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Among the meeting participants were Chief of Staff of the Presidential Executive Office Sergei Naryshkin, Security Council Secretary Nikolai Patrushev, Deputy Prime Minister Sergei Ivanov, Deputy Prime Minister and Finance Minister Alexei Kudrin, Economic Development Minister Elvira Nabiullina, Defence Minister Anatoly Serdyukov, Head of the Federal Space Agency Vladimir Popovkin, First Deputy Defence Minister and Chief of the General Staff of the Russian Armed Forces Nikolai Makarov, CEO of Rosatom State Atomic Energy Corporation Sergei Kiriyenko, CEO of Russian Technologies (Rostekhnologii) State Corporation Sergei Chemezov, heads of major corporations, companies and industrial associations of the defence industry.

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“We must not delay the tenders, which is the responsibility of the Defence Ministry. Otherwise a number of important weapons would be in jeopardy, as it happened last year.”

President of Russia Dmitry Medvedev: Good afternoon, colleagues. We have agreed to discuss the state and the prospects for the development of Russia’s defence industry, to discuss what needs to be done to make it more efficient and to ensure that the production of weapons and equipment needed to increase our country’s defence capability takes place in accordance with the programmes we adopt rather than some other scenarios.

Let us briefly recall that for the past three years the state has done a great deal to strengthen the defence industry; major financial support was provided during the global economic crisis and defence contracts were covered in full. All this helped to maintain the stable operation of the strategic enterprises. In 2009 alone, the amount of state support for the defence industry amounted to about 100 billion rubles [$3.6 billion]. Integrated structures were set up to provide support for the entire cycle of modern weapons’ development and production.

However, despite all those measures, the state of the defence industry cannot be called prosperous, as all of you present here know. There are objective reasons for that: the wear of enterprises’ fixed assets is about 70% on average and the situation in some of them is even worse. So far we have not seen much success in setting up effective mechanisms for introducing innovation and private investment in the defence industry.

As you know, I have approved the key strategic planning documents on military security, modernisation and innovative development of the defence industry. At the end of last year a new long-term state armament programme was adopted, and the funding allocated for it is 300% higher than in the previous periods: the figure is in the region of 20 trillion rubles. We need to think about how the programme will be implemented.

“The Defence Ministry must complete the placement of defence contracts in full by the end of May and to make advance payments to companies in accordance with the plan for 2011 and the period up to 2012–2013.”

At the meeting of the Defence Ministry Board in late March I spoke about the need to balance the interests of customers and manufacturers. The state order must secure a sufficient level of profitability, that much is absolutely clear, which will finance modernisation and long-term research and development. On the other hand, prices for defence products must be justified, and the structure of these prices must be clear to the customers. Unfortunately, at present many aspects are completely hazy. Most importantly, the responsibility for fulfilling obligations must be increased, and I will say some more about that later.

It is essential to achieve several objectives in the near future.

First, we must adopt a federal targeted programme for the defence industry development for the period from 2011 to 2020. I hope the Government will resolve all the matters relating to the financing in the nearest future and submit a final proposal to me (I know that they are coordinating issues at present), taking into account not only the army’s needs and export orders, but also the real commitment of defence companies to produce specific models of weapons and military equipment. I stress: a real commitment.

Second, the Defence Ministry must complete the placement of defence contracts in full by the end of May and to make advance payments to companies in accordance with the plan for 2011 and the period up to 2012–2013.

This work has been proceeding very badly and slowly. I want to remind you that the state defence order was approved in December 2010 and at the Defence Ministry Board meeting in March I spoke about the failure of the previous state armaments programme. Today I want to hear from all those present why this happened, from the Government members and CEOs of companies. Who has been punished for it and how? Submit your proposals, if you haven’t already, containing details of the posts and the accountability. If such reports are not submitted, that suggests to me that it is sectoral heads and Government members who must be held accountable.

It is an unacceptable situation when decisions are made at the highest level, the money is allocated, and yet products are not delivered. Today I took the trouble to go over the 2009 Presidential Address [to the Federal Assembly]. Here are my words from the Address: “In the next year we need to provide the Armed Forces with more than 30 ballistic land- and sea-based missiles, five Iskander missile systems, about 300 modern armoured vehicles, 30 helicopters, 28 combat aircraft, three nuclear-powered submarines, one corvette-class battleship and 11 spacecraft.” As you must realise, I did not make up these things for the Address. All of it had been agreed with those present here. Why has it not been done? I am waiting for your response and your proposals. I am sure you realise that in different times half of you present here would already be engaged in hard physical labour in the fresh air. We must be responsible for our commitments. This is absolutely unacceptable.

“We must also consider ways to attract investment in the defence industry to promote the introduction of advanced technology and to conduct new research and development.”

We must not delay the tenders, which is the responsibility of the Defence Ministry. Otherwise a number of important weapons would be in jeopardy, as it happened last year.

We must also consider ways to attract investment in the defence industry to promote the introduction of advanced technology and to conduct new research and development. I remind you that military production is profitable in the entire world, and it attracts strategic investors interested in the long-term development needs of their own Armed Forces and export orders. We must think about the mechanisms that are used to encourage investment in the industry. Therefore, the main objective of today's meeting, as I said at the Defence Ministry Board meeting, is to hear reports on what has been done in terms of accountability of those who organised the work, and to remedy the situation.

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