{"id":62145,"date":"2021-09-03T16:39:17","date_gmt":"2021-09-03T16:39:17","guid":{"rendered":"https:\/\/one.sightlinemg.com\/defensenews\/uncategorized\/2021\/09\/03\/private-companies-at-army-2021-forum-strive-for-survival-as-russian-military-orders-shrink\/"},"modified":"2026-08-08T00:33:06","modified_gmt":"2026-08-08T00:33:06","slug":"private-companies-at-army-2021-forum-strive-for-survival-as-russian-military-orders-shrink","status":"publish","type":"post","link":"https:\/\/one.sightlinemg.com\/defensenews\/industry\/2021\/09\/03\/private-companies-at-army-2021-forum-strive-for-survival-as-russian-military-orders-shrink\/","title":{"rendered":"Private companies at \u2018Army 2021\u2019 forum strive for survival as Russian military orders shrink"},"content":{"rendered":"\n

MOSCOW \u2014 For years, Russia has faced international sanctions that limited its ability to build or acquire state-of-the-art military capabilities<\/a>. Now, President Vladimir Putin and the country\u2019s military leaders are trying a new tactic to acquire and develop the weapons they need: They\u2019re asking Russian small businesses for help.<\/p>\n\n\n\n

\u201cThe country\u2019s defense complex has enormous potential, which allows it to solve problems of a very different scale. But it is really difficult to master the production of civilian products by the military-industrial complex. It has no experience of working in tough market conditions. Business should come to the rescue,\u201d Sergey Katyrin, the president of the Chamber of Commerce and Industry, told reporters following the arms trade show Army 2021 last month.<\/p>\n\n\n\n

Last week, dozens of private Russian companies, many of which already perform defense work, took part in the annual Army forum, which ran Aug. 22-28. The small businesses – working in a range of topics, from information technology to optics – were trying to capture the attention of Russia\u2019s largest prime contractors.<\/p>\n\n\n\n

At first glance, Army 2021 was a display of traditional Russian military might. But behind the scenes were military and civilian industry officials and experts discussing two critical issues facing local businesses: import substitution and production diversification.<\/p>\n\n\n\n

United Aircraft Corporation, a subsidiary of the state corporation Rostec, is no stranger to import substitution. After several Western companies declined to provide composite materials for the MC-21 jetliner, UAC turned to domestic providers, including private companies.<\/p>\n\n\n\n

Speaking to Defense News, an official with the Ministry of Industry and Trade described the effort to replace foreign-made materials as a \u201csplash\u201d for Russian industry. For example, Russia has successfully replaced Ukrainian-sourced engines for ships and helicopters with homemade versions.<\/p>\n\n\n\n

However, circumstances in the field of microelectronics are more complicated. Many Russian manufacturers lack the ability to produce their own microelectronics, instead turning to Asian countries<\/a>.<\/p>\n\n\n\n

According to Russian arms export agency Rosoboronexport, a boost to the local development of microelectronics and related components will require a government investment of 798 billion roubles (U.S. $11 billion) to 2024.<\/p>\n\n\n\n

The presence of such foreign-made components in Russian-made devices creates an obstacle for domestic firms seeking business with the military. One of them is Siltech, a producer of devices that scan product labels and keep track of the data.<\/p>\n\n\n\n

The company attended Army 2021, and its manager, Grigory Britvin, said it\u2019s been unable to win business with the Defence Ministry because its products depend on foreign-made materials. But he said he doesn\u2019t regret the company\u2019s approach, citing bureaucratic red tape as the problem.<\/p>\n\n\n\n

Nevertheless, he added, \u201cwe are a commercial company, and the speed [of acquisition] is a question of survival for us.\u201d<\/p>\n\n\n\n

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Animators disguised as a doctor and a coronavirus gesture during the Army 2021 forum on Aug. 23, 2021. (Kirill Kudryavtsev\/AFP via Getty Images)<\/figcaption><\/figure>\n\n\n\n

But Vladimir Kuznetsov, the head St. Petersburg-based KUBO, which makes electric motors and servo drives for robotics and mechatronics, says military acquisition officials are beginning to change their approach.<\/p>\n\n\n\n

\u201cThey understand that without modern solutions and modern technology, there will be no modern army,\u201d he said, emphasizing that private businesses are the solution.<\/p>\n\n\n\n

Embracing diversification<\/h1>\n\n\n\n

Meanwhile, Russia\u2019s broader defense industry is facing a downturn in military spending, which means fewer arms purchases by the state.<\/p>\n\n\n\n

The country spends 2.7 percent of its gross domestic product on defense, but that\u2019s expected to drop to 2.6 percent in 2022 and again to 2.5 percent in 2023, according to government figures.<\/p>\n\n\n\n

In 2017, Putin ordered the country\u2019s military-industrial complex to dedicate 30 percent of business activities to making civilian products by 2030, and 50 percent by 2050.<\/p>\n\n\n\n

The move was seen as part of efforts to boost domestic production amid Western sanctions. That includes Russia\u2019s Foundation for Advanced Studies, the military\u2019s home for its most ambitious projects.<\/p>\n\n\n\t