Tough Conversion for Russia's Armsmakers
With weapons orders from the Russian government collapsing and aid failing to materialize, Russian armsmakers are seeking Western investment to convert to civilian production
SOVIET leader Mikhail Gorbachev appeared before the United Nations in 1988 to announce a bold program to cut the Soviet Army by half a million men and to convert the massive defense complex to civilian production.Skip to next paragraph
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Four years later, with the Soviet Union and Mr. Gorbachev no longer on the scene, the conversion program remains little more than paper. Yuri Glyibin, who headed the group that drafted the plan, admits that the plan, which called for some 500 military factories to be converted, has effectively been shelved. The veteran defense industry bureaucrat is back at work on another plan, this time for Russia, as the head of the Ministry of Industry's department on defense conversion.
"Conversion is going on but it is not a planned process," says Mikhail Malei, conversion adviser to Russian President Boris Yeltsin. He complains that little financing has come through for conversion, without which the plans are useless.
"The Gorbachev plan was brilliant but Mr. Gorbachev forgot to indicate sources of financing for conversion." He estimates a serious conversion plan needs $10 billion a year for 15 years. "Now we are not even trying to work out another complex plan for conversion for which Russia doesn't have the financing."
Instead of a careful effort to shift the military-industrial complex away from arms production, Russia has plunged into what one defense industry official decries as "spontaneous conversion." Government orders drop
This is the result of a plunge in defense spending by a Russian government trying to control its massive budget deficit. According to Russian officials, orders for military hardware this year were down about 60 percent, more than 10 times the drop in the United States. The decline in research spending is even greater.Mr. Malei, an energetic former defense industry executive, cites cases where orders dropped to zero. The Balakirevo machine plant near Moscow which manufactured mines and self-guided artille ry shells for tanks and cannons, saw its orders drop by 86 percent, he says. Out of four shipyards making nuclear-powered submarines, only one is still working.
Russian officials decry the collapse in orders, particularly its impact on the Russian economy. Malei estimates that the defense industry directly employs about 4 million workers, with an additional 12 million employed servicing the industry. According to most estimates, defense spending during the Soviet era consumed between 15-20 percent of the gross national product.
In addition, defense industry is concentrated in certain areas such as the Urals, Moscow, and St. Petersburg. The region of Udmurt, west of the Urals, is most dependent on the defense industry with 86 percent of the economy defense-related, Malei says.
"The fate of these people depends entirely on ... these plants," Malei says. "No government - Yeltsin or anyone else - can allow the death of those plants. That would mean creating volcanoes on the territory of the military-industrial complex; social outbursts near huge concentrations of weapons."
Officials also express concern that an uncontrolled breakup of the defense complex would mean an irreplaceable loss of the greatest concentration of highly skilled manpower in the Russian economy. "We think it is necessary to maintain the scientific-technical potential, to preserve it in the defense industry," says Industry Ministry official Glyibin.
"We must stop the destructive explosion of our defense industry," says Alexander Vladislavlev, deputy head of the influential Union of Industrialists and Entreprenuers. "It is the treasure of our economy, the best engineers, the best scientists, the best technology, the best infrastructure."
A draft policy prepared last summer calls for preserving the high technology potential in the defense industry there. "The majority of enterprises found themselves unprepared for the radical reduction of subsidies for hardware purchases," the study says. "An internal brain drain from the defense complex can be perceived."