Are there any prospects for the Ukrainian military-industrial complex?
June 16, the new president of Ukraine, Poroshenko, in connection with the well-known events that are taking place in the south-eastern regions of the country, has banned further cooperation of the Ukrainian defense industry complex with the Russian one. Experts have different assessments of the chances for the further development of the Ukrainian defense-industrial complex.
After the assignment of the head of state is completed, the Ukrainian defense industry, according to the estimates of some experts, will lose only 15 percent of annual exports, which is about 300 million dollars. In the opinion of Ukrainian specialists, a break in relations between the two states will not bring catastrophic consequences for the provision of Ukrainian armed forces. Even more, they are sure, the Ukrainian defense industry may even win in the future.
But first things first. After the collapse of the USSR, Ukraine inherited about a third of the allied military production facilities. The structure of the Ukrainian defense industry consisted of almost 3600 enterprises that employed more than 3 millions of people. Approximately 700 enterprises engaged in the production of exclusively military products, and more than thousands, in addition to weapons and military equipment, were engaged in the production of dual-use or civilian goods. Ukraine inherited a third of the Soviet space industry as a legacy. In the space industry was involved about 140 enterprises. From 20 types of missiles that were produced in the USSR, 12 were designed and manufactured in Ukraine.
In Ukrainian aviation 39 enterprises, 11 aircraft repair plants are involved in the industry.
After the end of the Cold War, some of the enterprises were reduced. Those enterprises that were engaged in the production of civilian products were privatized and turned into corporations. However, they didn’t have enough experience in the market conditions, so production stopped and the factories became bankrupt.
To this day, only a small part of Ukrainian enterprises that were engaged in the production of military products have survived. According to the Ministry of Harrow, currently in Ukraine there are 162 enterprises of the military-industrial complex. That part of them, which remained in state ownership, kept afloat due to the few state defense orders, from time to time receiving export contracts. It is quite obvious that this was enough only to not collapse completely, and it is absolutely not enough to ensure the work of all employees. A vivid example of this is the state enterprise Antonov, which previously collected up to 200 airplanes annually, and is now capable of collecting about five.
To date, experts say, it is quite clear that it is pointless to focus on Ukraine on the legacy of the former USSR. Ukrainian defense enterprises are engaged in fragmentary production of weapons and military equipment, they are dependent on foreign supplies of components, primarily Russian. Over the years, experts have repeatedly pointed out the existing problems, but now they are confident that it is too late to talk about the holistic development of the Ukrainian defense industry complex. Therefore, it makes sense to focus on the development of those individual areas that have certain prospects.
And such directions exist. This is primarily the production of armored vehicles, radar systems, aircraft missiles.
Currently, foreign firms are greatly interested in the Cyclone launch vehicle, which is designed to launch middle-class satellites. Antonov Design Bureau presented several of its new developments, in particular, An-140 and An-70, which have already declared themselves to be the most competitive machines in their class. Motor Sich manufactures engines for An-24, An-32 and An-26 aircraft, Mi-8, Ka-25 and Mi-24 helicopters, which are in large quantities in service with many countries.
One of the advantages of the military-industrial complex is the fact that Ukraine has received a wide network of research centers, among which are developments in the field of electronics and cybernetics, laser technology, and radar stations for detecting unobtrusive targets. Ukrainian enterprises have a great potential in the field of modernization of Soviet weapons, which even now is in service with many countries of the world.
Thanks to all these areas, Ukrspetsexport, a monopolist in the Ukrainian market of armaments and military equipment, annually receives more than one billion dollars in revenue, and the state occupies high positions in the list of countries-exporters of armaments. At the same time, these figures are an order of magnitude less than what, potentially, according to a number of experts, the Ukrainian defense industry can bring. Therefore, in order to prevent the bankruptcy of the majority of Ukrainian defense enterprises, the Ukroboronprom concern (2011) was created.
