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Moscow Defense Brief Your Professional Guide Inside # 3, 2010 Moscow Defense Brief Your Professional Guide Inside # 3, 2010 ǞRPUDGHVLQ$UPV CONTENTS Defense Industries #3 (21), 2010 Ranking of Top Russian Defense Companies in 2009 2 PUBLISHER The Belarusian Defense Industry 6 Centre for Analysis of MZKT – the Minsk Wheeled Chassis Plant 11 Strategies and Technologies Arms Trade CAST Director & Publisher Ruslan Pukhov Russia Raking in New Arms Contracts 15 Editor-in-Chief Mikhail Barabanov Armed Forces Advisory Editors Konstantin Makienko Big Renovation Program for Russia’s Black Sea Fleet 16 Alexey Pokolyavin The Belarusian Army: Past and Present 18 Researchers Ruslan Aliev Polina Temerina Book Review Dmitry Vasiliev The Tanks of August 25 Editorial Office 3 Tverskaya-Yamskaya, 24, office 5, Moscow, Russia 125047 phone: +7 495 251 9069 Facts & Figures fax: +7 495 775 0418 Procurement Prices for Some Items of Weapons, Ammunition http://www.mdb.cast.ru/ and Special Equipment Purchased by the Federal Penitentiary To subscribe, contact Service of the Russian Federation in 2010 26 phone: +7 495 251 9069 or e-mail: [email protected] Our Authors 28 Moscow Defense Brief is published by the Centre for Analysis of Strategies and Technologies All rights reserved. No part of this publication may be reproduced in any form or by any means, electronic, mechanical or photocopying, recording or otherwise, without reference to Moscow Defense Brief. Please note that, while the Publisher has taken all reasonable care in the compilation of this publication, the Publisher cannot accept responsibility for any errors or omissions in this publication or for any loss arising therefrom. Authors’ opinions do not necessary reflect those of the Publisher or Editor Translated by: Ivan Khokhotva Computer design & pre-press: ZEBRA-GROUP www.zebra-group.ru Cover Photo: Collective Security Treaty Organization Secretary-General Nikolay Bordyuzha (left) and Belarusian President Alexander Lukashenko (center) during the final stage of joint strategic exercises “West 2009” at “Obuz-Lesnovskiy” firing ground in Brestskaya Oblast. 29.09.2009 Belarus, Brest Photo by: Alexander Miridonov/Kommersant © Centre for Analysis of Strategies and Technologies, 2010 Printed in Russia # 3, 2010 Moscow Defense Brief 1 Defense Industries Ranking of Top Russian Defense Companies in 2009 Dmitry Vasiliev he Center for Analysis of Strategies and Technologies 1. It now includes two new holding companies, the Tcontinues to publish its annual ranking of the top United Aircraft Corporation (UAC) and the United Engine Russian defense contractors, based on their key financial Corporation (UEC). The level of integration between these and operational indicators. companies’ subsidiaries is now deemed sufficient to consider UAC and UEC as single business entities. The two companies own almost all of the Russian aircraft and engine making Sources assets. Their inclusion has made the ranking much more representative of the situation in the industry. The ranking was compiled based mostly on official 2. Two of Russia’s largest submarine makers, annual reports and press releases of the largest Russian defense Sevmash and the Admiralty Shipyards1, which have contractors, as well as reports in the leading Russian media. traditionally been very secretive, released their operational The ranking also made use of information provided directly by figures to the Russian media in 2009. Combined with the the companies themselves. In a number of cases where official data from the shipyards that build surface ships – which figures were not available, CAST used its own estimates. are usually available from open sources2 – these figures The structure of the ranking includes the following paint a much more accurate picture of the Russian military operational indicators: shipbuilding industry. • revenues; Some of the big Russian defense contractors are not • net profit (net loss) included in the 2009 ranking because their operational • share of exports in total revenues; figures are not available. But we believe that only two of • share of civilian contracts in total revenues; them – Aerospace Equipment Corporation (Moscow) and • number of employees; KBP instrument design bureau (Tula) – would have made • sector: aerospace (AS), naval (N), ground equipment it into the Top 10. The threshold for entry into the Top 20 (G), equipment and electronics (EQ), artillery (A), would have increased accordingly; of the smaller companies small arms (SA), munitions (M), engines (E), air now not included, only concern Vega, a radio-electronic defense systems (AD); and instruments maker based in Moscow, would have earned a • ownership: private (P – state-owned stake less than place somewhere at the bottom of this more comprehensive 25 %), majority private-owned (MP – state-owned ranking. Therefore, despite the fact that only the Top 5 of the stake between 25 % and 50 %), majority state-owned 2009 table is fully represented, the Top 20 as a whole quite (MS – state-owned stake between 50 % and 75 %) and accurately reflects the