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Government acknowledges military-industrial complex was plundered

May 29, 2012, 16:21 UTC+3 Alexandrova Lyudmila

MOSCOW, May 29 (Itar-Tass) —— The Russian government has for the first time acknowledged that the country’s defense-industrial complex has been plainly plundered. Law enforcement officials will soon inspect Russia’s largest aircraft-building companies – the Yakovlev Design Bureau and the Tupolev holding company. Their task will be to find out whether large areas of land, originally belonging to them, were auctioned legally.

Deputy Prime Minister Dmitry Rogozin issued an instruction to probe into the legality of contracts to sell plots of land and real estate after a meeting with the acting chief of the state property management agency Rosimushchestvo Gleb Nikitin. Rogozin said the Russian defense-industrial complex has been “cannibalized.”

The possibility of a revision of the results of privatization has alarmed business people. Analysts keep wondering: what is the reason for digging up the past at a time when more crucial tasks are on the agenda.

Gleb Nikitin reviewed the results of inspections of two largest enterprises in the aircraft-building industry. According to Rosimushchestvo, in Moscow alone the Yakovlev Design Bureau had been granted more than 80,000 square meters of properties. Now virtually nothing is left of that amount – all had been sold up for next to nothing before 2006.

The Tupolev affair is far more interesting. The state had handed over to the company more than 250 square meters of real estate, of which amount only half is left. The land went to outside firms for next to nothing. All of these minor firms belonged to friends and relatives of the then chiefs of the holding company. Now there are supermarkets and apartment buildings.

Rogozin has promised to punish those responsible for selling up the real estate of aircraft-building companies, if the rumors prove true. “We shall look into the claims together with Rosimushchestvo, because now we are confronted with the need for implementing the state program for armaments, but now we see that in the 1990s-2000s the vast potential that had been built up in our great country within the military-industrial complex has been plundered,” he said. “They lost all fear and respect for the law.”

Nikitin’s report was one of the first in a series of memorandums he is going to submit to Rogozin during the year in connection with the investigation of the way the largest defense-industrial complex enterprises were privatized. Earlier, Rogozin had already addressed thievish officials entrenched in Russia’s defense-industrial complex once. It is necessary to track down the real private owners of the military-industrial complex, Rogozin told a conference devoted to defense contract problems in January.

Rogozin ordered drafting a government resolution stipulating the managers of defense-industrial complex enterprises should declare their incomes.

The daily Moskovsky Komsomolets, which has more than once wrote about how the Russian defense-industrial complex lost its territories and production facilities, says examples of this are many. For instance in an article on March 16, 2012 the daily said that the assembly shop of the chief design bureau Almaz-Antei, which had developed all of the country’s air defense systems, now houses a concert hall with Europe’s longest bar counter. There is literally no place where to develop next generation S-500s, the new owners push the designers and manufacturers out into the street, and S-400 radars keep rusting outdoors under the snow and rain. The developers of unique military hardware have to pay businessmen for leasing the buildings that once had been their own.

The very same publication says that this is just a typical picture of what happened to the Russian defense-industrial complex in recent years. Almaz is not the sole one experiencing such problems, the daily says. “Visit any defense industry research institute, and you will see that 50%-80% of its premises have been occupied by car repair shops and striptease bars. A very popular ice show on the TV is filmed inside a hangar of a leading aircraft manufacturer that had once housed an experimental warplanes workshop.

As the daily’s sources have said, Rogozin took note of the publication. He has allegedly initiated a number of inspections of defense-industrial enterprises. For the first time in the post-Soviet years all this land and real estate business in the defense-industrial complex has in fact been declared criminal, the daily says.

Rosimushchestvo suspects that state properties were sold up at grossly understated prices. At random and to whoever cared to lay hands on them. However, now business people feel alarmed about the risk of a revision of the results of privatization. And analysts have been voicing surprise over why the authorities have decided to dig up the past at a time when more crucial tasks are on the agenda. Whole defense industries are in depression.

“No privatization of land or buildings is flawless, if looked at from the standpoint of the market,” said the managing director of Praedium Oncor International, Mikhail Gets, on Business FM radio. “This question has been raised after so many years. It looks rather a political one.”

“The Superjet project is in a critical phase. Ilyushin’s medium haul plane project is practically on the brink of collapse,” said the deputy director of the Center of Analysis of Strategies and Technologies, Konstantin Makiyenko. “The export of combat aircraft has collapsed.” In the meantime, Dmitry Rogozin is itching for a probe into the affairs of the 1990s, into privatization that was held naturally in the realities and under the rules of the 1990s.

Experts offer a very simple explanation for the auditing of the defense-industrial complex. Coping with the current defense contract on the still available industrial base is impossible. So the government had had an idea to gather everything under the same roof again. Possibly, specialists speculate, when the current owners are tracked down, the government will be persuading them to sell the acquired assets.