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RUSSIAN MILITARY-INDUSTRIAL COMPLEX: DEVELOPMENT UNDER
SANCTIONS RESTRICTIONS
S.N. Larin, Candidate of Technical Sciences, Leading Researcher
O.E. Khrustalev, Candidate of Economic Sciences, Senior Research Fellow
Y.M. Ermakova, Junior Research Scientist
Central Economics and Mathematics Institute, Russian Academy of Science (Russia, Moscow)
DOI:10.24412/2411-0450-2021-10-2-20-26
The article was prepared with the financial support of the Russian Foundation for Basic Research, project №19-010-00043a.
Abstract. Imposition of sanctions restrictions had a negative impact on the leading sectors of the Russian economy, slowing down their progressive development. It affected the Russian military-industrial complex, which is one of the most high-tech segments of the Russian economy. The article solves the problem of assessing the impact of sanctions restrictions on the Russian military-industrial complex and substantiates the importance of implementing import substitution programs for its innovative development. Research materials were obtained from open sources of the Russian press. To analyze and generalize them, authors used the methods of an integrated approach, statistical and economic analysis, comparison of indicators and others. As a result of the research, it was found that the introduction of sanctions restrictions initially created certain problems for the normal functioning of many industrial enterprises of the Russian military-industrial complex. However, subsequently, they essentially gave a purposeful impetus to its innovative development through the implementation of import substitution programs and other modern organizational and economic mechanisms. Their implementation and introduction into the activities of industrial enterprises of the Russian military-industrial complex opens up additional opportunities for the development of new industries, creates new jobs and increases the employment of the able-bodied population of the country.
Keywords: Russian economy, industries, development, sanctions restrictions, military-industrial complex, import substitution programs, organizational and economic mechanisms.
Introduction. The introduction by the United States, EU member states and their allies (spring, 2014) of sanctions restrictions against the development of the Russian economy had a negative impact, primarily on the leading industries and complexes of the Russian economy. They significantly reduced the volume of attracting foreign capital to finance many strategically important structural projects, prohibited the transfer of technologies, equipment and military and dual-use components for industrial enterprises of the Russian military-industrial complex, leading oil and gas companies, fuel and energy companies and number of other industries. Hereafter, the sanctions restrictions were repeatedly tightened, and their effect was extended to specific individuals and enterprises in the transport, oil production and a number of other indus-
tries, as well as to support the construction of Russian export gas pipelines [1]. Currently, all Russian companies can attract loans from abroad for a period not exceeding 14 days.
However, after seven and a half years, it became clear to everyone that the complex of sanctions restrictions did not achieve its goals. The political course of Russia has not changed, but the Russian economy has found internal reserves and, with the help of the implementation of import substitution programs, is gradually entering a growth trajectory. At the same time, in the foreseeable future, we should not expect the lifting of sanctions restrictions. It is rather difficult to assess the negative impact of sanctions restrictions on restraining the development of the Russian economy [2]. Most likely that such estimates will take a longer period of time. But today
there is every reason to assess how one of the leading sectors of the Russian economy, which is the military-industrial complex, was able to counter the sanctions restrictions with internal resources and new mechanisms of economic development through the implementation of import substitution programs. These aspects will be disclosed in this work.
Research objective. The purpose of the study is to obtain preliminary estimates of the impact of sanctions restrictions on the Russian military-industrial complex and substantiate the importance of the development and successful implementation of import substitution programs for its innovative development.
Materials and methods. As materials for the preparation of this article, authors used publications in the open press about the ways and methods of countering sanctions restrictions at the enterprises of the Russian military-industrial complex, reports on the implementation of import substitution programs, speeches by managers of different levels on the issues under study. To analyze and generalize this information authors used methods of an integrated approach, statistical and economic analysis, comparison of indicators and others.
Results and discussion.
