The rumoured merger of the two major aerospace agencies Promexport and Rosvooruzheniye
appears to be moving closer to reality. Promexport confirmed that there was
a meeting last week of the Commission on Defence Technical Cooperation (OTS)
chaired by Russian Premier Mikhail Kasyanov and reports from other sources have
suggested that a potential merger of two agencies was on the agenda. The results
of the meeting are unknown, but Promexport have been arguing for such a merger
since the earlier part of this year and confirmed their commitment to such a
move when asked.
Since 1997, the two organisations have existed in parallel with the remit in
the case of Promexport, the export of spare parts and lighter end of the defence
equipment market, while Rosvooruzheniye has dominated the heavier end of the
market with its sales of fighter aircraft. Recently however, the two agencies
have increasingly overlapped in the missile market particularly. A situation
exacerbated by the merger of Promexport and export agency Rossiiskye Tekhnologii,
responsible for weapons technology, at the end of April 2000.
The main mover for the merger of the two agencies has been Sergei Chermerzov,
the Director General of Promexport. Appointed to the role by President Putin,
he has been an active proponent for the merger of the agencies on the basis
of two arguments: one public and one less so.
The first argues hat it makes no sense for the Russian defence equipment market
to have two export agencies competing recently against each other as illustrated
by the attack helicopter competition in South Korea, where the two agencies
have promoted the Mi-28N and the Ka-50-2 against each other. The recent moves
of Rosvooruzheniye into the avionics market through its involvement with avionics
start up Kronstadt, has further muddied the waters by taking the agency into
both technology and ownership of a producer.
The second argument and probably the more compelling in the mind of the Putin
administration, is Rosvooruzheniye's control of the lucrative sale of combat
aircraft. This is the biggest element of defence exports, and there is a widely
held view that this cash flow has been loosely in the hands of the Kremlin family,
the group of businessmen linked to Yeltsin.The appointment of Alexei Ogarev
to the position of General Director of Rosvooruzheniye in August of last year,
after the firing of the widely respected and generally competent Gregory Rapota.
Has been interpreted as evidence of the undue influence of the grouping, given
that Ogarev is close to Yeltsin's daughter Tatyana Dyancheko and Alexander Voloshin
Yeltsin's former Chief of Staff.
There seems little doubt that the Putin camp would like to untie these bonds
and place Chermerzov in overall control. A merger of the agencies would therefore
not be a complete surprise, but both sides are playing for high stakes given
the role of defence exports and it seems unlikely that either side will give
up without a fight.
