Russia's military industrial complex expects banner year

MOSCOW -- Russia, studying a merger of its major government weapons contractors as part of an effort to streamline its endangered defense industry, expects an increase in exports for 1999.

Officials said they expect exports by the top government conglomerates to top $3.5 billion this year. They said the devaluation of the ruble has led to an increase in defense exports.

The government plan is to eliminate or merge hundreds of weapons factories. Officials said the issue will be discussed by Russian Security Council later this month in an attempt to obtain a mandate for accelerated reform.

The defense industry has five leading agencies, each with hundreds of factories under its control. "If an agency today has some 400 enterprises in reality it should have not more than ten concerns," Russian Vice Premier Ilya Klebanov told a news conference on Wednesday. "Then we will be able to say that Russia is guaranteed for many years to come that it will have arms to supply its army with and to export."

Klebanov said the reform is necessary to ensure development of new weapons and increase Russia's arms exports. Klebanov was named by President Boris Yeltsin as overseeing the reorganization of the defense industry.

Klebanov said Russia's three leading government defense conglomerates hope to export at least $3.5 billion of weapons this year. Russia also has private weapons contractors.

Officials said they expect large defense deals with Syria, China and India.

The three leading companies are Rosvooruzhenie, the government export agency, Promexport, which supplies the army's reserves and Rossiiskiye Tekhnologii, which sells licenses and technologies. Klebanov said Rosvooruzhenie predicts sales of $2.5 billion.

"We must drastically step up our work to sell our armaments," he said. "Then we will definitely solve the main task of supporting the military-industrial sector."

A 1997 report by the U.S. Arms Control and Disarmament Agency ranks Russia as the third largest export of arms with $3.3 billion in 1996.

In the first quarter of 1999, the defense industry produced 20.2 percent more than during the same period last year, officials said. The industry is composed of 1,700 plants. All but 500 of them received government orders in 1998.

In 1999, 670 enterprises received orders. The government in Moscow owes the defense industries more than $1 billion.

Klebanov said the government must set weapons development priorities for the military. He said revenues from arms sales must be poured into R&D. "In principle, if we succeed in consolidating all these additional sources we will get quite a good sum that will substantially improve the situation with military R&D," he said.