Tag Archives: Mistral

The GOZ Last Week (Part II)

We looked at last week’s news.  What’s it mean?  There wasn’t a lot of commentary about it, but there were two very good pieces.

To backtrack a little, if it looks like Defense Minister Anatoliy Serdyukov might be (just might be)  getting an upper hand on forcing defense producers to his prices instead of vice versa, then the commentaries give insight into what is happening (or may happen) if Serdyukov succeeds in driving hard bargains with the OPK.

Moskovskiy komsomolets’ Olga Bozhyeva asked a general who worked on the GOZ to comment on this year’s situation:

“The Defense Ministry now lacks an organ with responsibility for contracting work, beginning with formation of initial prices and ending with accepting the results.  In the past, the chief of armament’s apparatus performed these functions, currently it’s been transformed into a department with unintelligible functions.  Tax organ officials who’ve come into the Defense Ministry’s key financial posts can’t connect the price of a product with the characteristics of the model being produced and its contribution to the country’s security.  In the Defense Ministry in recent years, three basic methods of calculating the cost of a product have been introduced, but not one of them factors in the substantive part of the work.  They are all built on the principle:  I have a certain amount of money, I want to give you this much of it.  But putting it to concrete use no longer interests anyone.  And it turns out that the methods of calculating prices in the Defense Ministry and in VPK enterprises are different.  The people speak different languages . . . .”

Bozhyeva concludes:

“In a market economy, you have to survive somehow.  Here is not America, where work for the Pentagon brings a good profit.  With us, it only allows you to survive.  And that is if they allow it.  But they don’t let everyone.”

“Here not long ago the Defense Minister got indignant, for example, that shipbuilders [Sevmash] had become so brazen that they also put the cost of kindergartens and other “social benefits” into the price of a missile-carrier [SSBN].”

“I’m not a taxman, evidently, since I don’t understand:  but where can they put it?  Let’s take Severodvinsk here.  It is completely dependent on “Sevmashpredpriyatiye.”  Like it or not, the kindergartens, schools, hospitals, clinics, housing – the factory has to maintain all of it.  And, naturally, they put the upkeep into their production cost.  How can it be otherwise?  If there aren’t kindergartens – there aren’t missile-carriers.”

Editorializing in Nezavisimaya gazeta, Viktor Litovkin writes:

“What are the causes of such an ‘inability to agree?’  In the fact, in my view, that it’s impossible to marry purely administrative approaches to the imposition of concrete military department prices on defense enterprises with largely market relationships which exist for the defense sector today.  With achieving that degree of Gosoboronzakaz profitability in which enterprises have the chance not just to survive, but also develop.  Several defense NII and factory directors, undoubtedly following the example of MIT General Designer Yuriy Solomonov, have already even stopped ‘fearing’ to publicize their disagreements with the Defense Ministry in front of journalists.  General Director of NII Instrument-building named for Tikhomirov, Yuriy Belyy told me ‘in the ordering structures of the military department people have come, who, to put it mildly, don’t understand anything about production and price formation’ (this, by the way, also means Anatoliy Serdyukov. – ‘NVO’ No. 25).  ‘Still they always demand the reduction of invoiced expenditures, reduction of profits, of labor input.  And often arbitrarily disregard prices on final goods.’  This, in his words, is happening all over the defense sector.”

“’If we had the GOZ alone, the enterprise would have died long ago,’ Yuriy Belyy told me.  ‘There are practically no resources remaining for development after GOZ fulfillment.  It isn’t understood that wages take according to some kind of averaging principle.  Invoicing expenses also.  So goes the practical strangulation of the defense sector.  In the country’s leadership they say that the OPK’s profitability is the locomotive of industry, should be not less than 15%, but in fact it’s not more than 5-7%.  And, the main thing, not understood, is with whom to talk in the Defense Ministry.  Completely incompetent people have arrived.  Their mission is not the development of industry, not increasing the country’s defense capability, their mission is to save money by any means.’”

“An enterprise producing a final product, like ‘Dolgorukiy,’ which buys metals, nuclear reactors, various components at market prices from the monopoly producers of these products, can’t give away the good created by its workers lower or a little, one-two percent, higher than its own cost, or lower than its profitability level.  It can’t buy new machine tools, technology, reequip its production line, train and select new highly-qualified personnel, provide them housing . . . .  It can’t not think about tomorrow.”