actual state of affairs in the Russian state-owned (S – companies with a state-owned stake defense industry. of over 75%). The ranking will become even more representative once The ranking does not include: the United Shipbuilding Corporation (USC, St Petersburg) • companies working for the Russian nuclear forces or starts to release its annual report to the public. Some of space forces; its larger subsidiaries are now included in the Top 20 as • companies which derive over 80 per cent of their individual companies. The impact of including USC as a revenues from civilian contracts; and single business entity on the accuracy of the ranking will • companies whose operational figures are not available be even stronger than in the case of UAC and UEC. The and there is not enough information to make an accurate reason for that is not just that the large Russian shipbuilders estimate. specializing in nuclear submarines are generally very secretive. Another thing to take into account is that under the Russian accounting rules a new ship is only reflected Representativeness in the shipyard’s revenue figures once it has been fully commissioned. As a result, the company underreports Compared to the previous year, the 2009 ranking is its annual indicators while the ship is being built, and much more representative, and for two reasons: overreports them on the year the ship is commissioned. Once 2 # 3, 2010 Moscow Defense Brief Ranking of Top Russian Defense Companies in 2009 Defense Industries operational results of all the individual shipyards that are of the Tor-M2 (SA-15) SAM systems to the Russian armed now part of USC are merged into a single USC annual report, forces.6 these fluctuations will cancel each other out. And in future, UAC exported 41 fighters of the Su-30 family in 2009. the company will probably adopt international accounting Twenty of them went to India (two finished ones and standards, so the problem will be resolved once and for all. 18 assembly kits), 14 to Algeria, six to Malaysia and one to Indonesia. To Russia’s own air force, the company delivered 31 MiG-29SMT fighters previously destined for Algeria, as Main conclusions well as two new Su-34 frontline bombers. It also built three Yak-130 trainer jets (delivered to the Russian Air Force in The combined defense revenue of the Top-20 companies February-March 2010) and upgraded Tu-160 and Su-24M reached the rouble equivalent of 12.25bn USD3 in 2009, bombers, Su-27 and Mig-31 fighters, and several other down from 13.39bn the year before. If the 0.34-per-cent US aircraft. The company also continued R&D under the fifth- deflation figure4 for 2009 is taken into account, the adjusted generation fighter project, the T-50. fall in revenues is 8.2 per cent. The Tactical Missiles Corporation, which came third We can surely say that 2009 was not the best year for in the ranking, relied mostly on aviation weapons sales. An the Russian defense contractors – owing partly to the world increase in government procurement contracts “had a huge financial crisis. Among the Top 5 companies, which account political and moral significance” for the company, according for over 70 per cent of the combined Top-20 revenues, only to its director-general, Boris Obnosov.7 Those contracts were Uralvagonzavod (UVZ), the maker of T-90 main battle tanks, instrumental in maintaining the revenue figure at the previous showed growth. UVZ finances in general, meanwhile, were year’s level. Speaking in an interview, Obnosov highlighted in a dire state by the end of 2009, as much of its revenues Vietnam as one of the most promising export markets. He derive from its largest civilian customer, Russian Railways, believes that the Chinese market is close to saturation, while which greatly reduced orders for railway carriages in view the Indian one is rapidly becoming highly crowded. of the economic crisis. Russian Helicopters, which ranked fourth in 2009, made In fact, Russia’s best-performing defense company is 183 helicopters for Russian and foreign customers, up from now Russian Helicopters. Apart from military contracts, 169 in 2008.8 The leader among its divisions in terms of output the company has a thriving civilian business. Opposed to was the Kazan helicopter plant (85 helicopters, city of Kazan), UVZ, Russian Helicopters have many eager buyers and followed by the Ulan-Ude aviation plant (60 helicopters, Ulan- does not depend so heavily on any single one of them. The Ude), Rostvertol (15 helicopters, Rostov), Kumertau plant (13, company is therefore sitting pretty and will continue to do so city of Kumertau, Bashkortostan), and the Sazykin Progress at least until the life cycle of its main cash cow, the Mi-8/17 Aviation Company (10, city of Arsenyev, Far East). About 120 helicopters range, runs out. of the 183 helicopters made in 2009 were destined for exports.9 The share of the Top-20 companies’ revenue generated Known deliveries include Mi-17 family military helicopters by the domestic Russian market continued to grow in sold to Afghanistan (13), Azerbaijan (six), China (six), Iran 2009.
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