Saturday, March 20, 2010

Window on Eurasia: Moscow’s Arms Purchases Abroad Costing Russians Wages and Jobs at Home

Paul Goble

Vienna, March 19 – Moscow has long been proud of the sale of Russian arms abroad, but increasingly it is buying military equipment from foreign firms, a shift that is contributing to wage arrears and even unemployment in that Russia’s own military industry and quite possibly creating a potentially serious political problem for the Russian powers that be.
Russian purchases of four ships from France and its attempt to purchase pilotless drones from Israel have attracted a great deal of media attention in both Moscow and the West, but efforts by the Russian defense ministry to purchase 1,000 IVECO M65 armored vehicles have sparked real outrage in Russia.
The reason for that, Igor Dmitriyev argues, is that while many assume that senior Russian officials are corruptly benefiting from the other purchases abroad, the Italian deal represents an immediate threat to Russian workers who produce a similar and perhaps even better piece of equipment(
If the Italian deal goes through, the “Versiya” military commentator says the Federation of Independent Trade Unions of Russia has concluded, more workers at the Arzamas machine-building complex, one of Russia’s hard-hit company towns, will see their wage arrears increase or even see their jobs disappear entirely.
The proposed Italian deal, Dmitriyev says, is especially “scandalous.” The vehicles that the Arzamas plant produces and that the Italian purchases would displace are equally good in the opinion of Russian military experts such as Ruslan Pukhov, the director of the Moscow Center for the Analysis of Strategy and Technology, and one-third to one-half less expensive.
Moreover, these experts say, the Russian model can be upgraded and modernized in ways that the Italian one cannot, meaning that initial savings to the military budget will be multiplied in the out years. And at the same time, because the Italian models won’t include all the equipment required for operation, the real cost of the deal is greater than Moscow says.
Investigative journalists at “Vzglyad,” Dmitriyev continues, may have found the explanation for this strange deal. It turns out, they say, the Italian company which would sell the armored vehicles to Russia is “a shadow partner of another Russian firm, KamAZ, “whose director in turn is friendly with the leadership of the defense ministry.”
The Arzamas factory, on the other hand, is part of a different military-industrial structure. Thus, KamAZ “is lobbying the interests of a [foreign] partner” against the interests of other Russian firms, and “it is completely possible to assume that as a result, particular functionaries of the ministry will receive some profit” from this “multi-million-dollar contract.”
But the interests of the workers at Arzamas will be ignored. That represents an economic and social tragedy. As of January 2010, wage arrears in Russian firms had reached, according to official figures, 4.1 billion rubles (135 million US dollars), including unpaid back wages in the region where Arzamas is located of 152 million rubles (5 million US dollars).
Moreover, Russian unemployment, which already stands at between eight and nine million, may now increase, Aleksandr Shershukov, the secretary of the Federation of Independent Trade Unions says, if the Italian deal goes through and there is no work for the employees of the Arzamas plant.
Russian arms purchases abroad may seem to be either a small problem or even from some perspectives a positive development, especially compared to Russian arms sales abroad. But these purchases have the potential to create a very serious political problem for the Russian powers that be because they bring together three different sets of concerns and political groups.
First, such purchases represent yet another attack on Russian pride. As Svetlana Savitskaya (KPRF), deputy head of the Duma Defense Committee, puts it, she “won’t be surprises if several years from now, they will tell us” that we have to put more Russians out of work and purchase even more military equipment abroad.
Second, such purchases represent a threat to Russia’s defense industry and its allies in the defense ministry, an alliance that may be further strengthened and prompted to go into action by these purchases which many members of these two groups will view not only as unsettling and insulting but a direct threat to their own futures.
And third, the linkage of such purchases and the unemployment they cause to corruption in the upper reaches of the powers that be is likely to bring together class and nationalist outrage, something that Russian opposition leaders may seek to exploit and that the Russian government will ignore at its peril.

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