“And from the other side, if it’s possible to pay the French one and a half billion Euros for ‘Mistrals’ we need or don’t need, then why does ‘Sevmash’ have to give away a strategic submarine extremely essential to the Navy and Russia for free?!”

Air Forces Prospects

With MAKS-2011 underway, this is something of a moving target.  Before getting to the main topic, a little news from Zhukovskiy . . . some of today’s headlines. 

OAK President Mikhail Pogosyan told the press two more T-50 prototypes will join the development and testing program this year.  He expects more than 100 military transport aircraft to be bought under GPV 2011-2020.  Il-112, Il-476, and Il-76MD will come first, then ten An-124 in 2014-2015, and later a larger number of An-70s.  Pogosyan said, starting from 2011, OAK will deliver more than 20 combat aircraft each year.

VVS CINC, General-Colonel Zelin told the media he foresees five squadrons of Su-34 (possibly as many as 120 aircraft).  The VVS will have six by the end of 2011 and will get 12 next year under the current contract for 32 aircraft.

For Air Forces Day, RIA Novosti had military commentator Konstantin Bogdanov describe how he sees things developing for this armed service.  How he puts the Air Forces’ future picture together is worth a look.

Bogdanov says he sees, for the first time since the Soviet collapse, movement, a turnaround in procurement financing, and real deliveries of aircraft in 2011. 

Interestingly, he begins with the Su-35S.  Forty-eight of these “transitional” 4++ generation fighters will be procured, but there could be more if there is any delay in the 5th generation T-50.  Bogdanov suggests, even without a  delay, the pragmatic Defense Ministry leadership could decide to blend 4th and 5th generation technology and equipment in one aircraft.

Bogdanov maintains one Su-34 flew missions in the 5-day war with Georgia [has anyone seen this elsewhere?], then got its serial production go-ahead, and contract for 32 aircraft in fall 2008.  Modernizing the aged Su-24 is a backup plan for the Su-34.  Bogdanov claims VVS CINC Zelin has hinted that ALCM-armed Su-34s could go to LRA.

Some old Su-27s have been updated to Su-27SM, and even a few new Su-27SM3 — unsold to China — have been obtained.

RSK MiG’s future, according to Bogdanov, looks less certain.  Russia had to buy the defective Algerian MiG-29SMTs.  It’s unclear if the Defense Ministry will have any requirement for the MiG-35.  And this leaves MiG with the possibility of providing MiG-29Ks to replace the Navy’s Su-33 fighters on the Kuznetsov’s deck.

Bogdanov then mentions how Irkut has parleyed its export success into more domestic sales.  He says the firm has redeveloped its Indian Su-30MKI into the Su-30SM, and it may sell as many as 40 to the Defense Ministry.  Twelve might go to replace Naval Aviation’s Su-24s at Gvardeyskoye in the Black Sea Fleet [apparently these aircraft weren’t swept up by the VVS earlier this year].  Similarly, says Bogdanov, KnAAPO last fall sold the VVS four Su-30M2s, domestic versions of its Su-30MK2 export.

Turning to rotary-wing aircraft, Bogdanov sees stable order books for Russian helicopter makers.  The order books are balanced in terms of military and civilian, and internal and external buyers, and all sales sectors are growing.

He says by 2010 the military’s contract for Mi-28N helicopters reached 100 units and serial production of its main competitor, the Ka-52, continued.  Mi-8s have been bought by the dozens.  And the hangars and flight decks of Mistral helicopter carriers will have to be filled in the future.

Bogdanov concludes more than 100 helicopters of all types may be procured before the end of 2011.  He repeats the familiar goal of 1,000 new helicopters by 2020, and says the near-term future for this sector looks good.

Bogdanov sees more clouds in military transport development and production.  Il-476 production at Ulyanovsk still needs to stand up, and Zelin’s already announced that a new A-100 AWACS will be based on it.  Restarting An-124 production and buying the An-70 from Ukraine are possibilities with details to be worked out.

