- Sergei Viktorovich, please try explaining the so-called phenomenon that no matter what Russia begins to produce it always ends up with a Kalashnikov assault rifle?
- No, not always! We have come up with other products as well. For instance, if we are talking about Rostec, it has a large share of the civilian-oriented production segment. In 2016, this segment accounted for a quarter of the overall output and as of today all of our group’s companies were assigned to boost this figure up to 50 percent before 2025.
Otherwise, our enterprises would go bankrupt. The state rearmament program is in force until 2020 and we hope that its completion would be gradual.
However, what comes next? Obviously, production of up-to-date weapons will continue in the future, but not like today’s volumes. A gradual shift into towards civilian-oriented production is inevitable and we will need to come up with top-quality, cutting-edge intellectual and competitive products. I should say that our production for perinatal centers is in line with Western standards. Our manufactured Neonatal Intensive Care Units (NICU) is in great demand across Europe. This is not our only product, which enjoys customers’ popularity in Europe and beyond its borders.
But you are right saying that we keep up with producing decent Kalashnikov assault rifles. By the way, I would like to say that four years ago Izhmash scientific and research center was on the brink of bankruptcy seeing delays in wages up to half a year, exhausted manufacturing equipment and only a 20-percent workload on newly purchased equipment. In 2013 we have reformed the scientific and research center into the Kalashnikov Consortium inviting private investors, who acquired a 49-percent stake in the company. Rostec remained the core shareholder of the company and in January 2014, Alexei Krivoruchko, one of the major investors, assumed the post of the director general. He takes great interest in his work, likes weapons and is a great expert in this sphere. However, we are not coming up with combat assault rifles only. Today, it is a multi-oriented enterprise producing various products, including hunting rifles, sports rifles - both for sports shooters and biathletes – as well as developing guns and equipment for Airsoft and Paintball competitions.
Last year the consortium bought the Rybinsk shipyard and assumed management over Vimpel shipbuilding company. The shipyard is developing and constructing high-speed powerboats as well as low and medium water displacement vessels. The vessels are produced both for military and civilian purposes.
Moreover, the Kalashnikov consortium is currently reviving motorcycle manufacturing. Perhaps, you do remember how popular the Izh-Planeta motorcycle was in the past. We now have been assigned to resurrect what was in the past and bring it to today's level.
- Was it is the same type of motorcycle you saddled up for the first time?
My father treasured the motorcycle and I took it without asking for his permission. I was a kid at that time, and rather irresponsible. How old was I at that time? Perhaps, eight years old, since I was a second-grade pupil. I got myself mounted on the motorbike, somehow kick started it and then rode off with it. To be honest, it was a short-distance ride. I was not strong enough to steer the motorbike so I crashed into the closest fence after riding directly into it. I tumbled out of the saddle and fled the scene of the accident.
My father heard a strange noise from the outside, went out, looked around, saw that the motorbike was gone, but having noticed nothing extraordinarily suspicious left for work because it was inadmissible at that time to be late for the work shift. When he was back from work later that night our neighbor told him: “Vitaly, your motorbike is laid out at the end of the street because Sergey took a ride on it earlier.” My father got scared stiff immediately thinking about whether or not I had been harmed, but then after figuring out that I was fine, besides sustaining several scratches and bruises, he got ticked off because of my contrariness. I did not get beaten with a waist belt, but I got a decent slap on the back of my head for doing that.
- Your father had a very peaceful professional occupation.
- The most peaceful as it could be. He was a flour miller or, to put it in other words, he was a technician at a flour-mill.
I used to help my father as best as I could, particularly during my university years. I used to unload dry-cargo vessels carrying bags of flour and grains. It was indeed a great strain, but I coped with it. At that time I was actively in sports, so I was strong and I had great endurance.
- But you seem to continue working out.
- Yes, from time to time I do go to a gym with my younger son Sergei. On top of all, I am the president of the Boxing Academy, which is based in Moscow’s Luzhniki. The academy is attended by professionals and amateurs, including female athletes. I work out in order to stay physically fit and to be always in a decent shape.
- Do you often hit the ring?
- Not as often as I would have liked to, but I do get some opportunities each month. The rest of the time I work out at my dacha with the use of weightlifting machines and, particularly, the elliptical trainer, which I believe is more effective than a treadmill.
- Does your son keep you company?
- Sergei turned 15 on May 7, he likes sports and is good in certain competitions, which he is interested in. He is good at snow and water skiing, as well as aquabiking. He recently participated in Russia’s Jet-Ski championship finishing in second place. Participants faced a tough program stipulating various jumps, backflips and other somersaults.
His latest hobby is Heliskiing. This sport is about free downhill skiing after you are dropped in the mountains from a helicopter. I enjoy downhill skiing as well, however, I would not dare risk such an undertaking since I like to take on previously-used and tested skiing courses.
Sergey, however, has never cared much for boxing, although I had tried to get him interested in it on numerous occasions. All of a sudden, he tried boxing and then took up regular practices. He now practices three or four times a week and almost every day if he is on vacation. He is addicted to boxing.
My eldest son Stanislav also used to practice boxing, while my middle son Alexander avoids all of this. He is the most uninterested in sports in the family. Alexander majored in medicine, wrote and defended a thesis on healthcare and now works in an insurance company.
- Is Stanislav also in business?
