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President of Russia Vladimir Putin: Good afternoon.

Mr Sozinov, Almaz-Antey needs no additional introduction. The company’s products are well-known all over the world. Air defence systems are the world’s most reliable and most in-demand arms on the global market. This is a universally recognised fact.

But I would like to start with something different – the non-military part, the civilian goods that you have begun to produce, with a planned increase in production, keeping in mind that, in general, in 20 years the company has not only actively consolidated all options in the sphere that you are involved in, but has increased them many times over. And we will discuss that today too.

Please.

General Designer of Almaz-Antey Aerospace Defence Concern Pavel Sozinov: We are indeed celebrating our 20th anniversary this April, bearing in mind the Executive Order you signed in 2002, accordingly, we can discuss specific results and further plans including civilian produce.

As of today, the technologies that were predominantly developed over the last 10–15 years for military products turned out to be in demand for civilian products and we continue to develop both assembly operations and process solutions.

I would like to highlight, first and foremost, that a significant part, around 30 percent of the 140,000 employees of the concern’s enterprises (22 regions are covered by our concern) are involved in civilian production and this number continues to grow.

Vladimir Putin: And what is the total number of employees?

Pavel Sozinov: It is 140,000.

Therefore, a key element amidst specific restrictions, including export orders for armaments and military vehicles, is that we are forced to search for civilian products, including those that meet the needs of other countries rather than just the Russian Federation, and to seek partners and consumers abroad. Not only the ‘near abroad’, as it is common to say, but in the ‘far abroad’ as well.

Primarily, this relates to air traffic control. In keeping with your Executive Order, over the past few years we have completed the core elements of the programme to overhaul this system in the Russian Federation. Most airport areas received new equipment. Thus, we have been able to upgrade all electronic equipment used in these systems with products made in Russia in a relatively short period – a little over 12 years. Moreover, we reduced our reliance on third-party solutions supplied by entities that used to operate in this segment, including during the Soviet era. We did not have any problems regarding third-party equipment.

Developing weather radars for meteorological services, including for weather agencies, as well as other entities, was our second focus area. Over the past eight years, we delivered about 200 radio locators of this class to customers in the Russian Federation, and exported quite a few devices of this kind. There is great demand for these products. These are research-intensive devices, which is also important.

Medical equipment is another civilian segment we are working into. This has always been a research-intensive segment. Even today, we already have the required quality certifications for a number of products and supply medical equipment to several health facilities.

I would like to emphasise that today we offer a full range of X-ray devices and systems, which can completely cover the needs of the healthcare systems of the Russian Federation and the former Soviet republics. Essentially, we could fully cover the sector’s demand if we received the corresponding orders.

Vladimir Putin: How are your relations with the Ministry of Healthcare and other agencies?

Pavel Sozinov: This is quite a complicated relationship, which is understandable, because in some cases we have comprehensive contracts, under which specific products have to be offered as part of a product package, rather than separately. Quite often, a tender is held to purchase a large number of equipment items and gear. For example, this can be just X-ray machines, but the tender includes many other items that we do not make, while somebody else does. Of course, it is not uncommon for foreign producers to take part in these tenders, which complicates things.

Vladimir Putin: There is nothing complicated about this. This may be a challenge for you, but not for those who place these orders. We need to discuss this matter separately.

Pavel Sozinov: Yes, this is a topical matter indeed.

We have been proactive in developing another civilian segment over the past two years, taking into account the fact that we have built a major high-precision mechanical processing factory in Nizhny Novgorod. You attended the opening ceremony of the Nizhny Novgorod 70^th Anniversary of Victory Plant. Today, we have filled most of its order book with the development and production of complex solutions for Gazprom, including for deep-water devices and hydrocarbon extraction.

All this amounts to re-engineering our capabilities. We have been promoting import substitution as per the technical specifications Gazprom sends us. Overall, we already have eight projects involving high-end technology devices and units. If everything goes as planned in the next 12 to 18 months, there could be a substantial, up to tenfold increase in Gazprom’s orders, so much of our production capabilities dealing with mechanical processing, metal plating and so forth will be taken up by these orders.

Finally, making certain types of mini and micro aerial and ground vehicles is another important segment in today’s world. I am talking about drones, which have been such a hit lately. The Defence Ministry uses them for some of its purposes, but they can be used quite broadly and by other agencies as well, not only for traffic management purposes, but also as a civilian product, including as household goods. Will the law provide for this option? I do hope that this will be the case. For this reason, we are already designing an air traffic control system for UAVs covering large territories, including remote locations in Siberia, in Russia’s Far East, and so forth.

These basic technical solutions can be embedded not only in ground infrastructure, but also into drone elements to be used for urgent deliveries of medical supplies, goods and anything else to remote locations across Russia. I hope that this segment will benefit from all-round support. That said, this is only one side of the coin.

The other side of the coin is that we see quite a lucrative market for these products in the Russian Federation, as well as in former Soviet republics. From a technology perspective, we are ready to make systems and devices of this kind. We have everything we need for this here in Russia.

These are the main points I wanted to cover. Of course, we have many more products, but these are the key, systemic, cutting-edge solutions.