Focused on platforms, Bogdanov gives short shrift to organizational and human aspects of VVS development.  He notes the Air Forces are completing the change from mission-oriented air armies and divisions to territorial composite or mixed formations (air bases), and he briefly mentions scandals over the handling of “order 400” premium pay.  But he concludes:

“In coming years we’ll see more than a few painful symptoms in the VVS, both strictly aviation-related and internal, and those connected to the general background of difficult transformations of the country’s armed forces.  Let there be pains, but let them be growing pains.”

Done Deal

Mistral Contract Signing

The deal for the first two Mistrals, that is.  With President Medvedev looking on, Rosoboroneksport’s Anatoliy Isaykin and DCNS’ Patrick Bouasie signed the contract at the Petersburg International Economic Forum.  RIA Novosti quoted Isaykin on the €1.2 billion price.  Work can begin after the Russians pay an advance (Versii.com repeated a rumor that the French wanted 80 percent prepayment). 

RIA Novosti also noted Isaykin saying the Russian Mistrals will be identical to French units except they’ll have reinforced hulls and flight decks to handle Russia’s northern waters, and its heavier helicopters.  Isaykin said Russia has an option for two more Mistrals to be built in Russia.  But it’s up to the Defense Ministry to get money for them in the Gosoboronzakaz.

ITAR-TASS made the point that the Senit 9 tactical command and control system, and its documentation, are part of the just-inked deal.  OSK General Director Roman Trotsenko told Rossiya-24, “The French side has gone to an unprecedented level of technology transfer and is transferring technologies, including the programming source codes for battle information-management systems, communications systems.”

Kommersant reported the first Russian unit is expected in 36 months, the second in 48, or 2014 and 2015 respectively.   It cited Trotsenko on Russia contributing up to 40 percent of the work on the two ships to be built at STX in Saint-Nazaire.

While the Mistrals will come with French electronics, the Russians will have the task of outfitting the ships with their own weapons, helicopters, amphibious assault craft, and other systems.

Radio Svoboda asked for some thoughts about the occasion.  NVO’s Viktor Litovkin opined that these expeditionary warfare ships don’t make much sense under Russia’s current military doctrine or in the context of defending the Kurils.  Pavel Felgengauer said the Mistrals may be appropriate for fighting enemies with weak air and naval forces, but Russia’s leadership hasn’t specified who they might be.  Viktor Alksnis complained that they are another stake in the heart of Russia’s dying OPK.  He calls for Russia to modernize its own arms production base instead of buying abroad.  He also fears the French could put an “off switch” in the ships’ C2 systems, effectively turning them into “target barges.”

Aleksandr Golts supports the deal because Russian shipbuilders will participate and get new technologies, but he also because he favors the emphasis on force projection rather than the Navy’s pro-SSBN mission.

Navy CINC, Admiral Vladimir Vysotskiy made some appropriately effusive comments about the capabilities and prospects for employing the Mistrals.

Mistral in Piter (photo: Izvestiya)

Defense Minister Serdyukov was less willing to elaborate saying:

“Let’s build them first, and then we’ll think about where to deploy them.  We have plans to employ them, when they’re closer to ready we’ll disclose them.”

In Moskovskiy komsomolets, Olga Bozhyeva writes that the Mistral deal does several things for Moscow.  An arms sale like this implies a level of acceptance by Europe, it divides old and new Europeans, and it serves as a wedge between the U.S. and its European allies.  She notes that Russian military leaders have kept pretty quiet about Mistral.  And Bozhyeva concludes, overall, it’s a bad deal for Russia.  It’s a high price tag for something that’s not a priority for the fleet.  Its missions are not well thought out.  A relatively old system like Senit 9 won’t help Russia catch up very much.  And Russia didn’t seriously consider Dutch, Spanish, or South Korean shipyards to drive the French price down, but:

“. . . we would have to exclude a certain corruption component, which, in the opinion of many experts, is included in the Russo-French contract (but it’s better to leave this subject to the procuracy).”

