.  And the president not without some internal pride calls himself the ‘dove with iron wings,’ telling foreign guests directly at a Valday Club session that he was still in the Leningrad courtyard when he learned to ‘strike first’ if a fight is inevitable.”

“And it’s still necessary to remember:  even a war far from the borders, if it’s protracted, requires not  only military, but also great financial resources.”

“So if the economic collapse in Russia continues, pride in the army still cannot fully make up for people the absence of conditions for a normal life.  But for now — in a situation where the authorities live by tactics and not by strategy, — the army and military mobilization of the nation really look like a national idea, and a panacea for the crisis, and a means of supporting a high rating.”

“Polite green people are already capable of becoming not simply a symbol of the Crimean operation, but a symbol of an entire epoch. But they usually don’t solve all the accumulated social, economic, and human problems of a large country.”

More S-400s

On 2 September, TASS reported Almaz-Antey delivered its ninth “regimental set” of S-400 / Triumf SAMs “ahead of schedule.”  The agency cited General Director Jan Novikov who claimed his company will send two more “sets” to the military before next year.  They will be numbers ten and eleven.

But those late year deliveries have a way of sliding to the right.

S-400s on Display (photo: ITAR-TASS / Sergey Bobylev)

S-400s on Display (photo: ITAR-TASS / Sergey Bobylev)

Novikov said the most recent “set” wasn’t due until November under the delivery plan.  He indicated the S-400s and associated equipment were sent to the “test range” — Kapustin Yar — where all “delivery-handover tests” were conducted successfully.

Writing for RG, Yuriy Gavrilov reports that, to meet the demand for the S-400 and S-500, Almaz-Antey has a robotic microelectronics production line for SAMs in Omsk.  This week the firm is also supposed to open a robotic lathe and milling line at the same facility.  Novikov reportedly said it will increase productivity in priority areas by a factor of 12.

Gavrilov writes that the new “set” is bound for Moscow.  It will make a fifth red pin in a blob of four currently around the capital.  Twelve “sets” are supposed to defend the skies of the “central administrative and industrial region” by 2020.

Russia's S-400 Deployments

Russia’s S-400 Deployments

That count of nine S-400 “regimental sets” is intriguing.  

By last year’s information, this should be ten, with the delivery to Kamchatka being the ninth.  But apparently not.  So which of the nine red pins is wrong (if any)?  It might be Novocherkassk, but some recent sources place this “regimental set” at Novorossiysk. Which begs its own question:  will the Defense Ministry shift them to Sevastopol eventually?

Also, there’s no indication yet of where “sets” ten and eleven (or eleven and twelve?) could go.

How do the overall numbers look?  If the fifth “set” for Moscow is actually the ninth overall, we’d expect a total of 19 regimental sets (based on General-Major Demin’s September 2014 statement that 12 more would be deployed).  If it’s actually the tenth, then a total of 20.

Both possibilities get close to the 56 S-400 battalions projected under the GPV. If all “sets” after Kamchatka have three battalions, they might get between 50 and 52 battalions.

For Nakhimov’s Price

Admiral Nakhimov? (photo: Topwar.ru)

Admiral Nakhimov? (photo: Topwar.ru)

The photo above appears to be Kirov-class CGN Admiral Nakhimov (ex-Kalinin) having its superstructure dismantled at Sevmash.  Topwar.ru didn’t indicate how it came by the picture.

Blogger Aleksandr Shishkin recently offered his rationale (and that of other navy advocates) for repairing and modernizing Admiral Nakhimov.

As a shipbuilder, Shishkin says the “enemies of these monster-ships” think that the extraordinary expenditures required to renovate Nakhimov could be redirected to better use for the Russian military.  But he contends that Russia’s nuclear-powered guided missile cruisers have a disproportionate military-political effect when compared to other ways of spending this part of the MOD budget.

First, he makes a military firepower argument.

He argues that Nakhimov provides more “bang for the ruble” measured against new surface combatant construction.  He offers as an example the proyekt 20380 Steregushchiy-class corvettes of which five, with a total of 100 missiles, can be bought for Nakhimov’s price.  Two and one-half proyekt 22350 Gorshkov-class frigates can be bought for Nakhimov’s price.  Three Gorshkovs have 144 missiles. Or, for the cost of Nakhimov, one future proyekt 23560 (Lider) destroyer with approximately 136 launchers could be bought.

