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President of Russia Dmitry Medvedev: Mr Ivanov, yesterday, I approved the principles of the state policy on the defence industry and its development. Of course, the Government, and you personally, were directly involved in drafting this document. I would like to hear from you how you plan to implement it and what will be the first steps to take.

Deputy Prime Minister Sergei Ivanov: Mr President, in accordance with your instruction, the Government drafted the document entitled the Principles of State Policy of the Russian Federation on Development of the Defence Industry through to 2020 and beyond. The document’s main author, the Industry and Trade Ministry, oversees work in this sector, but [Russian Space Agency] Roskosmos, the Defence Ministry and practically all of the relevant state agencies, as well as State Corporation Rosatom and the Security Council staff were all actively involved in the drafting work. The document defines the aims, strategy, tasks, and stages for the defence industry’s development, and I stress that this development will take place in stages. It takes into account the provisions of all the relevant basic policy documents such as the National Security Concept, the Military Doctrine, and the main guidelines for the Government’s work. It also takes into account possible threats to the programme’s implementation, both internal and external, such as weak points of our industry and economy. All of these things have been taken into account.

A total of 1,729 enterprises listed on the official defence industry register will take part in implementing the programme. I note the continuation of what I see as a positive trend towards creating vertically integrated defence industry organisations: the United Aircraft Corporation in aircraft manufacturing; the United Shipbuilding Corporation in shipbuilding; Almaz-Antei, which, as you know, is involved in building all of our air defence systems; and of course Rosatom and Roskosmos. Rather than falling on just one of these 1,729 companies, the main burden will therefore be spread among the integrated organisations that we have established in accordance with our plans.

In each of the main areas — aircraft manufacturing, shipbuilding, rockets and missiles, the radio-electronics sector, and the conventional weapons sector – the document is based on the development strategies adopted earlier for each of these specific sectors.

Dmitry Medvedev: In your view, what should be our key short and mid-term priorities, taking into account the current economic situation and the weak points that you mentioned, imbalances in developing this or that sector, or simply insufficient financing for particular areas of work?

Sergei Ivanov: From an industrial point of view I think we need to concentrate first of all on developing the radio-electronics sector, developing radiation-resistant hardware components, for example, because, as we discussed at the meeting that you held, without this we cannot develop effective modern arms, be they planes, missiles or ships. Radio-electronic technology, command systems, target designation systems and precision weapons are the basics today. But this sector is still insufficiently developed here, and this goes not just for the military side of the sector, because on the civilian side of things we see pretty much the same picture.

In response to this situation we are now drafting a new version of the federal targeted programme for developing the defence industry as regards implementation of the state arms procurement programme, which will be submitted to you this year for the period covering the next ten years. We and the defence industry companies are standing firm on ensuring that the radio-electronics sector is a cornerstone of this federal targeted programme, because it is the foundation of the entire defence industry. I therefore see this as our main priority.

Dmitry Medvedev: Over the next few years?

Sergei Ivanov: Over the next 3–4 years, not right the way through to 2020, but it is the area we need to tackle first. The Defence Ministry has already developed specific weapons systems and models, and they will be listed individually in the state arms procurement programme.

Dmitry Medvedev: Let me ask you about financing then. Is there sufficient financing today in this area in your view?

Sergei Ivanov: The Prime Minister chaired a meeting just recently at which we discussed and agreed on financing for the state arms procurement programme as a share of GDP for the coming decade. This is already set out in figures now.

We also need to develop the federal targeted programme for defence industry reform, which is part of the work to carry out the state arms procurement programme, and will receive funding of around 100 billion rubles a year through to 2020. If we complete all of these steps we will be able to rest assured that the orders placed through the State Arms Procurement Programme by the Defence Ministry and other agencies such as the Interior Ministry, Federal Security Service, and the Emergency Situations Ministry, will be carried out in full compliance with the stated volumes and items.

Dmitry Medvedev: Have the figures you mentioned already received Government approval?

Sergei Ivanov: The approval process is practically complete. The agencies placing orders through the state arms procurement programme have all been informed of the limits. As for the draft federal targeted programme, it has already gone through preliminary discussion, and the Finance Ministry has already accepted the financing application.

Dmitry Medvedev: I think that whatever the case we will still need to come back to this subject, and also to another matter too, that we discussed a little while ago, namely, the quality of the defence sector goods our companies produce.

I held a large meeting on this matter, and this was followed by several Government meetings in specific areas. The Prime Minister and you were both involved in this work. I think that we will soon need to do some summing up, because holding meetings is certainly important, but we also need to examine the actual state of progress and assess the impact these decisions are having on the quality of our goods.

Sergei Ivanov: On the quality, and on the price setting.

Dmitry Medvedev: Yes, I am referring in general to quality and to the quality/price adequacy ratio. We both know that the quality/price ratio is one of our competitive advantages in military technical cooperation with other countries. If we let the situation slip any further it will negatively impact our competitiveness.

Good, we will come back to this subject. As far as the basic policy document goes, implementation needs to start immediately. Prepare specific proposals if there is anything requiring approval by presidential orders and instructions.