Defense Minister General Pavel Grachev told a government meeting Thursday that his ministry should have the right to coordinate arms trading, Interfax reported.


Grachev said the current weapons sales system through the state arms trading monopoly Rosvooruzheniye was putting off potential buyers, who had no idea whom to order from and who would deliver the weapons.


"The reason for this is a huge bureaucratic system set up to trade weapons," the agency quoted Grachev as saying.


The right to coordinate arms trade would make it possible for the ministry to "boost Russian weapons exports and solve many budget problems," he said.


Grachev's remarks were criticized by Marshal Yevgeny Shaposhnikov, President Boris Yeltsin's personal representative at Rosvooruzheniye, who said the Defense Ministry "should only help to promote Russian weapons abroad but not take part directly in its selling."


"Nowhere in the world do defense ministries sell weapons directly. I don't think we should start this practice," he said at a press conference Thursday.


Shaposhnikov rejected Grachev's charges that long-standing foreign clients were turning away from Russian producers, saying that Russia had not lost any of its partners but had even managed to attract new ones in South Asia, Middle East and Latin America.


Rosvooruzheniye was founded in 1993 by a presidential decree to handle all arms exports, replacing three state bodies which previously had the right to export arms and had begun competing with each other.


Last month Rosvooruzheniye was charged with mishandling millions of dollars of funds through tax evasion and illegal foreign currency transactions.


A preliminary investigation which resulted in the charges, showed that the company had concealed profits of 137 billion rubles ($27.4 million) from tax inspectors and carried out transactions worth $90 million involving personal bank accounts abroad without obtaining a Central Bank license.


Alexander Kotelkin, head of the company, said last week that the scandal could damage the image of the company and threaten some profitable contracts.


Russia suffered a huge decline in its arms industry after 1987, when the Soviet Union supplied Warsaw pact and other client states with an estimated $22 billion worth of weapons.


But Russia has managed to bolster its position on the international weapons market over the last year by signing several lucrative deals. In the first three months of 1995 the country exported arms and military equipment worth around $1.5 billion, compared to $1.7 billion in the whole of 1994.