1. Characteristics of the Russian military-industrial complex.
Military-industrial complex (MIC) can be characterized as one of the most high-tech segments of the Russian economy. Its products are designed to fulfill the important task of ensuring the defense and security of our country. Industrial enterprises of the Russian military-industrial complex make a significant contribution to the introduction of innovative developments and generate positive qualitative transformations in such important sectors of the economy as: aircraft and shipbuilding, the fuel and energy complex, transport, communications, healthcare and in a number of others.
In mid-2020, 1281 enterprises were included in the consolidated register of the MIC. They provided employment for almost 2 million people. Over 80% of the MIC enterprises are in the field of action of the Ministry of Industry and Trade (Ministry of Industry and Trade) of Russia [3].
The goals, principles, priority areas, tasks of state policy in the field of the MIC and the mechanisms for their implementation are determined in the main document of strategic planning - the Fundamentals of State Policy in the Development of the MIC.
Over a studying period, the Ministry of Industry and Trade of Russia, with the participation of relevant federal executive bodies and other ministries, developed and approved at the state level the Fundamentals of State Policy in the Development of the Military-Industrial Complex until 2020 [4]. The response to the changed military-political and socio-economic conditions in connection with the introduction of sanctions restrictions against the economy of our country was the Fundamentals of State Policy in the Development of the Military-Industrial Complex until 2025 and beyond, developed by the Ministry of Industry and Trade of Russia [5].
In 2016, the Ministry of Industry and Trade of Russia developed the state program of the Russian Federation "Development of the military-industrial complex" (SP MIC) [6]. This document provides significant costs for investment and research work on import substitution (microcircuits, components, parts, assemblies, etc.), measures of state financial targeted support of a sectoral nature in the form of various subsidies and state guarantees to the military-industrial complex, stimulating payments to their employees. In 2019, in order to ensure the fulfillment of the tasks of the new state armament program (SAP), the implementation period for the SP MIC extended until 2027.
The changed political, economic and technological conditions required a qualitative transformation of the military-industrial complex in the period from 2014 to the present to ensure the fulfillment of the SAP and the state defense order (SDO). As a result of these transformations were formed and created modern regulatory legal framework, tools for state support, modern organizational and institutional structure of the military-industrial complex, an advanced scientific and technological reserve, modern production facilities. Russian MIC were able to increase the output of high-tech competitive products, ensure the development of their human resources.
To improve the results of production activities in the MIC were created a number of large vertically integrated holding structures. They united enterprises into unified production chains and assumed the function of new centers of excellence. In 2008, 31 such structures functioned in the sphere of jurisdiction of the Ministry of Industry and Trade of Russia. They concentrated the output of 38.6% of industrial products in the MIC. And in 2020 were already functioning 40 such structures. They included over 600 organizations that produced about 84% of the industrial products of the MIC [3]. The creation of such structures helped to focus resources on the most significant, breakthrough projects to create and ensure the production of advanced models of weapons and military equipment (WME). The State Corporation «Rostech» occupies an important place among the integrated holding structures. It includes more than 80 parent and subsidiary holdings, such as PJSC «United Aircraft Corporation», PJSC «KAMAZ», JSC «United Engine Corporation», JSC «Russian Helicopters», JSC «Concern Uralvagonzavod», JSC «Concern Radio-electronic Technologies» and many others [7].
The difficult situation with the pandemic of coronavirus infection practically did not affect the pace of the actual implementation of the state defense order. By mid-2020, the Armed Forces received over 1,100 basic models of weapons and military equipment. By the end of 2020, the level of equipment of the army and navy with modern WME models was brought to 68% [8]. In addition, the MIC enterprises actively participated in ensuring the safety of the health of citizens and the state. They quickly ramped up production and carried out development and subsequent production of products aimed at countering the spread and combating the Covid-19 pandemic. These products include: thermal imagers and infrared thermometers, medical masks, anti-epidemic suits, devices for sterilization and disinfection of air and premises, detergents and disinfectants and apparatus, pharmaceutical refrigerators and freezers, artificial lung ventilation apparatus and extracorporeal membrane oxygenation apparatus.
