The Russians are making it perfectly clear to us: a union with Russia will mean restoration of trade relations, and frozen projects will be unfrozen. This conclusion suggests itself because, on the very first working day after Kyiv had failed to sign the Association Agreement, a Russian delegation with Vice-Premier Dmitry Rogozin at the head arrived in Ukraine and visited strategic factories in Kyiv, Dnipropetrovsk, and Mykolaiv oblasts. It also matters what Rogozin himself wrote in his Twitter microblog during and after the visit.
It is, among other things, about the military-industrial sector. For, no matter how hard our neighbors may be trying to persuade us that they are no longer interested in the Ukrainian defense industry, it is no more than a bluff. Let us look at things one by one.
According to Igor Korotchenko, member of the Russian Defense Ministry’s Public Supervision Board, the government has placed almost all its defense orders on the territory of Russia itself. Ukraine’s share in this accounts for no more than 1-2 percent. Korotchenko also says that if Ukraine signs the EU Association Agreement, Russia will not be keeping the Ukrainian industry afloat at its own expense. Bold enough! But, clearly, there is more politics than economic calculation in this statement.
Russia cooperates with Ukraine in certain sectors not at all for “keeping it afloat.” Russian military experts themselves are saying that it is beneficial for Russia to cooperate with Ukraine in the military field. “Ukraine still has, since the Soviet era, some enterprises that work like clockwork. The cost of labor is several times lower there than in Russia. A number of our businesses are inclined to believe that the customer must be satisfied with what it is given. But in Ukraine people are afraid to work like this. Ukrainian businesses will only survive if they put out products at a lower cost and of a higher quality than their Russian competitors do,” says Ruslan Pukhov, chief of the Center for Strategies and Technologies Analysis.
Moskovskiy komsomolets observer Olga Bozhieva is also skeptical of the officials’ claims that Russian can do without Ukraine in a number of projects. She offers some rather convincing arguments.
For example, here is what she says about producing the An 124 Ruslan military cargo aircraft whose documentation is kept at the Antonov State Company: “There are only shop-floor documents in Ulyanovsk [where the plane is finally assembled]. Even the Ruslan’s tail unit is made in Kyiv. And will a new plane fly far in this tailless configuration? But are we really unable to organize its production in Russia? We’ll be able to do so in 7 to 10 years’ time. As a result, the plane will be 5-7 times more expensive because we will have to update – at the United Aeronautical Corporation’s expense – the manufacturing technologies worked out back in the Soviet era at the governmental cost.” She believes that if costs are to be increased in this way, this may undermine the budget.
Incidentally, The Day’s sources at the Antonov State Company have confirmed that representatives of Russia’s United Aeronautical Corporation and Vice-Premier Dmitry Rogozin recently visited the enterprise to discuss further cooperation. The Antonov Company sees no danger, on the whole, in the visit of the Russians. On the contrary, they say it is a signal that the Russians are not giving up cooperation, which they have threatened before. Incidentally, it is no other than Rogozin who pronounced those threats. Yet there is a “but” which the Antonov must have forgotten.
The Russians’ visit to our defense production facilities has triggered a rumor that our northern neighbor may privatize them. “Russia has long been interested in Ukrainian defense enterprises in order to privatize them and produce something new or to borrow technologies. So, no matter what Russian officials may be saying, they do not design the military cargo planes that the Antonov Company does. Nor has Russia managed to organize the production of warship gas turbines manufactured by Zoria-Mashproject. They cannot do without Ukraine, either, in making a new heavy ballistic missile which, as President Putin said recently, Russia is in a dire need of,” says Valentyn Badrak, director of the Conversion and Disarmament Center.
“In reality, Russia is afraid that Ukraine will establish defense cooperation with the West. For example, it may take part in deploying an antimissile system in Europe. For we have already carried out certain orders – our aerospace facilities took part in the US NMD research and supplied a Vega launch vehicle stage to Europe. Besides, the US has cautiously hinted that it was prepared to participate in privatizing Ukraine’s defense industry. In particular, United Technologies, the biggest player on the market, has been repeatedly saying it was ready to take part in privatizing the Ukrainian aerospace production sector,” the expert told The Day. In his view, it is extremely important for Ukraine to cooperate not only with Russia in order to get rid of critical dependence in the military-technological sphere and obtain new technologies which are almost inexistent in Russia today.
Incidentally, against the backdrop of a conflict with Russia, the neighboring Poland has suggested that we deepen military-industrial cooperation. Particularly, Polish defense factory managers have evinced interest in using the capacities of DerzhKKB Promin (producer of aircraft-borne and antitank weapon components, etc.) for Polish army modernization. They are saying Ukraine might also take part in the manufacture of armored vehicles in Poland. Yet it is of course unrealistic to expect this cooperation to be as wide-ranging as it is with Russia.
Defense industry privatization is not yet on the agenda, even though there has been some preparatory work in the past few years. For example, the Ministry of Industrial Policies drew up the law “On Privatization of Ukraine’s Defense Industry Facilities” a few years ago. But it will take time to change legislation, exclude certain enterprises from the list of the ones that are not subject to privatization, and corporatize a part of the military-industrial complex. What also matters is a favorable situation – not the one we have now.
Incidentally, the Ukroboronprom state-run company assured us as long as a year ago that privatization of Ukraine’s defense enterprises would not begin before 2015.