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. Last Updated: 07/27/2016

Third of Arms Firms Face Bankruptcy

One-third of Russia's weapons makers are on the verge of bankruptcy, and the industry is seeking Western loans because domestic credit is impossibly expensive, Russian Technologies head Sergei Chemezov said Wednesday.

"The financial and economic condition of only 36 percent of strategic organizations in the military industrial complex can be seen as stable," Chemezov told lawmakers.

"About 30 percent of organizations [in the military industrial sector] have signs of bankruptcy," he said, adding that about half of the enterprises in the ammunition and explosives sector were "potentially bankrupt."

"Unfortunately, over the past four months the situation has only become worse," he said.

Chemezov said interest rates being offered by Russian banks were far too high and that he was in talks with Western banks.

"Credit is the most painful topic. With such high interest rates, we are simply unable to develop industry," he said.

"In the end, we will have to get these credits in the West, and we are holding talks because the cost of credit there is much less, several times less," he said.

A spokesman for Russian Technologies declined to name the Western banks involved or the sums being discussed.

Russian Technologies is a special state corporation that includes the assets of state arms exporter Rosoboronexport and has stakes in carmaker AvtoVAZ and VSMPO-Avisma, the world's largest titanium maker.

Deputy Prime Minister Sergei Ivanov told State Duma deputies on Wednesday that demand was tumbling by as much as 50 percent to 70 percent in some sectors.

"We can characterize the current industrial situation as a crisis of demand," he said.

Russian arms exports hit a record $8.35 billion in 2008, though industry officials have long warned that major investment is needed in research and productive capacity.

Some major clients, such as India, have complained about late deliveries on major orders, while Algeria returned 15 MiG fighters last year, saying they contained some substandard parts.