He is currently finishing up the construction of a brick-yard plant in the Belgorod Region. The media used to publish reports that my son was allegedly involved in the pharmaceutical business, but that news was complete nonsense. To be more exact, my son together with Dmitry Dokuchaev tried to set up a pharmaceutical cluster, but later withdrew from the project.
I also have an adopted daughter, Anastasia, and she is the person, who is involved in pharmaceutics. However, she began working in this sphere long before Rostec decided to launch its business in that direction.
- I recall media hype about Anastasia Ignatova after she posed as a model for the annual Pirelli calendar.
- All of this was about an accidental turn of events. In 2014 we were guests in Milan at home of Marco Tronchetti, who is the owner and CEO of the company (Pirelli).
I have known Marco long before that, Rostec enjoys successful cooperation with Pirelli and we have two plants operating in Russia, namely in Voronezh and Kirov. We were invited to celebrate the 50th anniversary of the first edition of the Pirelli calendar, which turned to be a huge event in the world of culture and showbiz.
The celebration was attended by various top models, who posed for the calendar throughout its history. I was accompanied by my wife and daughter and we were seated at a table together with Sophie Loren. It was at that time, when I realized that although age can be merciless, beauty is eternal.
Anyway, during the festivities, the renowned German fashion photographer Peter Lindberg, who is a true professional in this sphere and on top of that was the photographer of the 50thanniversary calendar, well Anastasia caught his eye. He took several pictures of her and wrote down her telephone number. A couple of months later, he called her and invited for a full-scale photo-session. Anastasia was about to graduate from MGIMO at that time, was also preparing for the postgraduate education and thus rejected Lindberg’s offer.
- Was it you, who objected?
- No, it was a decision made by my daughter. She decided that there were far more important things in her life instead of posing in front of a camera.
Later, we were once again in Milan and Marco (Tronchetti) asked Anastasia whether she had changed her mind about the photo shoot since Peter (Lindberg) kept asking about her. My daughter replied ‘Now, I am ready to give it a shot.’ Usually, female models posed for Pirelli calendars half-naked, to put it mildly, but Lindberg ditched this stereotype in 2017 by having taken pictures in black-and-white without any makeup on the models.
- Anastasia’s picture was eventually in the calendar with world’s top-notch celebrities such as Nicole Kidman, Uma Thurman, Penelope Cruz, Hellen Mirren, Kate Winslet, Juliana Moore… Media reports instantly followed alleging that Chemezov daughter’s appearance in such company was not accidental and something was fishy about it.
- Not in the slightest way to offend the Western celebrities, but I must say that my Nastya was the most beautiful girl in this calendar. At least, this is how I see it.
She never planned to be in advertising or becoming a model. She received an offer and accepted it, but accepted not immediately as I had said before. And I had nothing to do with it.
- It seems that Nastya is now most likely not to be invited to such international projects since she is a relative of a person, who had been blacklisted.
- But this is not a brand-ironed mark, is it? I am personally not worried about the imposed sanctions. If there is something that I regret about, are my trips to Europe, which I really admire. We used to spend vacations with my family there. We rented a house there in the course of ten years, and even pondered buying out this house to make it our property. We did not buy it and now it turns out for better, because today we would have been forced to sell it.
The current sanctions did not particularly influence my work. However, I had to alter the course of my previous business trips. I pay now more visits to the Asian, African and Arab countries, where, I should say, most of our major business partners are living. I don’t think that I would be barred from going to these destinations.
- This year Rostec is celebrating its 10th anniversary.
- Yes, indeed, and we are now in talks about it, discussing how to celebrate it, in order to stimulate our employees expressing their artistic ambitions.
- Celebrations to be in the Kremlin?
- We will find a decent venue.
- Are you going to take part in the celebrations personally? It is said that you are very fond of singing.
- I do love singing. But I never do on-stage singing, although I had spent six years studying vocals. To be honest, I attended the vocal classes without any enthusiasm, despite the fact that my parents and, particularly my mother, had been insisting on it. My mother used to play piano and my younger sisters played it as well. But in my childhood I viewed this instrument as a petticoat one. This is why I chose the accordion, but boxing was more appealing to me.
At that time, we all lived in the Marat district in Irkutsk and the ability to fight was much more valuable than playing musical instruments. Let’s say that our neighborhood was very tough. We were all brought up according to harsh rules, which meant protecting ourselves and our friends, so we got into fistfights quite often. On Saturdays we would go out dancing, which usually ended up with the usual one-on-one fistfights.
- So any fight would keep going until someone started bleeding?
- It depended. Sometimes you could sustain a good blow from a garden hose with a bicycle chain inserted inside of it. It was a weapon that was as powerful as a policeman’s baton! Anyway, your ribs could break easily if you were ever hit with such a ‘weapon’. Sometimes someone could have been hit with this sort of a hose across the head as well. Boys from our district were always packing brass-knuckles and it was considered normal at that time, however, knives were excluded as they were not in line with so-called “local laws.”
You ask me why I signed up with boxing? There were no other sports clubs in the Marat district at that time. The selection process for the (boxing) club was managed by then-head coach Mushkatelnikov, who we dubbed as Mukha (The Fly). He had severe tests for us. A rookie joining the club had to go over a sparring bout against an opponent, who had been already training for a year. The experienced opponent had the chance of beating up his partner like he or she was a punching-bag. But, if a contender endured a testing bout and appeared the following day at the gym, he or she was allowed to join practice sessions. Coach Mukha was adamantly against all violations of his training schedule and if he smelled the odor of tobacco or alcohol on you, you would have to beg for mercy. He could beat you. His technique was not very pedagogical, nevertheless, it was very effective. Any craving at all to light up a cigarette or to take a tiny shot of alcohol vanished.