As is often the case, Nezavisimaya gazeta sums it all up best:

“The Glavkom [CINC] ought to specify the countries on which our Navy intend to ‘project the power’ of the LHD.  Judging by the fact that it’s intended to deploy the first two ships in the Pacific Fleet, for the defense of the Kuril Islands (can it really be that someone intends to attack them?), then Japan—ally of the U.S., China—our strategic partner or North and South Korea could be the object of this projection.  Again with Seoul it’s somehow uncomfortable.  It’s also an ally of Washington.  And don’t mention projecting power on Pyongyang, apparently, even the Americans aren’t risking doing this.”

“And not everything’s clear with our deck-based aviation for ‘Mistral.’  Our attack helicopters, Mi-24, Mi-28N, Ka-52, and naval Ka-27, Ka-28, Ka-31 are bigger (higher) in their dimensions than French ones, so it’s necessary to redesign the LHD’s hangar deck for them.  This means extra expenditures of financial resources, as well as a change of extremely weak armament for this ship.  Including even air defense.  There are also other problems.  Like the construction of a shore base for the deployment of ‘Mistrals’ on the country’s eastern shore, on the Pacific Ocean.  It still isn’t there.  But to keep such a huge hull tied up at anchor in Petr Velikiy Gulf or in other Far Eastern bays, like it was with domestic Proyekt 1123 class helicopter carriers ‘Moskva’ and ‘Leningrad,’ means to expend their service life in vain and kill it without reason.”

“In a word, the French LHDs, which should enter our Navy’s inventory in 2014 and 2015, could be not a reinforcement of our groupings of ships, which, by the way, also still need to be built up, but a headache for Russian admirals.”

Government Hour (Part II)

There was plenty of interesting media coverage of the Defense Minister’s meeting with the Duma on Wednesday, and plenty of criticism of what he said or didn’t say.  Plenty worth covering in a Part II, especially regarding Serdyukov’s effort to shift the blame for another failing GOZ.

Radio Svoboda quoted KPRF deputy Vladimir Ulas putting all the blame for the army’s current state right at Anatoliy Serdyukov’s feet:

“The public clearly understands that the situation in the Armed Forces is far from favorable.  Constant scandals which rock this department, the morale-psychological situation in which personnel, first and foremost, the officer corps, find themselves, both the material condition, and the lack of modern armaments – all these problems are completely real.  I also hoped to hear answers to questions, how the Defense Ministry intends to solve them, from the minister.  But, to my greatest regret, the biggest, in my view, problem of today’s Armed Forces is the absolutely dense incompetence of the military leadership.  With people like Serdyukov still heading our Armed Forces, and he, unfortunately, is far from the only one, hoping for some kind of positive shifts is absolutely senseless.”

There was plenty more to be said about problems with the GOZ, the OPK, and the VPK and Defense Ministry blaming each other for what looks like a failing GOZ-2011.

KPRF deputy Anatoliy Lokot told Nakanune.ru:

“I have the impression that these sessions are ‘closed’ to hide the bitterness of the questions and negative results of the work of Military-Industrial Commission (VPK) and Defense Ministry leaders.”

United Russia’s Igor Barinov reiterated what he said he told President Medvedev a year ago:

“I noted then that the lack of competition and incomprehensible system of price formation in the VPK is a deadend path.  We’re reaping the fruits of this now.  Judge yourself:  one, well, a maximum of two enterprises produce this or that type of our armament or military equipment.  Meanwhile, enterprises getting money from the federal budget dispose of it as they wish.  Prices simply come from the ceiling.  No one bears any responsibility for quality.  No one invests money in improving types of military equipment, in the end it goes that even in infantry weapons we’ve fallen behind.  Our legendary automatic weapon Kalashnikov, the value of which everyone recognized before, now lags the best Western types in tactical-technical characteristics.  And so it is in almost every area, with rare exceptions in the areas of missiles and some aircraft.”

“The Defense Ministry announced it won’t buy airborne combat vehicles [BMDs] and infantry combat vehicles [BMPs] from ‘Kurganmashzavod.’  This enterprise was one of the guilty in breaking the Gosoboronzakaz.  And here’s the thing in this.  ‘Kurganmashzavod’ is part of the United ‘Tractor Plants’ Corporation.  Budget money is shared out with ‘Kurganmashzavod’ in a targeted way for the purchase of equipment, but the corporation’s directors dispose of it according to their discretion, and, naturally, BMP and BMD production is the last thing of concern for the owners of this holding company.”

