Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

How to Define Strategic in the Broadest Sense

To Our Readers

The Moscow Times welcomes letters to the editor. Letters for publication should be signed and bear the signatory's address and telephone number.
Letters to the editor should be sent by fax to (7-495) 232-6529, by e-mail to oped@imedia.ru, or by post. The Moscow Times reserves the right to edit letters.

Email the Opinion Page Editor

Last week, sources at Rosoboronexport announced a possible partnership between the Magnitogorsk Iron and Steel Works, also known as Magnitka, and RusSpetsStal, a special steelmaker formed last year by Rosoboronexport. When news of this started to spread, RusSpetsStal's general director, Sergei Nosov, publicly denied such a deal was in the works.

The general director of Rosoboronexport, Sergei Chemezov, is a close ally of President Vladimir Putin. Chemezov has already gained control over a number of businesses, including VSMPO-Avisma, the world's largest titanium manufacturer, and AvtoVAZ, the Tolyatti-based carmaker. In fact, Chemezov's director at AvtoVAZ, Vladimir Artyakov, was appointed Monday as the governor of the entire Samara region.

The official reason given for Rosoboronexport's interest in Magnitka is that it manufactures specialized steel necessary to the defense industry. On that basis, any company in Russia producing anything related to defense could be swallowed up by Rosoboronexport -- except, perhaps, McDonald's.

There might be another reason, however, for the interest in Magnitka apart from the fact that it produces specialized steel. Nosov, in addition to being the director of RusSpetsStal, is also the grandson of the legendary general director of Magnitka and former director of the Nizhnetagilsk Metallurgical Plant. As one of Russia's top managers, Nosov was recruited by Evraz for the Nizhnetagilsk position as part of Evraz's plan to gain control of Magnitka.

What Nosov was unable to accomplish at Evraz, he might pull off at Rosoboronexport. The chronology of events certainly catches one's attention. Evraz co-owners laid claim to 30 percent of Magnitka's shares. Evraz, as part of its industrial turf battle with Magnitka, was successful for a long time in preventing the company's initial public offering.

In January, Putin flew to Magnitogorsk to enjoy some skiing and to meet with Magnitka's chairman, Viktor Rashnikov. In February, it was announced that Nosov would be appointed head of RusSpetsStal. Magnitka raised almost $1 billion in its IPO two months later, after which rumors began circulating of the company's planned partnership with RusSpetsStal. This creates the impression that the $1 billion from the IPO constitutes Rashnikov's severance pay. It also seems that Evraz, which for many years tried to gain control over Magnitka, relinquished its role as the hunter and has become instead the game warden, chasing the prey right into the government's gun sights.

The Kremlin is currently creating two types of corporations: oil and gas enterprises and state-owned holding companies that have been created to develop the high-tech sector. The true financial potential of such holding companies differs drastically from their hyped-up image created by the Kremlin PR machine. For example, according to the Economic Development and Trade Ministry's official white paper on long-term social and economic development, Russia's shipbuilding industry will control 20 percent of the world market by 2020. In reality, however, the construction on the aircraft carrier Admiral Gorshkov that India ordered from Russia is still unfinished, while the money paid for it has, well, disappeared somewhere.

If you compare all of these aviation, shipbuilding and other defense-industry holding companies with state-owned giants such as Gazprom and Rosneft, the difference is striking. There is no limit as to how much money can be earned from oil and gas, whereas only a limited amount of funding can be squeezed from the state budget for high-technology, aviation and similar projects.

Still, there is one way for the high-tech elite to earn unlimited money -- if they explain to the president that nanotechnology research and development can be successfully developed only if high-tech firms gained control of related industries, such as coal. You didn't know that nanotechnology requires nanocarbon tubes? Of course it does! No less than the defense industry relies on specialized steel.

Yulia Latynina hosts a political talk show on Ekho Moskvy radio.