Defense industry of Russia
Encyclopedia
The Defense industry of Russia is a strategically important sector and a large employer. It is also a significant player in the global arms market. Russia is the second largest conventional arms exporter after the United States, with $8 billions' worth of exports in 2008.

Economic significance

Russia's defence industry employs 2.5 – 3 million people and accounts for 20% of all manufacturing jobs. The combined revenue of the industry's 20 largest companies in 2009 was $12.25 billion.

State orders

During the crisis years of the Russian economy, the country's defence industry survived mainly on exports. Today, domestic defence procurement is an important source of income for the industry. State orders for military equipment have risen considerably during the last decade. While in 2002, the State Defense Order amounted to only RUB 62 billion, by 2007 the sum had risen to RUB 302.7 billion. When calculated in constant 2000 prices, this represents an increase by a factor of two.

The State Defense Order for 2009 was expected to amount to a record of RUB 1.2 trillion, showing an increase of RUB 70 billion from the previous year. The order was expected to be raised by a further RUB 40 billion for 2010, and by RUB 60 billion for 2011. In total, the state plans to spend $128 billion in military procurement in the 2009–2011 period. Military-Industrial Commission of Russia
Military-Industrial Commission of Russia
The Military-Industrial Commission of the Russian Federation was established by a ukaz in March 2006. According to the decree, it is a permanently functioning body with vast responsibilities for supervising the distribution and implementation of the "State defense order"...

 is responsible for supervising the distribution and implementation of the State Defense Order.

Exports

Russia is the world's second largest conventional arms exporter after the United States. In 2008, the Russian defence companies delivered over $8 billions' worth of arms to foreign customers. The most popular types of weaponry bought from Russia are Sukhoi
Sukhoi
Sukhoi Company is a major Russian aircraft manufacturer, headquartered in Begovoy District, Northern Administrative Okrug, Moscow, famous for its fighters...

 and MiG
Mig
-Industry:*MiG, now Mikoyan, a Russian aircraft corporation, formerly the Mikoyan-Gurevich Design Bureau*Metal inert gas welding or MIG welding, a type of welding using an electric arc and a shielding gas-Business and finance:...

 fighters, air defense systems, helicopter
Helicopter
A helicopter is a type of rotorcraft in which lift and thrust are supplied by one or more engine-driven rotors. This allows the helicopter to take off and land vertically, to hover, and to fly forwards, backwards, and laterally...

s, tank
Tank
A tank is a tracked, armoured fighting vehicle designed for front-line combat which combines operational mobility, tactical offensive, and defensive capabilities...

s, armored personnel carriers and infantry fighting vehicle
Infantry fighting vehicle
An infantry fighting vehicle , also known as a mechanized infantry combat vehicle , is a type of armoured fighting vehicle used to carry infantry into battle and provide fire support for them...

s. Aviation products make up about half of the country's arms exports.

Since 2007, the government-controlled consortium Rosoboronexport has had a legal monopoly on Russian arms exports. All exports must proceed through Rosoboronexport, although 22 firms are allowed to independently export spare parts and components. In 2010, total Russian arms exports amounted to $10 billion. Rosoboronexport's share was $8.6 billion, with independent suppliers making up the difference.

The Moscow-based independent defense think-tank Centre for Analysis of Strategies and Technologies
Centre for Analysis of Strategies and Technologies
The Centre for Analysis of Strategies and Technologies is an independent, noncommercial, nongovernmental organization, which carries out research and analysis on Russian conventional arms trade and defense trends both nationally and internationally...

 has analysed the identified exports of Russian weapons in the year 2009. The share of different weapon types was the following: 61% Aerospace, 21% Ground, 9% Naval, 8% Air Defense and 1% other. Algeria
Algeria
Algeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...

 was the top customer with an export share of 29%, followed by India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

 (25%) and China (10%). Vietnam
Vietnam
Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...

 became Russia's largest weapons customer in terms of new contracts signed in 2009, especially due to a large order for six Project 636M Kilo-class submarines. Vietnam is expected to considerably increase its share of Russian arms exports in the future.
Russian arms exports by year
2001 2002 2003 2004 2005 2006 2007 2008 2009
$3.7 bn $4.8 bn $5.6 bn $5.8 bn $6.1 bn $6.5 bn $7.4 bn $8.3 bn $8.8 bn

Companies

According to Centre for Analysis of Strategies and Technologies
Centre for Analysis of Strategies and Technologies
The Centre for Analysis of Strategies and Technologies is an independent, noncommercial, nongovernmental organization, which carries out research and analysis on Russian conventional arms trade and defense trends both nationally and internationally...

