The Conversion Crisis

Ever since the collapse of the Soviet Union, influential figures in government and in the military have been constantly assuring us that, despite Russia's economic difficulties, the armed forces remain ready and able to protect the nation's vital interests. The military operation in Chechnya, however, has demonstrated rather convincingly that these claims are false.


Last month, a round-table discussion sponsored by the Defense Industry Cooperation League revealed the appalling state of the military-industrial complex. Currently, the country produces only 6 percent of the weaponry and military equipment that it produced in 1991. Only 30 percent of the weapons available to the armed forces meet modern technological standards, and if current trends continue, by 2005 that figure will reach 5 percent. In a number of high-technology areas, Russia is unable to produce even the same weapons systems that it was making five years ago.


It is no secret that until 1992 the country's economy was intensely militarized. According to various figures, between 70 and 80 percent of the industrial enterprises in Russia are tied into the military-industrial complex. But the Soviet Union collapsed, the military-industrial complex was also ripped apart. Interdependent enterprises found themselves in different countries, and no one knew what to do with the more than 2,000 defense-dominated industrial enterprises scattered across Russia.


In the past, these plants depended entirely on specific instructions from the government's centralized weapons-development program. That program, though, has essentially been shut down for the last three years. State orders for electronics, for example, are 5 percent of 1991 levels; for radio equipment, even less. In short, the situation was catastrophic: Two thousand enterprises found themselves literally decapitated.


And there is still no plan for handling this situation. Workers simply have not been paid for months. Factories are falling into decay. Although no one is arguing that all these enterprises must be saved, the government must define what Russia's defense needs are and will be in the years to come so that the most vital sectors of the military-industrial complex can be saved.


All efforts by the Defense Industry Cooperation League and other interest groups to press this claim with officials in the president's administration, the Duma and the Defense Ministry have so far led to nothing. Plant managers are left guessing what the state expects from them and what the future will hold. Should they convert to civilian production? Should they privatize? Should they contract or should they just shut down?


A significant portion of the military-industrial complex must undergo conversion. Russia already has a law, On Conversion, and the government has even, on paper, developed a conversion program. To date though, neither the law nor the conversion program are being implemented since the original 1994 budget did not allocate any funds for this purpose, and the funds that were finally approved by parliament after intense lobbying were entirely inadequate. The conversion program has again been conspicuously omitted from the 1995 budget currently under consideration in the Duma.


The situation has gotten so desperate that one defense enterprise even staged a work stoppage. For three days in November, the former Soviet Union's largest space and aviation technology research facility, Geofizika, which holds many important patents and employs leading specialists in many fields, came to a complete standstill.


By any standard, Geofizika is bankrupt. This unique scientific facility has already lost virtually all of its creative potential. The average salary at Geofizika is 150,000 rubles ($40) per month, although the majority of non-scientific staff receive from 30,000 to 40,000 rubles -- little more than the cost of a few kilograms of sausage. No one at the plant has received any wages since mid-summer. This enterprise, which once employed 15,000 people, now has only 3,000, most of whom are just too old to find work elsewhere.


In order to keep its remaining staff, Geofizika has worked out an agreement under which employees work only three days a month. The plant's management, unlike the government in Moscow, understands that it would be impossible to replace Geofizika's scientific and technical staff. If they leave or fail to pass on their experience, it will take literally decades to return the enterprise to the level it had attained by the end of the 1980s.


The plant currently owes about 6 billion rubles for utilities and other services. In turn, it is owed roughly that amount from the state for orders already fulfilled. Interest and penalties on Geofizika's debts mount daily, but the plant has received no credits under the state conversion program. Workers are now working in unheated laboratories. This is a complete breakdown.


And this story is just one link in a chain reaction of breakdown. Without Geofizika's products, the country's entire satellite industry is grinding to a halt. An international program on satellite launching is in danger, to say nothing of the much-touted international mission to Mars, in which Geofizika was to play a leading role on the Russian side.


Obviously, the economy is over-militarized. Plants designed to produce tanks and submarines must be sensibly converted to the production of tractors, cars and kitchenware. But scientific research facilities like Geofizika are fundamental to Russia's future. Once they are lost, they are virtually lost forever. No presidential order or legislative act can restore them, and Russia will fall ever further behind in research for both military and civilian needs. Saddest of all, the government does not seem to realize that the information, patents and inventions of such facilities could become valuable commodities on the international market, bringing trillions of rubles to the state each year.





Tatyana Leiye is a reporter for Selskaya Zhizn. She contributed this comment to The Moscow Times