The priority area for the development of the MIC is the diversification of production. It will become the basis for maintaining the potential and sustainable work of the MIC organizations in the context of a decrease in the state defense order. By order of the President of the Russian Federation No. Pr-2346 dated December 5, 2016, fixed the necessity to achieve the share of high-tech civilian and dual-use products (HTCDUP) in the total volume of products manufactured by defense industry organizations by 2020 -17%, by 2025 - 30%, and 2030 - 50%. According to the results of 2019, the share of HTCDUP in the MIC is 24.1% [9].
The most important direction in the development of the defense industry is the export of Russian military products (MP) within the framework of military-technical cooperation (MTC) of Russia with foreign states. Despite the sanctions restrictions, Russia holds the second place in the world in the supply of WME for export. The total volume of MP exports within the framework of the MTC in the period 2008 - 2019 amounted to more than 163 billion US dollars [10].
2. Import substitution problem.
Until 2014, the idea of economic globalization and division of labor markets prevailed in Russia's policy in the field of providing the army and navy with military equipment. The share of the dependence of the Russian MIC on the supply of foreign components, microcircuits, assemblies and parts was very high. The consequences of the collapse of the USSR contributed to the high dependence on imports. They led to the fact that many defense enterprises began to be located outside the country, but Russia continued to maintain close ties with them. In the activities of the MIC, the principle of reducing costs for the development of its own production of military equipment, associated units and components, while there is a possibility of their purchase in other countries, prevailed.
This policy had the right to exist until 2014. Even an unsuccessful deal of buying two Mistral-class universal amphibious assault ships from France did not lead to a loss of funds. Moreover, Russia gained access to technologies and design solutions, gained experience in building modern universal am-
phibious assault ships, similar to these ships have not yet been in the Russian fleet.
Serious problems were caused by the refusal of the authorities of the USA, EU countries and Ukraine to supply defense products to Russia, and in some cases also HTCDUP within the framework of sanctions restrictions. Following the United States, Japan imposed sanctions on the supply of composite materials to Russia and HTCDUP. This ban dealt a serious blow to the Russian project for the production of the MS-21 passenger aircraft. Its serial production was launched only in 2021. Even greater problems for the Russian MIC were brought by the refuse of Germany and Ukraine to supply ship engines, and Ukraine's refusal to supply aircraft engines. Added to this was a reduction in the supply of electronics by European and other traditional partners of Russia.
The most critical for the Russian MIC was the severance of relations with Ukraine. The dependence of the production of weapons and military equipment on the supplies of Ukrainian enterprises in the aviation, shipbuilding and rocket and space industries was enormous. Until 2014, almost all engines that were installed on Russian military and civilian helicopters were manufactured in Ukraine at the «Motor Sich» enterprise. In 2011, the Russian holding Russian Helicopters signed a contract with this enterprise for the supply of 1,300 helicopter engines to Russia for a total of $ 1.2 billion. Annually, the Ukrainian manufacturer had to transfer 250-270 engines to Russia. However, with the outbreak of hostilities in Donbass, this contract was terminated at the initiative of the Ukrainian side.
It turned out to be problematic to accurately determine the required volume of import substitution in the Russian MIC due to the confidentiality of information. However, the scale of the problem can be imagined in terms of statements in open sources of high-ranking officials. Thus, Dmitry Rogozin during one of his speeches noted that components and assemblies from NATO and EU countries (mainly radio electronics and optics) were used in 640 Russian-made weapons and military equipment. According to the former Deputy Minister of Defense of Russia, now Deputy Prime Minister of the Russian Federa-
tion Yuri Borisov, by 2025 the Russian MIC should replace the supply of imported components for 826 samples of military equipment. Other sources indicate that in order to replace only parts and components that came to Russia from NATO and the EU, it is necessary to modify at least 800 different models of Russian-made weapons and military equipment.
