chapter  8
18 Pages

A work in regress? Russian defense industry and the unending crisis of the Russian state: Stephen Blank


Since 1990 Russia has repeatedly sought unsuccessfully to reform its defense industry. The latest such attempt in 2007 created an industrial behemoth that emerged out of Russia’s chief arms seller, Rosoboroneksport (ROE), that resembled the Soviet Ministry of Defense Industry (Blank 2007, 2008; Pronina 2006; Vardul and Simonov 2006). ROE then evolved into Rostekhnologiia under the direction of President Putin’s former crony from the KGB, Sergei Chemezov (the Soviet security service, the Committee for State Security). Like other state corporations, Rostekhnologiia came under attack during the economic crisis that began in 2008 due to their inherent inefficiency and drain on the state economy through the mechanism of endless subsidies. Nevertheless, Rostekhnologiia weathered this attack and possibly grew stronger (Kalinina and Kozyulin 2010: 35-7). Indeed, an April 2009 edict let it become a stockholder in open-type joint-stock companies whose shares were transferred to it, thus excluding the legislative requirement on submitting public offers to other shareholders (RIA Novosti 2009a). Those calls for reform are well-founded, for these state corporations are essentially mechanisms for privatization of state property among Putin’s “Boyar Duma” and for money laundering, i.e., criminalization of the economy.