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. Last Updated: 07/27/2016

In Defense of Fatherland or Own Pocket?

Amusing things are occurring in the country's defense industry. In July, the state-owned Komsomolsk-on-Amur Aviation Production Plant, or KnAAPO, sued the (also state-owned) Sukhoi Aviation Military Industrial Complex, or AVPK Sukhoi. The grounds for the suit were that AVPK Sukhoi had tapped into the earnings from a contract signed by KnAAPO to supply China with Su-27 fighter jets. The reason: They need money to develop a fifth-generation fighter plane. Let's try to get to the heart of the matter.

Should a production plant hand over money for the development of a fifth-generation fighter?

"No it should not," they will tell you in Khabarovsk region, "because in the state-owned enterprise in Moscow the money will just be looted." "Yes it should," they will say at AVPK Sukhoi, "because the top management of state-owned KnAAPO lives only for today -- but what is it going to sell tomorrow?"

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Both are right. In this country, the problem of constructing a fifth-generation fighter jet simply cannot be resolved by a state holding company. All the money designated for technological modernization will be pilfered and the earnings received from exporting existing planes will be used up.

What you could do is privatize KnAAPO. Then the owners themselves could put aside funds for modernization, not so that the money could then be spent on lavish dachas for corrupt officials, but to fund R&D at a design bureau controlled by the owners.

There is a precedent. Irkutsk Aviation Plant, which produces the same Su fighters (only its contracts are with India, not China) blows huge amounts of money on research. It recently bought Russkaya Avionika, the best Russian design bureau in the field, and set about serious modernization of the Su planes. The only difference between the Komsomolsk and Irkutsk plants is that the latter is private. Furthermore, privatization of KnAAPO at the moment would be pure fantasy, as it contradicts the prevailing economic trend toward strengthening state ownership in the defense industry. The St. Petersburg entourage of President Putin, which is still too weak to take on the big boys over control of oil, aluminum and steel enterprises, is happily cutting its teeth on private defense enterprises.

The official concept for restructuring the defense industry not only envisages the creation of 48 centralized holding companies, but also would include in these holding companies already privatized enterprises. The Irkutsk plant is to be swallowed up, which would ruin a genuinely successful enterprise in the name of some mythical modernization in the future. This program was lobbied by Ilya Klebanov, then deputy prime minister responsible for the defense industry, and current industry, science and technology minister.

Klebanov is also the author of two more outstanding ideas, in which the common good coincides with that of the agencies under him with astonishing precision. First: Why don't we force private defense enterprises to pay for the intellectual property created during the Soviet Union? (Read: Let's bankrupt them and place them under the management of Klebanov's ministry.) Second: Let's force arms exporters to contribute money to a fund that the army can draw on to buy new weapons. It is not at all clear why such a fund should be financed by the defense industry. Maybe it would be better to legalize prostitution and slap a weapons procurement tax on hookers. Then the girls standing on Tverskaya could collect money in aid of a fifth-generation fighter, as they pass on venereal diseases.

If any modernization did take place in the past 10 years it was at the expense of privatized enterprises. Now, the plan is to take money from these enterprises and pour it into a bottomless pit in the name of modernization. In the past, it would have been said that the authors of such proposals were in the pay of the CIA, Mossad and MI5. I am much more inclined to believe that those involved are just trying to fill their own small pockets.

Yulia Latynina is a journalist with ORT.