Shishkin projects 304 missiles on the renovated  Nakhimov — 224 SAMs and 80 cruise missiles.

That is, according to him, “twice-three times the quantity of similar and more powerful weaponry for the same money plus the possibility of using [the ship] anywhere in the world.”

Second, Shishkin argues for Nakhimov’s political effect.  Its return will keep Russia in a “firm second place” in the world navy “table of ranks” which carries a psychological impact “no one should underrate.”  Showing the flag promotes Russia as an alternative to the U.S. as the world’s lone superpower, according to him.

Nakhimov or no Nakhimov, many would argue China is the world’s second-ranked navy.

Third, the blogger maintains that reconstructing Nakhimov raises Russia’s “sense of self-worth” by showing that it can build [or rebuild] really large ships, not just patrol boats.

Fourth, he asserts that Nakhimov will be ready (2018-2019) earlier than new corvettes, frigates, and destroyers that won’t be delivered until the early 2020s.

Fifth, Shishkin says Sevmash’s work on a “first-rank” nuclear-powered ship like Nakhimov will prepare it to build aircraft carriers or to compete with Northern Wharf for destroyer contracts.

Shishkin notes that the renovation of Nakhimov costs 50 billion rubles ($1 billion), or 30 billion ($600 million) for the ship and 20 billion ($400 million) for new armaments and systems.  If this is the case, that makes Steregushchiys about $200 million, Gorshkovs about $400 million, and Liders about $1 billion per unit.

So none of this comes cheaply.

It’d be interesting to read an argument for Admiral Nakhimov addressing how the ship will figure in future Russian fleet operations and larger military strategy. How will it operate in defense of Moscow’s naval strategic nuclear forces, or in more likely contingencies short of this?

Admiral Lazarev (photo: Topwar.ru)

Admiral Lazarev (photo: Topwar.ru)

Admiral Ushakov and Admiral Lazarev remain in reserve in different states of decay and are very unlikely candidates for modernization.  Petr Velikiy will, at some future point, probably undergo the work currently being done to Nakhimov.

Impatient Putin

Once flagship of a robust Russian military press, NVO isn’t what it was.  What is after 15 years of Putin?  But NVO still has moments.  Its 22 May editorial is one.

Putin at 15 May Meeting

Putin at 15 May Meeting

NVO writes that recent Roskosmos failures overshadowed President Vladimir Putin’s mid-May meetings with Defense Ministry and defense industry leaders on the GOZ and GPV.  Still the 9 May Victory Day parade on Red Square showed much has been done to rearm Russia.  But much doesn’t mean every problem has been solved.  Rather, NVO contends, problems in the realization of GPV 2011-2020 and GPV 2016-2025 are “snowballing.”

The paper offers cases in point:

  • The fifth generation T-50 (PAK FA) fighter didn’t fly over Red Square even though it’s supposed to be in serial production already. The impatient Putin gave Russian designers just five years to field the T-50 while the Americans took 14 years from first flight to first delivery with the F-22 and 12 with the F-35.
  • Only a short time — two years — has been allowed for serial production of the new Armata tank.  The Soviet T-64 took 10-15 years from the start of testing until all development work was finished.  The call for Armata tanks and other armored vehicles on the same base in 2015 is just a “wish.”  Serial production won’t begin earlier than 2018.
  • There are delays in other key military programs — S-350 Vityaz, S-500 Triumfator-M, and missile defense systems (no specifics provided).

Then NVO reels off a list of weapons the Russian military needs that, the editorial asserts, aren’t exactly rolling off assembly lines:

  • Transport aircraft;
  • UAVs;
  • Air-launched missiles;
  • Air ordnance;
  • Artillery and fire control systems;
  • Space systems.

Regarding the final bullet, the paper notes that “even a huge investment of budget resources still won’t save Roskosmos from its systemic crisis.”

NVO concludes:

“On the whole, fulfillment of GPV-2020 and GPV-2025 has been summoned to restore Russia to military parity with NATO, if only the Russian economy can withstand the strain.  If not, the history of the USSR may be repeated.”

Some will quibble about particular systems NVO claims Moscow will have trouble fielding, but the general point remains:  far from everything needed by a military neglected for 20 years is being successfully procured.  There are more than a few independent Russian economists who say Moscow’s current high level of defense spending is damaging an economy already challenged by lower oil prices and Western sanctions.