- Were you ever caught up?
- No, since I was never among those violating the rules. I had always kept a restrained stance regarding alcohol and began smoking as I reached adulthood. It was smoking a pipe initially. My wife liked an aroma coming from a pipe tobacco so I took on smoking a pipe, so (wife) Katya would take the pleasure of it. However, smoking a pipe is a very responsible chore. Firstly, there should be several of them because it is impossible using the same pipe twice in a row and they should be changed. Secondly, a pipe needs permanent attendance in terms of cleaning and this is a very time-consuming procedure, while the time is very important for me. So, I switched over to cigars, but enjoy them on weekends only and in the company of guests. Who would want to be sitting and smoking alone?
- We need to hear now the names of those, who keep you a cigar company.
A: They are Yevgeny Giner, who is the president of CSKA Moscow football club, and he is our frequent guest. Vladimir Artyakov, my first deputy secretary, also knows how to light up a cigar. We do meet quite often to light a cigar, or perhaps, to see a cigar burning out.
- Was it Yevgeny Giner, who got you hooked on CSKA?
- You may say so… Although I began practicing boxing at ‘Trudovye Reservy’ amateur club and then I was a fan of Dinamo, but it was mostly due to my professional activities. However, I began leaning more and more later towards CSKA. When we worked in PromExport, we used to cooperate closely with the Defense Ministry, headed by staunch supporter of CSKA Sergei Ivanov.
However, I was acquainted with most of our famous athletes before the middle of 1990s, when I held the post of a deputy director general of SovInterSport. I do remember how we drafted a contract for famous ice hockey players Vyacheslav Fetisov, Igor Larionov and Sergei Makarov to see them playing in the West. The total deal was worth $20 million. It was a tremendous figure for that time. Fetisov, however, decided to act on his own, without our help. He was solid denying us and we sent Vladimir Krutov to the United States instead of him. To be honest, the contract shrank to $7 million by that time and inflicted financial losses both on players and our foreign trade enterprise.
- It seems that Fetisov benefited in that case?
A: You wish! He had a hired agent at that time, Malkovich, who cheated Vyacheslav, taking advantage of his poor English and his lack of knowledge of legal aspects. Malkovich flashed Fetisov with papers, wrongly translated for the benefit of the agent, and Vyacheslav signed them ending up with pennies instead of promised batches of golden nuggets.
He was instantly with me saying “Please help, I need a decent lawyer!” Of course, we never denied the legend of the Russian ice hockey and provided him with a qualified lawyer, who sealed the case winning it with the International Arbitrary Court in Stockholm, and Malkovich was forced to pay Fetisov all of the money.
The first ever contract that I signed was about the transfer of Alexander Zavarov from Dynamo Kiev to Torino’s Juventus. It was worth $3 million at that time. This sum should be multiplied ten-fold or even more considering the current-day exchange rate. Afterwards, Rinat Dasaev was sold to Spain’s Sevilla FC, Fyodor Cherenkov was traded to Paris Saint-Germain FC. Fyodor was one of the talented footballers, but unfortunately he felt sick and I was personally the one to organize his return to Russia from France. I received a telephone call from the Embassy, immediately took a flight and then took charge of organizing Cherenkov’s return back home.
I was also managing the organization of the first-ever race en-route Paris-Moscow-Beijing in 1992. This race was initially scheduled for 1991, but we had to delay it for one year because of Putch. To be honest, I withdrew from the race. One stretch of the race across our (Russia’s) wilderness was enough for me to realize that if I continue my spine would collapse. It was a real shake!
Considering (football) coaches, we helped with a contract for Valery Nepomnyaschy. Being in charge of the national team of Cameroon at the FIFA World Cup in Italy he managed to lead the team to the quarterfinals stage that year, and lost to team England in overtime. By the way, several years ago I was advising Yevgeny Giner to hire Valery (Nepomnyaschy) as an advisor on sports issues. Nepomnyaschy is a high-level specialist.
In late 1980s, Irina Viner worked for us for two years in London. She used to train the calisthenics teams in Tashkent before that. Irina’s previous contract was about to expire and we offered her another one with a club in Britain. This is when I got acquainted with Alisher Usmanov.
- Since we’re talking about acquaintances here, it is high time we ask you about Vladimir Putin, because you served in the same agency together with him. Sergey, when did you precisely sign up to join the KGB?
- It was in 1976, one year after my graduation from the Irkutsk State Institute of Economics. Actually, I applied at first with a polytechnic college seeking to major in construction works, but quickly realized, that it was not what I was aiming for. Geometry and advanced mathematics were way too much for me. On top of all, I was very involved in sports.
I barely passed my winter exams, but failed the following summer semester tests and was advised to ‘serve the Army.’ However, before the draft I managed to enter the State Institute of Economics. This is where I enjoyed studying, received an honorary diploma, stayed for over a year at the research institute center for rare metals in Irkutsk and then went for higher education at the Leningrad financial institute. I did not start on my dissertation papers, because I was drafted by KGB.
