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Heavy Industry To Turn Into State Corp

MOSCOW — Rosoboronexport’s assets will be consolidated into a new state corporation, Russian Technologies, in the next six months, Sergei Chemezov, head of the state arms trader, said Friday.

The new corporation will be formed after a bill goes to the State Duma this month and is signed into law by President Vladimir Putin next month, Chemezov said.

Chemezov, a close ally of Putin who is widely expected to head the new corporation, said it should lead the rebuilding of the country’s heavy industry.

“The bitter experience of the ‘90s demonstrated that our industry, without state control and mainly managed by private business, doesn’t guarantee proper development,” Chemezov told the first conference of the Union of Russian Machine Builders, which he has headed since last year. “In many ways, technologies are stalled at the level of the 1970s.”

The industry’s overhaul is happening at a rate of only 1 percent per year, when it should be 10 percent to 12 percent, Chemezov said. “This is a dead end,” he said. “Reforms are proceeding with extreme difficulty.”

First Deputy Prime Minister Sergei Ivanov, speaking at the conference, said the responsibility for state defense orders had been taken away from the Economic Development and Trade Ministry and given to the Military-Industrial Commission, which he heads, in an effort to cut out inflated prices and missed order deadlines.

Defense orders are not “a feeding trough” but rather “a piece of licorice worth fighting for,” Ivanov said.

The change comes after the ministry also lost control of the multibillion-dollar Investment Fund in a Cabinet reshuffle last week, which saw the replacement of longtime Economic Development and Trade Minister German Gref.

Rosoboronexport’s assets include stakes in AvtoVAZ, the country’s largest carmaker, VSMPO-Avisma, the world’s largest titanium producer and RusSpetsStal, a specialist steelmaker.

Yevgeny Fyodorov, head of the Duma’s Economic Policy, Entrepreneurship and Tourism Committee, said Putin had last week submitted a bill to the Duma on creating Russian Technologies. Deputies would pass the bill in the next two weeks, Fyodorov pledged, eliciting applause from the audience.

Last month, speculation swirled that Chemezov might get a post in the new Cabinet. Some commentators have interpreted the bill to create Russian Technologies as a consolation prize.

Excessive bureaucracy was stifling Rosoboronexport, Chemezov said in an interview in Parlamentskaya Gazeta. As a federal state unitary enterprise, it has to receive state permission to conclude any deal worth more than $50,000; as a state corporation, it would be freed from this requirement.

But turning the arms trader into a joint stock company would not make much sense because it would lose state guarantees and other means of support, Chemezov told the paper, a publication of both chambers of parliament.

Critics have said Chemezov has been lobbying for the creation of Russian Technologies to avoid thorough state oversight and get control of money flows.

Chemezov said, however, that various supervisory councils and other controlling structures would ensure state control and that Putin himself would appoint the head of the corporation. “So there cannot be any withdrawal into the shadows, by definition,” he told the newspaper.

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