15 february 2010

Prime Minister Vladimir Putin meets with Minister of Industry and Trade Viktor Khristenko and Head of the Federal Service for Military-Technical Cooperation Mikhail Dmitriyev

At the meeting, Mr Putin, Mr Khristenko and Mr Dmitrieyev discussed last year’s performance of the defence industry and its future prospects. The Prime Minister stressed that output in the sector rose in 2009. Special attention was given to the export of Russian-made arms, where a growth trend emerged.

The transcript of the beginning of the meeting:

Vladimir Putin: We have held a series of meetings recently to discuss the defence industry. The prime objective of our work is to provide our Armed Forces, the army and the navy, with up-to-date arms. But there is also another aspect to this work: our aim is to maintain our presence on world arms markets and master new markets.

In this respect, we have some marked achievements in recent years. We increased our sales from $3.7 billion in 2000 to $8.6 billion last year. This means that by engaging in foreign economic trade we have preserved a large number of jobs and contributed considerable resources to the defence sector and, therefore, to its modernisation and development.

Today we are cooperating with 85 countries round the world. I hope this is not all that our weapon makers are capable of. We are capable of moving further, to new and promising markets. The latest contracts that have been concluded testify to that.

We are still facing many issues and challenges. There is a problem of counterfeit products, and we need legal protection for our interests on world markets. We need to organise servicing of our products, provision of spare parts, and so on and so forth. But all these problems are connected with organisation of work in the defence sector as a whole. I expect that we will resolve these issues effectively not only inside the country, I repeat, inside the country, but also on the international stage.

Trade in arms and special equipment is both a business and an important foreign policy tool. Our approach to trade is carefully weighed. All our work in this area fully meets the obligations Russia has assumed under international agreements. So we should continue our work in the same vein. Let us now talk about issues connected with the organisation of this work, above all from the standpoint of requirements set to manufacturers, to defence industry production establishments.

Viktor Khristenko: Mr Putin, I would like to say first of all that 2009 was quite a successful year, as you have said, in the export of our military technical output. At the same time, the crisis could not but affect that sector. This perhaps explains why, as a token of special care, a variety of anti-crisis measures were taken in 2009 to assist the defence plants. We allocated about 6 billion roubles in subsidies as current loans for factories and plants. We put aside over 60 billion roubles as contributions to the companies' authorised capital. We issued 76 billion roubles in guarantees for these enterprises. All this has helped us not only to avoid lowering production in the defence industry but - according to our latest estimates - to boost it by more than 10% in 2009. That, of course, is an impressive growth.

Vladimir Putin: You mean to say the output in 2009, the volume of production in 2009 in the defence sector, went up rather than fell?

Viktor Khristenko: Yes, it grew by more than 10%. Exports play a substantial role both in the defence and in the non-defence sector. As you know, we have an effective system of support, including export loan subsidies for high technology industries and high technology products. Defence sector companies, too, receive such subsidies.

Last year, we allocated 9.13 billion roubles for subsidies, of which about 6 billion went to defence industry plants that supplied aviation and air defence equipment to external markets. That measure kept the plants afloat. We will continue supporting them.

In 2009, we also continued our drive to improve the quality of output in the defence sector. It is no secret that in many respects we need to change the ways the defence sector functions on foreign markets. We should create service facilities and an echeloned system of backing for our products on external markets. In 2009, another impressive stride was made in this direction.

As regards development projects, we and our colleagues already see that many products enjoy enhanced demand, and will continue to enjoy it in the foreseeable future. We are concentrating on development projects both for individual plants and for the defence industry as a whole, which is now undergoing renovation. This is all to be done in a new planning period. I think the positive trend, which is gathering pace both in problem solving and in improving performance figures, will continue in the current year.

Vladimir Putin: Usually, orders placed for aircraft, air defence equipment, naval equipment and weapons for ground forces are most promising and interesting for us. But a lot of work is also concerned with repairs and upgradings. Generally, how are your relations (turning to Mr Dmitriyev) shaping up with industry?

Mikhail Dmitriyev: On the whole I must say we have not experienced any great difficulties with supplies of military technical products for export. We are on an upward trend, and we are happy about that. Our order book keeps growing all the time and has now reached a very impressive size, so that Russia will be running at $9 to $10 billion a year in the coming years in the annual export of military-technical products.

Vladimir Putin: Our orders total $34 billion.

Mikhail Dmitriyev: Thirty-four plus a growth trend. The figure will increase greatly this year. The orders are mostly for aviation and air defence systems. You were right to stress that we should focus more on repairs and modernisation of our products, on service facilities. Our state mediator and other companies that have licenses and access to foreign markets are now working hard here.

There is definite progress and it is necessary to follow it up. On the whole, we look to the future with optimism. We do not have any big problems in the defence industry. In some fields, our plants have their hands full until 2016-2017 and foreign customers are even raising the issue of bringing the deadlines forward. Here some issues need to be addressed and we are trying to address them - by increasing production capacity. That is necessary in order to try and satisfy our buyers abroad.

Vladimir Putin: Now is the time to talk about ways of synchronising our efforts connected with exports and the need to resolve the headaches of our Armed Forces, our army and navy. I am referring to the export projects that we have recently discussed. We have certain capacities, and these are fully loaded up. We should look at what and how fast we can produce for ourselves, and what and how fast we will be able to supply to our overseas partners.