Putin Says No Cuts in Defense

Prime Minister Vladimir Putin said Wednesday that the state would not cut spending on defense contracts this year but called on fighter jet maker MiG to improve quality.

Putin, who presided over a budget-revision meeting Tuesday, said the decision to keep defense contracts "fundamentally" unchanged was final. He made the statement at a meeting with the country's chief arms designers.

Deputy Prime Minister Sergei Ivanov said recently that the federal budget allocates more than 1 trillion rubles ($28 billion) for the contracts in 2009.

Total spending this year is projected at about 9.5 trillion rubles.

Putin scolded senior MiG managers Wednesday over losses and debts at the company and urged them to improve quality, apparently referring to Algeria's rejection of several jets last year.

The government will increase MiG's equity capital by buying 15 billion rubles worth of shares, Putin said, without specifying when it would happen.

MiG ran up 45 billion rubles of debt and incurred losses of 11 billion rubles last year, Putin said. It spent 4.5 billion rubles servicing the debt in the last three quarters alone, he said.

"Additional difficulties with financing arose from the rejection of a portion of exported equipment," he said, according the Cabinet's web site. "I am sure that you must draw serious conclusions for the future regarding the quality of our products."