April 22, 2021
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Losing monopoly
Rosoboronexport to be de-listed as sole state arms enterprise

Come summer, the Russian arms conglomerate Rosoboronexport will lose its decade old status as sole arms import-export body of Russian state that sells all types of arms, from rifles to anti-satellite warfare platforms.

Rosoboronexport (RoE) is a Russian state enterprise through which it is mandatory that arms manufacturers will have to process the defence deals and get authorization to export arms to a foreign nation.

Despite the bright prospect for arms export, it is a peculiar situation as the order books of RoE are full for another 10 years but production is too low to meet those expectations, often resulting into life threatening row that later paralyzes other arms deals prospects with future clients.

Going by its performance, RoE has presented a mixed picture in which Russia has lost numerous lucrative arms deals abroad, although RoE has given a much needed boost to Russian defence industry. From here, RoE has to change its business strategy and enhance production.

“It is now a matter of time as we have already decided to streamline the whole merger and delisting process of several entities which are built around Rosoboronexport state enterprise,” said a senior Russian Defence Ministry official in Moscow.

However, the official who looks after projects said that big is always bad to manage and more complicated, but the small is always easy to run. Russian companies have been complaining against state control of arms export which many now perceive as a business disadvantage.

Ultimately, this has led to non fulfillment of export orders and losing some of the traditional markets Russians used to consider them as their zone of influence in Eastern Europe, Asia and Africa.

Thus, some Russian Defence Ministry officials think, it is high time the arms conglomerate should be de-listed as sole arms export body and stop acting as an umbrella outfit for all companies for license to export arms and sign special deals.

If one compares American or Western arms companies there is a huge gap that exists in Russian system. It is discouraging by all standards. Going by number of complaints received per year by Russian Defence Ministry, either post-contractual arrangements or non committal of ongoing deals, the picture is gloomy.

“Today it is a mere concern but there is a possibility it could be a worry tomorrow. The enterprise has not grown in terms of growth except mere projections,” said the official.

RoE’s problems in the industry are multi faceted which include a high level of debt, inflation and lack of qualified personnel. In 2011, it was reported that only 32 per cent of strategic defence enterprises are solvent, while 33 per cent are on the verge of bankruptcy.

Further growth will require a serious upgrade of production facilities, as well as investment in skills and training.

On the other hand, the present RoE Chairman Chemezov is also becoming a larger than life figure and emerging as a true arms Czar which can be considered as a threat given the prevailing mafia culture in Russia.