 (CAST), the most successful businesses in the sector are aerospace and air defense companies. The centre's 2007 rating puts the air defense missile producer Almaz-Antey
Almaz-Antey
OJSC "Concern PVO "Almaz-Antey" is a Russian joint undertaking in the arms industry, a result of a merger of Antey Corporation and NPO Almaz, unifying some of the national military enterprises, in particular, the developers of anti-aircraft defence systems . The organisation is headquartered in...

 in the top position (revenue of $3.122 billion), followed by Sukhoi
Sukhoi
Sukhoi Company is a major Russian aircraft manufacturer, headquartered in Begovoy District, Northern Administrative Okrug, Moscow, famous for its fighters...

 ($1.863 billion) and Irkut Corporation ($1.207 billion). These companies employ 81,857, over 30,000 and 11,585 people, respectively. Across the top 20 rated companies, growth in military production averaged more than 25% in 2007.

In 2008, the combined revenue of Russia's top 10 defense companies grew by 26% from the previous year, amounting to almost $12 billion. The top company was again Almaz-Antey, which boosted its revenue to $4.3 billion. Russian Helicopters
Russian Helicopters
Russian Helicopters is a helicopter design and manufacturing company headquartered in Moscow, Russia. The company designs and manufactures civil and military helicopters...

 produced 122 aircraft in 2008, increasing its revenue from $724 million to $1.7 billion. Uralvagonzavod
Uralvagonzavod
Uralvagonzavod is a Russian machine building company located in Nizhny Tagil, Russia. It is one of the largest scientific and industrial complexes in Russia and the largest main battle tank manufacturer in the world....

 earned $640 million by making 175 T-90 tanks: 62 for the Russian military, 60 for India, and 53 for Algeria, according to CAST.

The five largest companies of the industry in 2009, based on revenue, were:
  1. Almaz-Antey
    Almaz-Antey
    OJSC "Concern PVO "Almaz-Antey" is a Russian joint undertaking in the arms industry, a result of a merger of Antey Corporation and NPO Almaz, unifying some of the national military enterprises, in particular, the developers of anti-aircraft defence systems . The organisation is headquartered in...

     – air defence systems
  2. United Aircraft Corporation
    United Aircraft Corporation
    United Aircraft Corporation may refer to one of the following:* United Aircraft Corporation, formerly United Aircraft and Transport Corporation; now known as United Technologies Corporation....

     – fixed-wing airplanes
  3. Tactical Missiles Corporation
    Tactical Missiles Corporation
    275px|rightOJSC Tactical Missiles [ Weapons ] Corporation or KTRV for short is a major Russian weapon manufacturer. Headquarters in Korolev, Moscow Oblast....

     – air- and naval-based missiles
  4. Russian Helicopters
    Russian Helicopters
    Russian Helicopters is a helicopter design and manufacturing company headquartered in Moscow, Russia. The company designs and manufactures civil and military helicopters...

     – helicopters
  5. Uralvagonzavod
    Uralvagonzavod
    Uralvagonzavod is a Russian machine building company located in Nizhny Tagil, Russia. It is one of the largest scientific and industrial complexes in Russia and the largest main battle tank manufacturer in the world....

     – main battle tanks

Problems

Problems in the industry include a high level of debt, inflation and lack of qualified personnel. In 2008, it was reported that only 36% of strategic defense enterprises are solvent, while 23% are on the verge of bankruptcy. Significant portions of the increases in Russia's defense procurement budget are being eaten up by inflation: while the country's overall inflation rate in 2008 was 13%, in certain weapon categories the figure was more than 30%. Many skilled workers are nearing retirement age, and young graduates are hesitant to enter the industry due to low wages and insufficient career opportunities. In 2009, a senior official said that the Russian defense industry had effectively "reached its ceiling" and could not take on any more orders. Further growth will require a serious upgrade of production facilities, as well as investment in skills and training.

See also

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