I initially aimed serving with OBKhSS (Department Against Misappropriation of Socialist Property). I am not sure whether I have to clarify this abbreviation. Not everyone remembers that this abbreviation stood for Department Against Misappropriation of Socialist Property. It was a department with the Interior Ministry. I was a part-time officer with OBKhSS, received an ID, took part in raids and participated in sample purchases. During one of the raids, I got acquainted with an operative, who was in charge of the Irkutsk KGB department. He offered me “to come visit us after the institute.” Having his recommendation on the hands, I filed out loads of papers and while they were verified I worked in Irgiredmet.
- Did you tell your parents about your enlisting with the KGB?
- Of course I did, when I was officially enlisted. But I had never uttered a word before that.
I have an interesting detail to share. After I filed all the necessary documents with KGB, it turned out that I forgot to report about my aunt, who got married and moved living to Denmark. Such facts had to be reported at that time, but I simply did not know about that. My mom revealed this fact to me recently, about twenty years ago.
- If such fact surfaced out back then in 1970s, would it have served as an obstacle for your career?
- Perhaps. They could have ditched the papers and denied me the service. No other moves could have followed.
- The assignment to Germany was your first-ever trip abroad?
- Yes, I went there in 1983 and returned back to Moscow after five years in 1988. I spent first six months in Berlin and then moved to Dresden. At that time the Democratic Republic of Germany was the best place to undergo service among other venues of the Socialist countries. Living standards in Germany at that time were much higher compared with the Soviet Union.
- Putin was assigned to Dresden after you?
- Two years after me, in 1985. We had a small intelligence group at that time. Seven people. We worked together, we were neighbors, celebrated holidays and birthdays. We became very close.
- Would you name them all?
- Two of them passed away, two more are inadmissible. One used to serve in Belarus, then somehow went to the West, and, if I am not mistaken, he is living in Switzerland and published a reminiscent book about us. I believe that it contains much of imaginative things and biased facts.
The rest of us are here. Nikolai Tokarev is now in charge of Transneft company. Yevgeny Shkolov serves as a Russian presidential aide. We still keep contact with our commander Lazar Matveev and visited him recently to congratulate on the 90th birthday. He is living in Zhulebino and is a very modest and intelligent person.
Five years ago we had an incident. Matveev, who was widowed, went alone to his dacha in the Moscow region. On a late night he decided to go home, but a thin ice already emerged on puddles because of the freezing temperatures in autumn. Lazar slipped, fell down and cracked a hip while making his way to a commuting train back home. It was dark already and he could not have made his way anywhere if not for the passing by woman, who helped him by calling an ambulance. He was rushed to a hospital, where he was put into cradle outside the wards, since they were all packed at that time. Conditions were harsh! Lazar called his granddaughter, who managed to get in touch with my assistant, who in turn connected with me. I was on a business trip in Austria at that time. I called Sergei Mironov and he accommodated Matveev in Moscow’s Central Institute of Traumatology and Orthopedics (CITO). A surgery followed and he is now able to walk on his own. This is an old school! He is a fighter!
- Interesting to ask whether Major Putin was somehow different if compared to his colleagues 30 years ago?
- You want me to be honest? I would have never even guessed that he would be the president. We never thought about that. We used to live in the Soviet Union and were sure that the country would remain for another 1,000 years. However, Vladimir Vladimirovich (Putin) was different from us by always being capable to grasp the sense of any issue. On top of all, he was a fast-learner in everything. Being prone to fast-learning is still with him.
- He maintained his reputation by not giving up his companions?
- It is the case. But there is another saying, which could be applied to Vladimir Vladimirovich (Putin) – ‘One should be beating up own of its kind to root fear into others.’ I would definitely say that my old acquaintance with the president is definitely not an indulgence. We did see examples when things like that happened. We must be heartily doing our work instead of bragging about our connections with the president, while his trust is with you.
- You keep constant contacts with Putin?
- I worked in Moscow when Vladimir Vladimirovich returned to Saint Petersburg after Dresden. This is why we met here in Moscow or in Saint Petersburg on several occasions. In 1996, Putin was in charge of the Department of Presidential Affairs and called at that time asking me to take charge of the foreign economic affairs department, which he was overseeing at that time. At that time Russia received a great deal of foreign property and foreign-related contracts. Someone had to put everything up in order.
- Did you take a pause to make a decision?
- No, my reply was immediate. By that time I spent almost nine years in SovInSport and was a bit tired of it. It gets boring if you deal with something for a long time.
- But you have been in charge of Rostec for ten years already without any break
- I had to start everything from scratch here and encountered more than various challenges. It was definitely not boring to work here.
Moreover, SovInterSport business had been gradually fading away with many athletes inking contracts with Western clubs, while our services remained unclaimed.
The Russian Department of Presidential Affairs was offering numerous opportunities at that time and was later transferred into the department of foreign relations. We compiled a full list of the property, which used to belong to the Tsarist Russia and the Soviet Union. We figured out how many property we lost over the recent years. We could have retrieved some of it if we dealt with the issue immediately. We were stunned in certain cases of our research. For instance, former Soviet leader Nikita Khrushchev literally sold a plot of the Russian land to Israel for oranges. It cannot be compared with the case of Alaska, which Russian Emperor Alexander II sold for $7 million (at that time’s exchange rate) in 1867 to the United States and received the payment in gold.
- You worked at the Russian president’s Administrative Directorate for four years, did you?
