Politics & Policy

Pork-Barrel Defense Spending, Russian-Style

In Russia, spending on defense initiatives is diverted to a select group of functionaries.

Kiev, Ukraine — South Carolina congressman L. Mendel Rivers will probably go down in history as the man who perfected the art of pork-barrel defense spending. Rivers chaired the House Armed Services Committee during the Vietnam War era, and he succeeded in locating countless military bases near Charleston. A colleague of Rivers once joked, “You put anything else down there in your district, Mendel, it’s going to sink.”

Pork-barrel defense projects in post-Soviet Russia are a bit different — mostly because of who ends up benefitting from them. American defense-spending initiatives, while they’re often enacted for political reasons, boost the economies of local communities and improve thousands of lives. Such initiatives in Russia boost only the personal fortunes of a select group of functionaries.

One of the high-profile projects that has received a cornucopia of state funding over the last few years is the Sukhoi Superjet regional airliner. The plane is meant for commercial use, but it’s being built by Sukhoi, one of Russia’s two major fighter-aircraft companies, supposedly for the purpose of improving the company’s proficiency with current-day aircraft technologies.

But many in the aerospace community assert quietly (as one must do in today’s Russia) that rather large sums of money for this project were diverted into the pockets of a select few individuals. At an international aerospace exposition I attended not long ago, a long-time employee of one of Russia’s most prestigious firms said plainly that “aerospace programs have become more or less a mechanism for money laundering.” This practice is spreading to encompass most of Russia’s defense industry.

Recently, Russian president Dmitri Medvedev announced that the Kremlin would spend 4–10 billion rubles ($134–335 million) to establish a Russian analogue of California’s Silicon Valley. Medvedev has repeatedly criticized Russia’s Ministry of Defence (MoD) and major defense enterprises for doing little more than “patching up holes in old weapons” instead of creating new-generation aircraft and missile designs. This project would in theory create the microelectronic “building blocks” needed to develop next-generation weapons.

Several sites in Russia were in the running for this project, among them the Siberian “science city” of Tomsk, where the company NPF Mikron produces complex radars for the latest Russian fighter, the MiG-35 — one of the Russian defense industry’s few real success stories from the last several years. But, to the dismay of many defense-industry observers in Moscow, the final decision by Medvedev was to build this new R&D center in the Moscow suburb of Skolkovo.

Critics of Medvedev’s choice contend that building from scratch at Skolkovo is a waste of funds. In Russia’s technology centers, they say, the required facilities are already in place and are either underused or not used at all. Additionally, “spending this kind of money on a project so close to Moscow is problematic,” says one analyst familiar with the defense-electronics sector in Russia. “It is almost certain that large portions of this money will be stolen — like with the Superjet — and siphoned off in the process of creating this new scientific complex.” And the land in Skolkovo, which the government is expected to buy for $20–25 million per hectare (a hectare is roughly 2.5 acres), just happens to belong to a government official.

But the sums of money allocated for Russia’s Silicon Valley pale in comparison with the porkbarrelsful that are about to be pumped into two St. Petersburg shipyards.

Some background: Most of the major defense enterprises in Russia have been grouped according to their product lines and folded into large amalgamations. All of the air-defense plants are part of the Concern PVO Almaz-Antei, all aeroplane enterprises are now controlled by the Unified Aircraft Building Corporation (OAK), and so on. However, exceptions are made where an individual defense firm has ties to influential political figures. The Moscow Salyut jet-engine plant was the one major enterprise not to be pulled into the Unified Aircraft Engine Corporation (ODK) — because of the connections the company has to the city’s powerful mayor, Yuri Luzhkov.

In the same vein, St. Petersburg’s Baltiysky Zavod and Severnaya Verf facilities have been left separate from all of the other Russian shipyards, which were assimilated into the Unified Shipbuilding Corporation. These two are owned by a private firm called the United Industrial Corporation (OPK). OPK is run by Sergei Pugachev, one of Russia’s powerful oligarchs and a close supporter of Prime Minister Vladimir Putin, who hails from and started his political career in St. Petersburg. Pugachev also helped to bankroll the campaign of Russia’s current president, Medvedev.

The two shipyards were mysteriously selected, from all the shipyards in Russia, to be the location where the French-designed Mistral-class amphibious-assault ships will be built if Paris and Moscow can come to terms on the deal. Despite the importance attached to the project, the French manufacturer, DCNS, was reportedly told from the beginning that it would be dealing exclusively with Pugachev. Not surprisingly, the two shipyards are slated to receive $1 billion in state funding so they can be “modernized” before beginning construction of the Mistrals.

Writing in the newspaper Novaya Gazeta, Russian military analyst Pavel Felgenhauer commented that “as usual, the Russian leadership does not publicly explain to anyone seriously why suddenly the French Mistrals are urgently needed and not, say, an analogous Dutch or Spanish ship. This is why many Russian experts are saying that the choice of the Mistral is somehow connected with kickbacks. Incidentally, the Spanish dock landing ship Juan Carlos I is larger and roomier than the Mistral.”

Nothing about this arrangement should be surprising. “Russian state projects of this magnitude have been used as mechanisms for people in power to steal money even back in the days before the Communists under the Tsars,” says a prominent American analyst of the Russian military, “and they will continue to be this way now that the Communists are supposedly gone.”

Recently, Medvedev approved a plan to modernize Russia’s defense industry by 2020. Deputy prime minister Sergei Ivanov, another close Putin confidant, elaborated on the plan and stated that some 1,729 defense and industrial enterprises will benefit from state funding under this program, which means 1,729 more chances to repeat some version of the scenarios detailed above.

Tell the ghost of L. Mendel Rivers to move over. He has nothing on the Putin-Medvedev pork-barrellers.

– Reuben F. Johnson is an aerospace- and defense-technology expert based in Kiev, Ukraine.

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