The concern included 134 enterprises - state and joint-stock companies, which were state-owned. It soon turned out that for normal operation they lacked markets and money. The problem of a shortage of money was solved by redirecting the excess profit of some successful industries to the needs of those who had financial difficulties. The second problem was solved due to the fact that Ukraine took a permanent part in various international military exhibitions. The concern represented the interests of all its participants, even those who produced small volumes of products. Thus, a mass effect was created, which brought its results, and very quickly. Two years later, Ukroboronprom enterprises paid almost half of their wage arrears. Concern production volumes increased by 24 percent (compared to 2012 year) and amounted to more than 13 billion hryvnia. Some factories at the expense of large external contracts were able to increase production several times. So, for example, GAKH “Artem” increased production volumes by 7 times (to 2,2 billion hryvnias), “Zavod im. Malysheva "- a quarter (to 302 million hryvnia).
Thus, experts say, the Ukrainian military industry is currently able to compete in the foreign market in such areas as the development and production of aircraft (An-70), as well as the modernization of combat aircraft; cooperative manufacturing of warships, gas turbines, and other ship equipment; development, production and modernization of rocket space complexes and devices, processing of military missiles for civilian purposes, participation in satellite launches; development of promising models of military equipment and weapons, conducting research; carrying out repair work and modernization of Soviet equipment and weapons.
At the same time, the Ukrainian government needs to think about how to solve existing problems, in particular, reduce too high production costs, solve problems of insufficient financing and ensure sufficient volumes of state defense orders.
If the problem of high production costs is now partially solved by introducing energy-saving technologies and saving labor through the use of new machines, then with two other problems is not so simple.
As for the financial side of the issue, it should be noted that the state program for reforming and developing the defense industrial complex, calculated up to 2017 of the year (which, by the way, was developed under Yanukovych), implies the need to invest more than 10 billion hryvnias to modernize the industry. Of these funds, more than 6,5 billion was planned to be transferred to the needs of Ukroboronprom. At the same time, the budget supposed to allocate only about 3 billions, the remaining funds should come at the expense of loans and private financial investments, as well as the sale of surplus property of certain enterprises. However, due to the difficult situation in the country, the government cannot submit this money. Therefore, the concern is losing ground in the global arms export market. In addition, the concern’s management decided that it was necessary to restructure more than 40 enterprises where production was stopped due to inexpediency. Most of the concern’s enterprises have surplus assets, including land that was planned to be sold for 2,5 billion hryvnia. As long as all these financial issues remain unresolved, it is impossible to talk about the normal development of the defense-industrial complex.
No less significant is the problem of state order. The expenditures from the budget for the defense industry during all the years of independence were rather small. For example, last year they amounted to about 15 billion hryvnia. Of such fast-moving funds, only 2012 million hryvnias were received for the development of military equipment and weapons of the Ukrainian army in 890, in the 2013 year - 685 million, and in the current year - and even less - only 563 million is planned. It is obvious that such means are catastrophically low for the development of the defense industry. According to experts, in order to keep the Ukrainian army in a modern, combat-ready state, it is necessary to spend at least 400-500 million dollars on it, and this is only for the purchase weapons and technology. In addition, for the effective development of the military-industrial complex, it is necessary that the state defense order be several times higher than exports. In Ukraine, at present, about 93 percent of all defense products are exported.
Anyway, but in order for the Ukrainian defense-industrial complex to start developing, and not just keep afloat, all these problems must be overcome. An important circumstance remains Ukraine’s dependence on Russian components and the Russian market. Thus, the refusal of the Ukrainian defense industrial complex to cooperate with Russia will primarily affect the possibilities of filling the state budget through the export of military products of Ukrainian origin to Russia. In addition, the termination of cooperation will, according to experts, lead to a loss of about 30 thousands of jobs, since military production will noticeably decrease.
In addition, losses include the impossibility of implementing joint projects, in particular, the joint production of An-148 / 158, the resumption of production of Ruslan (An-124-100), the continuation of work on the construction of military transport aircraft An-70. In addition, the gap of cooperation will lead to the impossibility of using several shipyards in Nikolaev for the construction of heavy class warships.
Do not forget that Ukraine has already lost 13 enterprises, which are located on the Crimea peninsula. They, we recall, were part of the Ukrainian state concern "Ukroboronprom".