- Yes, until 1999. Then I started to deal with the issues of military and technical cooperation with foreign countries as it was necessary to consolidate operations in this sphere and bring structures, which existed in Russia at that moment, under one roof. When I started to work in this sphere, domestic arms sellers were earning less than three billion US dollars on average annually. The point is that anyone who had the desire to do so was trading with foreigners: both defense enterprises and intermediary companies. They were selling products for a penny just to earn something.
- Rosvooruzheniye with the annual sales of more than two billion US dollars was the basic seller while Promexport, which you headed, was earning five times less. Nevertheless, it is you who took over the rival when Rosoboronexport was established.
- It was necessary to consolidate business. First, we took over Rostekhnologii and then Rosvooruzheniye…
You can judge the efficiency of the steps made at that time by today’s results: the arms delivery volume of Rosoboronexport alone amounted to $13.1 billion in 2016 while the total figure for Russia exceeded $15 billion.
- The Corporation integrates 14 holding companies and over 700 enterprises. How can this monster be efficiently managed?
A: You can see for yourself. We’re coping with the task. But the figure of 700 does not include everything, by the way. There are subsidiaries, affiliates… All together, we have over 2,000 entities. Yes, we have to work intensively but we have long grown accustomed to this mode.
- Were there attempts to offer you a job outside Rostec, to work in the government, for example?
- There were talks on numerous occasions and not only about the government. But I wouldn’t elaborate on this issue…
- Could you at least explain why you declined the offer?
- Let me start with saying that Rostec wouldn’t have existed in the form it exists today in case of my departure.
- Is this about the role of personality in history?
- You can’t get away from it. I’m not going to extol my own merits but I have developed good business and human relations with the executives of various levels in recent years and I can solve many issues much more easily than anyone else in my place. In principle, I was ready to depart for another job both in 2007 and earlier but I understood that the corporation would be torn into pieces and pulled apart, everyone would again start trading in arms on his own and the system would collapse. Meanwhile, it was necessary to streamline everything in Rostec, establish holding companies and distribute duties and assignments among them. And today we can say that the corporation is operating and doing this quite successfully. We have actually no problematic production facilities left whereas initially, when we got the first 400 enterprises, chaos reigned there. More than a half of them were bankrupts or in the pre-bankrupt state.
- You brought everything unattended under your control at that time.
- You are mistaken. This was not the case. In actual fact, they piled up illiquid assets before us and told us: take this and bring this into order. We themselves never chose anything and we were given enterprises for management.
- So, it turns out that you didn’t take it but you were burdened with printing houses and many other assets that had no relations to defense and armament.
- This is the case. Incidentally, the printing house in Shcherbinka remains in our system to date and operates quite well, supplying Rostec enterprises (and not only them!) with the necessary printed matter.
- And why did you place pharmaceuticals under your control?
- At first, they transferred several enterprises to us, including Microgen research and production association, one of Russia’s largest producers of immunobiological products. We still hold a 38% stake in the Kurgan-based Sintez pharmaceuticals company while the rest has been bought by Alexander Vinokurov and he now has a controlling stake.
We have taken out a loan from VEB to build the Fort pharmaceutical facility in the Ryazan Region and subsequently we have purchased the bank’s stake of 25% plus one share in the enterprise. We are now deciding on whether to place Fort under our management or buy out the remaining stake. We are thinking. Considering that some assets are in our possession, it would be logical to further develop this area of business. We have started setting up joint ventures and involving foreigners. We are the sole supplier of vaccines for Russia’s Federal Penitentiary Service and all the products are made domestically whereas previously imported medicines accounted for almost a half and were sold with a markup of 100%. We obliged all companies to set up local production in Russia instead of bringing preparations from abroad and bottling or packaging them here. This is because it was a well-known fact that counterfeit products made up a considerable share of imports. We have suggested holding three-stage tenders. The first tender is intended for producers of the full cycle, from substances to finished products while the second is for those who do at least something in Russia, even if they pack medicines. And the third type of the tender is envisaged for the situations when no similar medicines are produced in Russia and can only be purchased abroad.
- By the way, what do you think about the government’s proposal to legalize the cultivation of opium plants for medicinal purposes in Russia? Are you ready to take up this mission?
- To grow opium for people? No, surely not us! We have neither plantations nor possibilities nor the desire, honestly speaking, to deal with this issue. We can produce medicines from prepared raw materials using available equipment. This is what we can do.
Now we want to bring the Rosplazma blood products factory in Kirov into operation. It has remained in its unfinished state for about ten years. While imported equipment worth huge amounts of money had long been purchased, it stood in unheated premises and partially fell into disrepair. Incidentally, no one has been held responsible for this negligence. The need for the factory’s products is great and most medicines planned to be rolled out in Kirov are not produced in Russia today. They have to be purchased abroad. Nacimbio, which is Rostec’s fully-owned subsidiary, will be completing the factory’s construction together with Italian partners from Kedrion Biopharma and the Russian company Pharmstandard.
- And why did you decide to monopolize the production of medicines for HIV-positive persons?
- We have concluded agreements with foreign partners and found a strong investor interested in the project. The investor is ready to organize full local production of innovative preparations in Russia within a short period of time as these medicines are currently not produced in our country.
Any company that has agreed to share technologies should know how to return the funds it has spent. It wants to be sure that it will be able to sell a large volume of products.