Therefore, it is no coincidence that in July 2014 Russian Government adopted the Import Substitution Program. In accordance with this program, it was supposed to replace about 700 samples of military equipment with components from Ukraine and more than 860 samples of military equipment with components from other foreign manufacturers. Completion of the replacement of components from Ukraine was completed by the end of 2017 and the replacement of foreign-made components - by the end of 2022 [1].
3. Results of import substitution in the Russian MIC.
Currently, the Russian MIC has made serious progress towards import substitution. At the same time, deliveries of the main types of weapons and military equipment are carried out without delay. At the end of 2019, the country's Armed Forces received 2.3 thousand units of modernized military equipment. The planned procurement and renewal indicators for the main models of military equipment this year were fulfilled by 47%, and in total, by the end of 2019, the share of new models of military equipment in the Russian Armed Forces reached 68% [8].
Russian President Vladimir Putin spoke about the progress of import substitution in the Russian defense industry on September 19, 2019. He noted that over the past six years the country has managed to make notional progress in the field of import substitution "in a number of significant areas". Technological independence is provided for more than 350 samples of military equipment. The President especially highlighted the successes in increasing the share of the Russian electronic component base, which is used in modern models of military equipment. Separately, he noted the beginning of the production of Russian engines for helicopters, as well as warships of the Russian Navy.
Today, the Russian MIC has completely overcome its dependence on the supply of helicopter engines from Ukraine. Back in 2019, Russian Helicopters managed to overcome this problem. The VK-2500 engine completely localized in Russia, which is produced by JSC Klimov, has become a replacement for the Ukrainian TVZ-117VMA engines [11]. These engines are installed on most of the "Mi" and "Ka" helicopters. According to the "Rostech" state corporation, in 2018 Ufa PJSC "ODK-UMPO" supplied 180 engine kits for VK-2500 engines. In addition, Russia has completely localized the production of the AI-222-25 engine, which is installed on the Yak-130 combat training aircraft, at the «Salyut» Gas Turbine Engineering Research Center [12].
The Russian MIC managed to solve the problem of replacing Ukrainian ship engines produced in Nikolaev. The break in militarytechnical cooperation led to a delay in the adoption of the frigates of the far sea zone of projects 11356 and 22350. So the second frigate of project 22350 "Admiral of the Fleet Kasatonov" was laid down back in 2009, but entered the factory sea trials only in 2019. A similar situation was with the frigate "Admiral Golovko", which was laid down in 2012. However, industrial enterprises of the Russian MIC have managed to overcome their dependence on Ukrainian gas turbine engines. Starting from February 2019, «ODK-Saturn» began to produce completely domestic gas turbine units for frigates of project 22350 under construction. On the rest of the frigates under construction, it is envisaged to use 10D49 cruising diesel engines manufactured by the Kolomna plant and the M90FR gas turbine unit manufactured by «ODK-Saturn» [13].
The successes of the Russian MIC in aircraft construction are noticeable too. At the same time, it is necessary to highlight both manned aircraft and unmanned aerial vehicles (UAVs). The localization of the production of the Il-112V military transport aircraft in March 2019 became a vivid example of import substitution [14]. This aircraft will replace the morally and physically obsolete An-26 aircraft, and will also become a direct competitor to the An-140T aircraft, developed
at the Antonov Construction Bureau in Ukraine. Back in 2011, the Russian military was going to purchase Ukrainian cars for transport needs.
An obvious success of the Russian defense industry was the creation of the S-70 "Okhotnik" heavy shock-reconnaissance drone in 2019. This unique UAV will be able to interact with the most advanced Russian fifth generation fighter Su-57. At the beginning of 2020, the Forpost-R drone will start to work with the Aerospace Forces. It is built using completely Russian-made components, with a Russian APD-85 engine and domestic software [14]. Previously, this UAV was assembled in Russia under an Israeli license from foreign components.