Vladimir Putin: Have you been able to meet the market demand, or have you been focusing on covering the Defence Ministry’s needs, while the global market comes only after that? To what extent do your capabilities match the market demand?

Pavel Sozinov: Today, we have to acknowledge that 40 percent of our production capacity in high-end radioelectronics, radio locators, radio communications and related equipment has been underutilised. This means that we can add a substantial number of other products, including for the defence industry, as well as civilian goods. There is nothing extraordinary about this. As I have already said, unfortunately, defence exports decreased significantly compared to the previous years, and we have to take this into consideration.

Therefore, we are ready to develop this segment.

Vladimir Putin: Good.

I suggest that we discuss social matters now.

Pavel Sozinov: As for social matters, we have been working on two fronts.

The first one is related to the fact that more people are eager to work for us, including young specialists. Within our company, we have a science and educational centre for this purpose. It works under the so-called distributed model, with its headquarters in Moscow.

We have our own departments or dedicated laboratories at major universities in all our core regions of presence, coupled with our science and educational centre that offers remote learning opportunities, among other things. This year, about two and a half thousand people are enrolled in supplementary education courses. They have some basic schooling and have worked for some time at our enterprises, but can now receive new knowledge and skills for designing high-end electronics and other systems. This is an important magnet for attracting specialists.

The second front is that we offer post-graduate degrees and have dissertation boards. This also attracts people who want to specialise in specific disciplines and do research. This deals primarily with radiolocation, radio communications, etc. In fact, apart from operating departments within the leading Russian universities, we run dissertation boards in all the key disciplines for post-graduate students.

Of course, average salaries vary greatly from one region to another. Nevertheless, we have reached an average level of 120,000 to 130,000 rubles for the core engineering and design entities. We have set this standard for the engineering staff. As for our manufacturing sites, including the main production facilities and their workers, we are also approaching this level.

Unfortunately, the picture gets a little worse once you count in the non-essential personnel, since it all depends on whether enterprises operate at full capacity. Sometimes there is not enough work to fill a shift. We have to reassign people to other tasks, and then move them back, which is quite a headache for us.

Overall, there have not been any substantial staff redundancies despite a certain decline in orders. What we do is redistribute orders and reassign people within enterprises in order to address this issue on a systemic basis. I would like to note right away that no single entity could have done this on its own. We shift our workforce within our group, and even work with other conglomerates on staff exchanges. If a company has many orders, we can send our employees there to carry out urgently needed work.

Vladimir Putin: Have you been able to help people with housing?

Pavel Sozinov: We do help people with housing. This is quite a challenge in Moscow, while the situation is slightly better in Moscow Region and Yekaterinburg. In fact, we have a programme for helping young specialists and essential workers get housing. We co-finance housing transactions or cover mortgage payments in full or in part. Having worked for us for some time, an employee becomes entitled to the corresponding compensation. In some cases, we buy apartments ourselves, and employees later pay us back from the bonuses they get, and so forth. In principle, we use these methods at the corporate level and in specific entities.

There are also other, more proactive youth outreach methods, including various competitions for the best engineers, the best projects, and the like. This is also quite an effective tool. Sometimes it is even more effective than trying to deliver on a certain task head-on. Creating ad hoc teams is also quite an effective tool.

There is one last thing I wanted to mention regarding our staff. Today, at our enterprises, as well as in the design bureaus, we have the workforce and all the equipment we need for delivering on the design tasks we have, from microelectronics to large-scale systems. I am referring to computer-aided design systems.

I have to say that we do have our own, in-house solutions. This is something we did not have before, but now we have computer-aided design systems for developing radiolocation devices, to give you an example. We intend to develop a similar solution for missile construction. These are very important things that we did not have before. Only Raytheon and Lockheed Martin currently have solutions of this kind, and no one else does. This is where we are aiming, and have been quite successful at it, by the way.

I believe that this factor also attracts some specialists who want to try unconventional ways of delivering on technological and project tasks.

Vladimir Putin: How many enterprises formed the corporation’s core in its early days?

Pavel Sozinov: At the outset, there were 46 entities employing some 60,000 people. Today, as I have already said, we have 140,000 people across 136 enterprises in 22 regions. Quite an increase, in fact. This enabled us to cover many areas of expertise over this time, including aerospace defence systems, and all the related equipment from space-based systems to very short-range locators, etc.

Vladimir Putin: How effective is your corporate governance?

Pavel Sozinov: I believe that our corporate governance system is well-equipped for operating in the current environment. We decided not to create any major sub-holding structures. In fact, we have a top-down management system for all the enterprises within our conglomerate. Apart from the official bodies like the board of directors, we also have councils for dealing with specific matters, formed by the leading designers and engineers, as well as scientific-technical councils for finding solutions to issues that may arise during our in-house or external collaborations. In most cases, we do not even have to bring in managers or senior executives, or reach out to the Ministry of Industry and Trade. Overall, we have the expertise to deliver on most of these objectives, except maybe for those that do not depend on us, such as third-party supplies, etc.

Vladimir Putin: Very well. Thank you.