That is why, we have agreed with the Health Ministry that we’ll become the sole contractor.
- You are speaking about foreign partners. Do the sanctions impede foreigners to work in Russia?
- Wherever it is profitable for them, nothing is a hindrance. Let’s take titanium. This is a strategic material, for which hypothetically we must be cut off access to external markets. However, VSMPO-AVISMA’s joint venture with Boeing, which will mark ten years this year, is operating successfully and expanding while its output volumes are growing from year to year.
It all began with my acquaintance at an international airshow with then-Executive Vice-President of Boeing Company Alan Mulally. We talked and he complained to me that the factory in Russia that was producing titanium products on order from the US side was constantly disrupting deliveries and producing spoiled products, due to which the company experienced serious problems. He told me a lot of things. I returned to Moscow and started to find out what this factory was.
It turned out that the enterprise was located in Verkhnyaya Salda in the Sverdlovsk Region. I went there and got acquainted with Vladislav Tetyukhin, a co-owner of the metal-working factory who had been setting up titanium production at the facility. He admitted that the quality of products was sometimes inferior but the enterprise had no money for its development. I walked through the workshops that were in a very deplorable state: everything was utterly run down, with dirt everywhere and machinery bogged down in oil.
I also found out that Tetyukhin was not the factory’s core owner as the majority stake was held by Vyacheslav Bresht who had once headed the local trade union and then bought out privatization vouchers from workers for a penny. We met and I asked him about his plans. Bresht was not going to change anything as he was already satisfied with everything. I proposed that he should sell the factory to Rostec. We started to bargain. Bresht demanded a sky high price. We invited independent experts who held an audit and estimated the sum to be three times less than the price demanded from us. However, Bresht stubbornly refused. He stood on his own and did not agree to any concessions. So, we didn’t reach any agreement. Shareholder wars and litigations began, actually paralyzing production.
Then I decided to act in a different manner. I agreed with the managers of Renaissance Capital that they would buy the factory as if for themselves and then re-assign it to us. This is what happened: the deal went through and the sum we initially offered was paid for the shares. Bresht received his share and left for Israel.
- Bresht later claimed that he was threatened with criminal prosecution at your suggestion.
- I can assure you that I have nothing to do with this. These are Bresht’s ‘old sins’ which are on his record. I deliberately distanced myself from the deal for the factory’s purchase to avoid accusations against me. By the way, Bresht was registered in the same apartment bloc in Moscow as I was. This was found out by chance when he had already emigrated from the country and put up his apartment for sale. This is a small world…
Tetyukhin invested his funds in the construction of a medical center in Nizhny Tagil while the factory in Verkhnyaya Salda became the largest supplier on the world market of titanium semi-finished products, including for Boeing. The Americans have shown a prospect for the sale of products and we have invested funds in this prospect. We registered Ural Boeing Manufacturing joint venture, built new production shops and delivered modern manufacturing centers. We didn’t take a penny from the enterprise for five years and invested all that we earned in improving production and purchasing equipment. Now the factory complies with the latest technological standards.
Besides, we have a joint scientific center with Boeing where modern alloys for aircraft are developed. The right to intellectual property belongs to us in equal proportions: 50 to 50.
- And what is the story with the Boeing 787 Dreamliner? Your subsidiary AviaCapitalService was going to buy twenty-two new airliners for Aeroflot but the airline actually admitted that it wouldn’t take them.
A: There has been no final answer yet but we are looking for buyers in other countries as well. We can give up the deal without penalties before September. So, we still have time.
Incidentally, the larger part of titanium items for the Dreamliner was designed and manufactured in Russia. I have not traveled aboard this plane so far but Americans say that the new machine is much more economical than the Boeing 767 as it consumes less fuel, has a longer flying range and pollutes the atmosphere less. I have no doubts that the Dreamliner will take up its niche on the market and will enjoy demand.
- As we have started to talk about aircraft, could you tell about how the project of the new Russian high-speed helicopter is developing? This story has been dragging on for over seven years.
- Believe me that this is a short term for aviation. We have made a flying laboratory and the helicopter already develops a cruising speed of 400 kilometers per hour while the vibration levels and the load in the rotor system are at a level acceptable for operation. So, the process is going on.
- But sometimes there is a large distance from the prototype to serial production.
A: The point is that today we are developing this project on our own initiative and are doing this at our own risk and peril, so to speak. But the potential we develop will come in handy on other helicopters in any way.
- Do you have a feeling that we are being edged out on the arms market?
- No, we do not observe this so far. On the contrary, we are demonstrating growth.
- But, for example, we lost large tenders in India: we lost to French contractors for the fighter jet and to Americans for attack helicopters.
- This has always been the case. Sometimes, we get ahead of others but then our rivals get the upper hand. This is a normal market struggle. Rostec annually sells armaments worth $1.5-2 billion to India. Besides, we have to take an important factor into account: the contracts you are speaking about have just been signed but have not yet been implemented. A contract is considered to have entered into force when the necessary decisions have been made by both sides on government levels. As they say, a promise does not mean I’ll plunge into marriage. There were so many cases when preliminary documents were signed but then potential buyers backtracked on their pledges.
- Did this also happen to us?
- In India, this didn’t happen to us. We always avoided such situations there. But as for other countries, such instances took place. For example, we signed contracts worth $20 billion with Saudi Arabia five years ago but it was useless as the deal did not progress further than the intentions. Riyadh did not buy anything at that time.