The result of the introduction of sanctions restrictions on industrial enterprises of the Russian MIC was the development and accelerated implementation of import substitution programs. Eventually, this entailed additional costs of several tens of billions of rubles, as well as delays in the delivery of individual samples of military equipment for a period from 1 year to 2-3 years. At the same time, the sanctions restrictions did not have a significant impact on the production of strategic nuclear weapons, which are the basis for ensuring the country's military security. This was largely due to fact that their production was initially based on Russian technologies and components, as well as on the use of production capacities of domestic industrial enterprises.
Conclusion.
Obtained results let authors formulate the following conclusions.
1. The main goals of the introduction of sanctions restrictions are clearly political in nature, expressed in the artificial creation of conditions for the growth of the technological backwardness of the Russian economy from developed countries, an increase in its dependence on purchases of foreign-made products up to the complete degradation of domestic production. Undoubtedly, the introduction of sanctions restrictions had a negative impact on the development of the Russian economy and its key industries.
2. However, the Russian economy in general and the Russian MIC in particular were
able to minimize the negative impact of the military equipment was not stopped. The sanctions restrictions in a short time and en- course towards import substitution does not tered the trajectory of gradual growth. To do mean complete isolation of the Russian pro-this, it was necessary to formulate develop- duction sector. n the field of the electronic ment strategies through import substitution, component base, Russia is actively develop-and as part of them, to develop mechanisms ing cooperation with China, which, after the to attract domestic and foreign investment, to introduction of Western sanctions, has bedetermine effective ways to carry out struc- come one of the key Russian partners in the tural and technological modernization of do- military-technical cooperation. mestic production in key industries. On this basis, we can conclude that the
3. It is obvious that the sanctions re- successful implementation of strategies and strictions have given impetus to the develop- programs of import substitution in the Rus-ment of the Russian MIC. Over the past seven sian MIC opens up new opportunities for the years since 2014, the Russian MIC got rid of development of new innovative industries, foreign dependence on many samples of mili- creates new jobs and increases the employ-tary equipment. At the same time, the process ment of the able-bodied population of the of re-equipping the army with new models of country.
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РОССИЙСКИЙ ОПК: РАЗВИТИЕ В УСЛОВИЯХ САНКЦИОННЫХ
ОГРАНИЧЕНИЙ
С.Н. Ларин, канд. техн. наук, ведущий научный сотрудник О.Е. Хрусталев, канд. экон. наук, старший научный сотрудник Я.М. Ермакова, мл. науч. сотр.
Центральный экономико-математический институт РАН (Россия, г. Москва)
Аннотация. Ввод санкционных ограничений оказал негативное влияние на ведущие отрасли российской экономики, замедлив их поступательное развитие. Оно сказалось на российском оборонно-промышленном комплексе, который является одним из наиболее высокотехнологичных сегментов российской экономики. В статье решена задача оценки влияния санкционных ограничений на российский оборонно-промышленный комплекс и обоснована значимость реализации программ импортозамещения для его инновационного развития. Материалы исследования получены из открытых источников российской печати. Для их анализа и обобщения были использованы методы комплексного подхода, статистического и экономического анализа, сравнения показателей и другие. В результате проведенных исследований было установлено, что введение санкционных ограничений изначально создало определенные проблемы для нормального функционирования многих промышленных предприятий российского оборонно-промышленного комплекса. Однако в последующем они по-существу придали целенаправленный импульс его инновационному развитию через реализацию программ импортозамещения и другие современные организационно-экономические механизмы. Их выполнение и внедрение в деятельность промышленных предприятий российского оборонно-промышленного комплекса открывает дополнительные возможности для развития новых призводств, создает новые рабочие места и повышает занятость трудоспособного населения страны.
Ключевые слова: российская экономика, отрасли, развитие, санкционные ограничения, ОПК, программы импортозамещения, организационно-экономические механизмы.
