Four new defense holdings in Russia

Russian government is about to form four new defense holdings in the sphere of aviation engines. President Putin signed the decree on creating the first one on the basis of the state owned Moscow based Salyut. The main objective of the integration is creating the new generation engines. The President attended the interdepartmental meeting held in St.-Petersburg concerning the development of the industry.

Putin publicly specified the strategic goals of the newly formed United Aviation-Building Corporation, which before 2025 is to make 300 passenger planes annually and double the manufacture of the military aircraft. He demanded to work out the long-term strategy of the development of gas-turbine industry in the shortest possible terms. The document is to set the priority directions for the period before 2015, and also for the long term - till 2025 at least.

One more holding will be created on the basis of the St. Petersburg based JSC Klimov and Moscow based plant Tchernysheva, the third - on the basis of the Samara Center of Aviation Building (including Kuznetsov, Metallist-Samara and Motorostroitel) and the last - on the basis of the enterprises located in Perm, Rybinsk and Ufa. President Putin supported the plans of passing over the state owned stock of the above companies to Rosoboronexport’s daughter Oboronprom. The latter had just increased its capitalization at the respective decree of the President. Oboronprom is to ensure the state owned controlling interest in the companies where so far have the government has a minority stock.

The First Vice-Premier Sergey Ivanov stressed that the government does not refuse from the idea of the private-state partnership. Just on the contrary, we welcome it, he said. Keeping in mind difficult financial situation of the Samara based enterprises their integration into the holding will go together with a number of measures of financial support from the state.

Most interesting and difficult developments are likely to take place along the axis Rybinsk – Perm – Ufa. The media interprets the governmental decision using the term attaching Saturn and UMPO to Perm Motors. However, private owners of Saturn and the biggest shareholder Yuri Lastochkin had repeatedly acted against all plans of integrating their company into something else. Last year it resulted in a public scandal between Lastochkin and Sergey Chemezov, the head of Rosoboronexport, which tried to buy the controlling stock of Saturn. Then Lastochkin accused some ROE’s manager of being unprofessional. On the other hand the state has 37% of Saturn’s stock and a powerful incentive – the 5th generation engine tender. UMPO, which has not acted independently in the past years, is likely to accept any development. Today the position of its administration is in favor of Saturn.

Certainly, media immediately started to produce tons of different materials representing the interests of various parties. An authoritative source called the situation around Saturn actual nationalization. Vatagin, the head of Klimov, just attended by the President, voiced in favor of two, not four holding. For sure it is just a first flow of interpretations. It is important to keep in mind that although the process reached the stage of presidential decrees, principal correction may still be taken.

For example, even today the head of the Federal Agency on Industry Boris Aleshin assumed that all four holdings will be finally incorporated into one structure. This is strange, as it runs contrary to the previous statements from a higher level, but some authoritative media sources confirm the same assumption from other officials. Today Russia aviation engine industry consists of about 40 enterprises, of which seven are making the final product.

Yuri Seleznev

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Author`s name Alex Naumov