Ivanov Seeks Funds for Arms Makers

Arms manufacturers are experiencing cash flow problems because of the financial crisis and need help from state-controlled banks, Deputy Prime Minister Sergei Ivanov said Tuesday.

Weapons are one of Russia's most lucrative exports, worth $7 billion in 2007 according to officials, and arms makers are benefiting from a sharp rise in defense spending as the Kremlin seeks to restore its military might.

But Ivanov, who oversees the defense sector, said the liquidity crunch had left some manufacturers unable to complete contracts or pay their employees.

"The world financial crisis is hitting certain defense-sector producers quite hard," Ivanov said at a meeting with defense officials, Interfax reported. "A whole series of defense producers are experiencing a pressing shortage of cash flow to ensure their finished products are released and handed over to their customers."

He said the government had proposed that banks controlled by the state -- Sberbank, VTB and Vneshekonombank -- should consider offering credit to defense producers on favorable terms.

"We are talking, in particular, about ... providing loans to companies under contract to the Defense Ministry to ensure cash flow, including for paying wages to staff, extending previously agreed credit lines and subsidizing interest rates," Ivanov said.