“If they understand that they can be deprived of budget resources, then this enterprise will be forced to invest in quality, and in cutting defects, and in the improvement of product types.  In addition, strict supervision is needed.  Money was allocated but no one asked anyone about this money, and the result was zero.”

The KPRF’s Lokot also dwelled on the GOZ:

“It’s obvious that if the Gosoboronzakaz isn’t formed in the first half of the year, then nothing will be accomplished in the remaining part of the time since money will only begin coming in at the end of the year.  Serdyukov acknowledged that today 13.4% of all contracts in the plan have been formed.  Some time ago, Sergey Ivanov gave us other numbers.  But I think that this number juggling was caused by competition between the Defense Minister and the Military-Industrial Commission.  Ivanov lumps all the blame on the Defense Ministry, Serdyukov – on the defense-industrial complex.  He even began his [Duma] speech with this, saying that the military-industrial complex is guilty of everything.  They have poor qualifications, technology losses, poor production and so forth.  But really at a minimum the Defense Ministry itself bears 50% percent of the responsibility for such a situation.”

“I have given the example of Novosibirsk proving the obvious guilt of the Defense Ministry in breaking the order.  One of the enterprises – the Lenin Factory, which puts out very important products for infantry weapons, became a victim of Defense Ministry officials.  In January this year, Serdyukov opened a state order tender with his signature, but closed it in March.  Now half the year is gone, and there are no results.  The enterprise isn’t working, products aren’t coming out, 211 million rubles spent on reequipping won’t bring any returns, and now they’re generally talking about cutting part of the work force.

“Right in Novosibirsk at the Comintern Factory the S-400 surface-to-air missile system is being produced on the enterprise’s own money, and not with government resources.  Serdyukov says:  ‘I don’t see anything terrible in this, let the enterprise do it on its own money.’  But where does it get its capital resources?  What world is Serdyukov living in?”

Vedomosti talked to a former Defense Ministry official who basically said the threat of arms purchases abroad really didn’t scare anyone.  And, according to him, although Serdyukov considers defense industry leaders lazy and prone to stealing, everyone understands imports can never replace domestic production.  Finally, a source close to the PA told the business daily that Serdyukov himself opposes the Mistral acquisition because of the large expenditures required to build its base infrastructure.

Mistral Endgame?

Mistral (photo: ITAR-TASS)

Maybe.  Maybe not. 

The Mistral contract endgame may in fact be upon us.  But some major players have warned (more than once) of a protracted negotiating process.

Kommersant reports Rosoboroneksport and DCNS signed a “contract” on June 10 for the first two Mistral units, according to a source familiar with the course of negotiations. 

After meeting President Medvedev at the G8 summit on May 26, French President Sarkozy said a “contract” would be signed in 15 days [that would have been June 10].  Now Sarkozy also said in late May that a Mistral “contract” would be signed on June 21 when Prime Minister Putin visits France.  Kommersant suggests this could be an official unveiling of whatever was signed on June 10.  But an RF government source said this isn’t planned, according to ITAR-TASS

As for the terms and price . . . the Russians were insisting that the Mistral come equipped with the SENIT 9 tactical combat information system and licensed rights for €980 million, but the French were saying no such tech transfer for €1.15 billion.  Also according to this story, the French don’t intend to provide SIC-21 in the Mistral package.

In contrast to Kommersant, RIA Novosti says what was signed last week was no more than a “protocol of intent” to sign a “contract.”  The news agency said the date and place for the “contract” signing remains up in the air, but it could be the international naval exhibition in St. Petersburg from June 29 to July 3.

It also says the price will be between €1 and €1.2 billion, and the French military still opposes giving SENIT 9 to Russia.

Rosoboroneksport’s press-service denied that a “contract” has been signed, and told media outlets the negotiations are in their concluding phase, and a Mistral contract is in the process of “technical formation.”

Utro.ru sums up what many may think about acquiring four units of Mistral:

“Military experts still don’t know precisely why Russian sailors need them, since all of two [sic] ships will scarcely substantially change the situation in the fleet.  It’s not excluded that Russia, first and foremost, wants the technologies the French use in constructing ‘Mistrals.’”

