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Russia’s rearmament plans in danger over price hikes — deputy PM

February 09, 2015, 17:26 UTC+3
The negative impact of the price hikes for products made under cooperation schemes will cause a sharp decrease in the profitability of contracted output assignments
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© Donat Sorokin/TASS

MOSCOW, February 9. /TASS/. Price hikes for 2nd-and 3rd-tier cooperation products may cause a slump in the profitability of Russia’s defense enterprises and endanger the country’s rearmament plans, Deputy Prime Minister Dmitry Rogozin said on Monday.

"In the current situation, the negative impact of the growth of prices for products made under cooperation schemes will cause a sharp decrease in the profitability of contracted output assignments and generate losses for parent organizations of industrial enterprises in some cases, to say nothing about the growing cost of armaments and military hardware," Rogozin said.

"This actually endangers all our plans for the rearmament of the Armed Forces in full," the vice-premier said.

Rogozin said the Russian government should extend state price regulation to products made under state defense order and apply quota schemes to raw materials and supplies used for military hardware production.

"Some price restraining measures are under active discussion today," the vice-premier told a meeting on pricing.

Infographics Russia’s state defense order in 2015 Russia’s state defense order in 2015

The Russian Defense Ministry is set to continue the rearmament program in the armed forces this year. Infographics by TASS

"Considering the current political and economic situation, and also in compliance with the statute on the state price regulation approved by the Russian government on December 5, 2012, we’ll extend state price regulation to the entire output supplied under state defense order and we’ll specify the list of such products, if necessary," the vice-premier said.

The system of control over budget spending during state defense order placement and fulfillment is a second price restraining measure, Rogozin said.

Russia’s Defense Ministry has approved a plan jointly with the Federal Agency for Financial Monitoring to establish such a system, the vice-premier said.

This plan envisages legislatively determining the procedure of preparing and using information on cooperation between state defense order contractors, the list of authorized banks for settlements under state contracts across all contractors, and also the procedure of information exchange between the state customer, contractors and authorized banks in the process of state defense order fulfillment. This work will be coordinated by the board of the defense and industrial sector, the vice-premier said.

"The schemes of quota allocation and reserving have long existed as part of state defense order placement but basically for petroleum products," Rogozin said, outlining a third measure.

"We need to extend this procedure to raw materials and strategic supplies, which are necessary for the production of armaments and military hardware at prices existing on the domestic market," the vice-premier said.

Infographics Strengthening Russia’s defense capability in 2014 Strengthening Russia’s defense capability in 2014
Modernization and reorganization of the Russia’s Armed Forces in 2014. Infographics by TASS

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