To call things by their proper names, the Saudis simply played with us, saying: do not supply S-300 air defense systems to Iran and we’ll be purchasing your weapons – tanks and other hardware.
Now we have started a new round of negotiations and concluded a preliminary agreement worth $3.5 billion. However, the Saudis have set a condition: the contract will enter into force, if we transfer a part of technologies to them and open production on the kingdom’s territory. We are thinking about what we can share. The simplest thing is to build a factory for the production of small arms, say, the well-known Kalashnikov assault rifle.
- And what can you say about the deliveries of S-400 systems to Turkey?
- As I said before, both sides have agreed all the technical terms. However, no final decisions have been made yet.
In this sense, things are quite different with India, for example. The inter-governmental agreement on the S-400 complexes has been signed, although there is still no contract, and we are discussing details of the deal. Let me repeat: it sometimes takes a year or more from the start of the process of negotiations to their completion.
Much depends on the buyers’ mood. If they urgently need it, they may promptly enter into a deal but in any case this takes no less than 3-4 months. I can’t remember any deal with any country that went through more quickly.
- You have long been speaking about the contract on the Pantsyr-S1 air defense system with Brazil. At what stage is it?
- There is certain interest and the Brazilians came to us to view all the trials and evaluate. Apparently, they send specialists not only to our country. They are choosing who can offer them better hardware and at a lower price. This is their right. We are waiting.
The portfolio of Rosoboronexport’s contracts that have been signed and have entered into force exceeds $45 billion. It is expected to be implemented in the next three-four years. I don’t see any reason to worry for a more distant future. Largely speaking, the sanctions have not affected our plans in any special way either. I won’t hide that initially we had fears that our volumes would shrink but this did not happen. There was no fall; on the contrary, we continue growing.
In a sense, serious demonstration of our military hardware took place in Syria. Our weapons vividly showed how they operated.
- Has the demand for some weapons increased?
- There is higher interest in air defense systems, from Pantsyr, Tor and Buk complexes to S-400 systems.
- Do we have any restrictions on deliveries? Turkey is a NATO member country, for example.
- These are defensive systems, which are designed to protect a country’s own territory rather than to attack anyone. Moreover, we do not transfer the codes, the friend-or-foe identifiers as the buyers adjust everything for their needs.
- Did the US strike on Syria’s al-Shayrat airbase with cruise missiles tarnish the reputation of our air defense systems when Tomahawks burnt out aircraft in hangars and refueling stations?
- We didn’t activate our air defense complexes and we didn’t try to shoot down missiles. This is why the Americans acted so calmly because they knew that we would not respond. But this was a case in the past…
- But in a different case, ‘heavy guns’ were used when you and your colleagues turned to Vladimir Putin, asking him to curtail the rights of minority shareholders of large state-owned companies. Why did you move to ‘attack’ them?
A: We do not ‘attack’ anyone. The talk is about a different thing. This concerns not only Rostec but also Transneft, Lukoil, Surgutneftegaz … Judge for yourself: a person buys a couple of shares and then begins to unnerve the management, incessantly demanding documents on the company’s activities. He wants the company to show one document after another … The company has to maintain a large apparatus just for the sake of satisfying the curiosity of some citizens who actually engage in blackmail. That is why, we suggested that a person should at least buy five percent of the shares and then ask and demand what he wants.
- What will this 5% be worth in the case with your holding companies?
- Let us take Russian Helicopters Group, for example. The holding company’s total worth is estimated at $2.35 billion and in February 2017 we sold a 12% stake to the Russian Direct Investment Fund and our foreign partners for $300 million.
- In other words, the admission ticket is over $100 million.
- Well, you shouldn’t take this so literally but, on the other hand, shareholders should not abuse their right. Otherwise, work will grind to a halt and we’ll have to spend the entire time on just replying to minority shareholders’ inquiries.
This problem is more serious than it may seem. Let me give you an example. I attend a meeting of KAMAZ shareholders in Nabarezhniye Chelny every year and each time I see one and the same picture: a person stands up and starts bombarding the presidium with questions. I’m sorry but sometimes he blurts out such nonsense! And we are obliged to hear and reply as he is a minority shareholder. But his shareholding is just so minute, it’s a fraction of a fraction!
In such situations, a blocking filter is needed.
Yes, it is necessary to hear the opinion of everyone but when it is constructive. For example, the personnel problem posed a major hassle when I joined the corporation. The average age of employees was close to sixty years. Young people did not want to work at the company as they saw no prospects. We started to think how to solve the problem. Now the ‘age threshold’ has decreased to 42-43 years. Rostec has agreements signed in all the Russian regions where there are specialized higher educational institutions. These institutions have departments preparing specialists directly for us. We conclude agreements with the most promising students and pay for their studies and after they complete their master’s degree, they join the corporation’s enterprises, undertaking to work within the Rostec system for at least five years. Otherwise, they will have to return the funds we have spent on them.
I am the head of the department of management in the field of military and technical cooperation and high technologies at the Moscow State Institute of International Relations (MGIMO). Unfortunately, I have little free time to communicate frequently with students but I see very talented persons among them. And the competition for enrollment to our master’s degree courses is very high. The corporation is expanding and so there will be enough work for all.