It’s also not excluded that perhaps some involved want the deal itself, commissions, bribes, and kickbacks, more than they want the ships.

Civilians Now Top Military Diplomats

There’s great interest in the new civilian chief of the Defense Ministry’s Main Directorate for International Military Cooperation (GU MVS).  With yesterday’s decree, President Medvedev appointed career diplomat Sergey Mikhaylovich Koshelev to this post.  Koshelev had been Deputy Director of the Foreign Ministry’s Department of Security and Disarmament Issues (DVBR or ДВБР).

Koshelev’s appointment followed that of former DVBR Director Anatoliy Antonov to be Deputy Defense Minister for International Military Cooperation.  So presumably close colleagues Koshelev and Antonov will collaborate again to promote Russia’s military interaction with foreign armies, with the former acting as the latter’s right hand.  The burgeoning “reload” or “reset” with the U.S. Defense Department and with NATO will be a principal preoccupation. 

According to ITAR-TASS, Koshelev has concentrated on strategic negotiations — including START, INF, missile defense, and military space issues — during his diplomatic career.  Today’s Rossiyskaya gazeta notes Koshelev had an active hand in negotiating the new START Treaty with the U.S.  The paper forecasts  he will be active on the issue of European missile defense.

Kommersant writes that Koshelev was born in Moscow on 26 June 1957.  In 1983, he graduated from the Institute of the Countries of Asia and Africa, proceeding to work in the diplomatic service in India.  From 1995, he worked on export control in the DVBR.  In 1998-2003, Koshelev was a counsellor in Moscow’s permanent mission to the U.N. Disarmament Conference in Geneva.  In addition to serving as DVBR Deputy Director, he was also chief of its multilateral disarmament section.  He was promoted to Russia’s third highest diplomatic rank — Envoy Extraordinary and Plenipotentiary Second Class — in 2008.

Gazeta.ru and Gzt.ru postulate, not without some basis, that Antonov and Koshelev will be part of a new negotiating team for the Mistral purchase.

It’ll be interesting to see what Koshelev and Antonov do with GU MVS, a storied organization somewhat adrift in recent years.  Koshelev relieves acting chief, Colonel Yelena Knyazeva, an interesting character in her own right.  The press notes that General-Major Aleksey Sukhov was dismissed in 2010.  His predecessor was General-Lieutenant Vladimir Fedorov, who had headed the UVS — External Relations Directorate, charged with supervising foreign military attaches in Russia and Russian ones abroad.  We’ve noted on these pages that General-Colonel Anatoliy Mazurkevich left in a hurry when Defense Minister Serdyukov arrived, and General-Colonel Leonid Ivashov discovered the Defense Ministry wasn’t big enough for him and Sergey Ivanov.

So GU MVS once got its leadership from the ranks of Russia’s military diplomats, its military attaches, i.e. from its military intelligence officers and the GRU.  In Gzt.ru, Ivashov described the old GU MVS as an “instrument for warning of military dangers and threats to the USSR and Russia” [i.e. the GRU’s strategic military intelligence mission], but he acknowledged those days are gone and this main directorate has been “reformed” in recent years.

Smiling, But Not About Mistral

Anatoliy Isaykin

FGUP Rosoboroneksport General Director Anatoliy Isaykin is smiling, but not about Mistral.

In fact, Isaykin’s poured cold water on thoughts of quickly resolving the Russo-French impasse over these helicopter carriers.

As if to answer anyone looking for a date when negotiations will be completed,  Voyenno-promyshlennyy kuryer quotes Isaykin:

“Dates are guesses.  Such contracts, when we’re talking hundreds of millions of euros, — this is years and years of negotiations.  It’s simply funny to expect we’ll conclude such a contract over several months.”

Of the complex and lengthy contracting process, VPK says don’t expect a detailed contract to be signed earlier than next year.  The political agreement on the acquisition was one thing, but now there’s routine pre-contract work which takes months, if not years, agreeing step-by-step on hundreds of points and compromises.

Recall early this year Isaykin was very reserved about the political agreement on Mistral, reminding the press it contained nothing about costs or timeframes.