However, there is armament in which Ukraine and Russia do not cooperate at all, but are competitors, especially in the markets of Asia and the East. It is, first of all, about armored vehicles. Ukraine has now entered very promising markets and has entered into several good contracts.
In addition, the Russian government received another cause for concern: the Dnepropetrovsk "Yuzhmash" allegedly intends to hold talks with representatives of some countries on the sale of the production technology of ballistic intercontinental missiles of the heavy class "Satan" and "Voivod". Moreover, the Russian Foreign Ministry has already appealed to the Ukrainian government not to disclose the technology, since Ukraine has signed the Hague Code of Conduct against Ballistic Missile Proliferation.
The decision of the Ukrainian government to cease military-technical cooperation with Russia automatically means that Ukrainian defense companies will have to either look for buyers for the products they sold to the Russians, or expand cooperation with existing buyers.
The Russian side has repeatedly stated that without cooperation of the two countries in the defense industry, the Ukrainian defense industry will not survive. In addition, Russian experts say that Ukrainian military products are not needed in the West, and they simply will not be allowed there in order to avoid unnecessary competition. This is really true, because the positions of German manufacturers are strong in the West. At the same time, there are developments in Ukraine that are interesting to the West. In particular, we are talking about joint cooperation of the Ukrainian enterprise "Luch" and the Belgian Cockerill Maintenance & Ingenierie Defense, which have implemented a project to create a Belgian tower with Ukrainian missile and cannon armament. This development is easily compatible with all types of light armored vehicles. A similar new thing has already appeared on the Polish armored personnel carriers "Rosomak". Poland has also repeatedly expressed its desire to implement jointly with Ukraine the development of navigation systems, radar stations, various kinds of missiles and communication equipment. Izium Instrument-Making Plant supplies its optical glass to European and American countries.
In February, the leadership of “Spetstekhnoeksport” discussed with the representatives of the Ministry of Defense and Marine Corps of the Indonesian Navy the terms of the contract for the supply of five BTR-4 armored personnel carriers. If the contract is successful, there is an agreement to supply more 50 units of such machines.
In addition, Ukraine is a supplier of components for technology in the markets of Asia and the East. So, last year a contract was signed between Ukraine and Pakistan for the supply of 110 power plants for combat tank Al-Qalid worth $ 50 million. Machine-building enterprise "FED" successfully negotiates with the Chinese on the sale of both finished products and technologies. Over the past year alone, the plant has developed about 30 new parts for aviation.
Interested in Ukrainian armored vehicles and Belarus. In particular, President A. Lukashenko became interested in Ukrainian wheeled armored personnel carriers. And although Lukashenka didn’t mention what kind of armored personnel carriers he was talking about, the press has already made suggestions that he was referring to the Bce-4 “Bucephalus”. It should be noted that the interest in Ukrainian armored vehicles is not accidental. The fact is that the Belarusian government intends to update the fleet of armored vehicles of its army. And besides, the Ukrainian BTR-4 entered the top ten best armored personnel carriers in the world in terms of firepower, protection and mobility.
Military experts differently assess the gap in military-technical cooperation between Ukraine and Russia.
So, according to the director of the Center for Army Studies, Disarmament and Conversion V. Badrak, the gap will be painful, but more so for Russia, because it will lose the Voyevoda launch vehicles. Without the Ukrainian components will not work and anti-tank complex "Chrysanthemum-S". In total, the losses of Russia could theoretically be about two billion dollars.
Almost all the Ukrainian “experts” say that for Ukraine the breakdown of relations in the defense industry is first and foremost a political decision. Since Russia allegedly showed aggression against Ukraine, Ukraine should fully abandon the Russian weapons and military equipment and not support the strengthening of Russia's defense potential.
But the Ukrainian politician V. Medvedchuk is sure that the Ukrainian defense industry will lose the Russian market, and with it the talented domestic military designers and strategic partners. In his opinion, the government destroys the Ukrainian defense-industrial complex by deciding to stop the cooperation of the defense industrial complex of the two countries and thus deprives the country of development prospects.
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