- In December last year, Uralvagonzavod merged into Rostec and two months later its CEO Oleg Siyenko who had held the post for seven years left the enterprise. Did you fail to get along with each other?
- It’s not me who didn’t get along. It all started much earlier and led to the problems that had to be solved. Oleg Siyenko did much for the development of the military component. But the corporation now faces ambitious tasks, first of all, for the output of civilian products. It was decided to renew the team.
- So, you received ‘restless’ business again.
- We are used to it … At the first stage, it was important to sort out things with the logistics company. So I discussed this issue with Russian Railways President Oleg Belozerov and we found common ground. It was necessary to relieve the company of excessive debts and minimize costs. By the way, this is why, starting from this year, we have given up the Russia Arms Expo exhibition traditionally held in Nizhny Tagil and transferred it to the Patriot Park in Kubinka outside Moscow. To my mind, this is an absolutely justified step.
- And what is the situation with Uralvagonzavod’s main brainchild, the Armata tank? When will it go into series?
- It is undergoing trials in the troops and they are scheduled to be completed by late 2018 and production will start in 2019. It is early to say how many machines the Defense Ministry is ready to order but I’m confident that the Armata will be in demand. This is the most advanced tank in the world!
But the T-90 is also a good tank. Several years ago, the Saudis organized a tender for the purchase of tanks, which involved the French Leclerc, the German Leopard and the US Abrams. Our T-90 was the sole tank that reached the tender’s final without any malfunctions after driving in a race across the scorched desert and shooting targets at an air temperature of 50 degrees Celsius.
Western tanks have air conditioners installed inside while our guys were sweating it out in a ‘tin can.’ I told the test drivers: “I’ll pour a glass of vodka for each of you guys when we return to Moscow. The dry law is in effect in Saudi Arabia and alcohol is prohibited. But in Russia no one could prevent us from celebrating a worthy performance. As they say, it was a fabulous race!
- By the way, you are a prominent hunter, Sergei Viktorovich. Your personal collection of arms should be impressive.
- Yes, it is large enough, about forty or fifty gun barrels, which includes gifted pistols, rifles and carbines. I especially like the Blaser hunting rifle.
- What animal did you hunt for with it?
- It would be better to say whom I didn’t shoot with it. I didn’t hunt for a lion, for an elephant… However, as for the latter, it somehow didn’t work out, and as for the lion, I couldn’t raise my hand at it because I’m a lion according to my Zodiac sign. I shot several bears in the Tver Region, one in the Leningrad Region and two in Kamchatka where they are really huge. Monsters!
- Did you hunt from hunting towers?
- From the ground. The animal is spotted from a helicopter, roused and chased to your side and you get the coordinates by radio and move forward until who sees whom first. Last time, I shot a bear that was three meters long from its head to its back. Can you imagine that such a huge beast stands on its hind legs and starts moving towards you! About a hundred meters were left between us. I couldn’t shoot the bear with the first shot and had to fire three times. Then I stood back up, pulling myself together after losing breath.
But the scariest thing is hunting for buffalo in Africa. This is where you get a powerful adrenaline rush. The first time was in Zimbabwe, everything there went smoothly. I nailed him pretty good and he dropped to the ground instantly and that was that. And then I flew to the north of Namibia on the border with Angola. Now I was only able to wound the target but the animal got away. So, the forest ranger and I followed the animal’s trail for two hours and a half. To be more exact, we didn’t walk but trudged through thick bushes. We ended up scratched and bloodied because of bushes’ thorns and prickles. Even my leather hat got scratches. What dangers do buffalo present? They can sneak up from behind so as you walk you constantly look over your shoulder.
In a word, we wandered for long but couldn’t find the wounded animal. It began to get dark and it is very dangerous to be in the bushes at dusk. We decided to continue the search in the morning because a wounded animal mustn’t be left alone: it will die all the same but it can cause a lot of trouble, if it attacks someone in a rage.
At dawn, I woke up with a bad premonition and decided against going to the bushes. Instead, I went to the savannah to hunt for antelopes. There are a lot of them there, all beautiful and big. The northern Namibian plains are as flat as a table’s surface with separately standing trees.
Meanwhile, the forest ranger went for the buffalo. This is his job. He took two local pathfinders without guns with him. And the animal attacked them, sneaking up from behind. The hunter didn’t even have the time to pull the trigger. The buffalo picked up the poor fellow by its horns, tossed him up and stomped on him and dragged him on the ground… The buffalo incapacitated him and again ran away. Then we had to carry out a whole ‘army operation.’ We gathered together experienced hunters with dogs and staged a true hunt. As a result, we found the beast and finished it off. The wounded forest ranger was evacuated to a hospital by helicopter. This was a young guy and he got a lot of stitches. When I learnt about this, I thanked God that he protected me!
- Did you lose the desire to hunt after such an incident?
- You know, it's like a drug. Once you try it, you can’t get off it. I got hooked on hunting in Germany. I hunted boars and hares with Germans. And so this went on and on…
- When did you last take the hunting rifle?
- In the second half of May, I went to the Tver Region for boar and deer hunting.
- Do you have rifles manufactured by the Kalashnikov Enterprise?
A: Yes, of course. But combat weapons are not sold and are prohibited to be kept at home. I have Saiga rifles, both a grooved and a smoothbore version. Now they have produced an excellent model for hunting goose. It would be strange, if the Rostec head didn’t have the products made by the Kalashnikov Group…