Streetwise Professor

August 21, 2013

When Do the Wrecking Trials Begin?

Filed under: Military,Politics,Russia,Uncategorized — The Professor @ 9:05 pm

A couple of months back the head of the Russian Pacific Fleet bragged that his unit would receive 30 plus new vessels of all types this year.  I was pretty skeptical, given all the negative stories about the Russian shipbuilding industry.

I’m not the only one who’s skeptical.  Putin, in fact, is PO’d at the situation, and took out his ire on Rogozin, demanding an end to warship delays:

Delivery of some new ships to the Russian Navy due after 2015 under the current procurement program, could be delayed until 2025, President Vladimir Putin said Monday.

“I know you have voiced the idea of introducing amendments into the existing state armaments program for financing ships which are due to be handed over by 2015,” he told a conference on the Navy’s development. “And for ships due after 2015 – ascertain the amount of money already in the new state program for the period to 2025. This is all possible, let’s see, but only so there are not setbacks,” in order to “synchronize manufacturing capabilities with the volume of funding provided,” he added.

. . .

He attributed the delays in the delivery of new warships and weapon systems for the Navy to irregular supplies of components to subcontractors, a lack of effective collaboration between design organizations and manufacturing enterprises, and the low quality of equipment.

No less than 132 equipment failures were found during construction of one warship, he said, urging industry and defense related agencies to submit proposals on ways of improving the situation.

Putin gave them six months to resolve these issues, Deputy Prime Minister Dmitry Rogozin said after the meeting.

It’s not just warships.  It’s also ships to support gas projects in the Far East:

Deputy Prime Minister Dmitry Rogozin said that construction at the Zvezda shipbuilding complex in the Far East is running 14 months behind schedule and will require a consortium of investors to bring it up to speed.

Rosneft head Igor Sechin proposed the plan at a meeting between government officials and representatives from the state-owned oil and gas giants Gazprom and Rosneft.

“The speed of vessel construction does not correspond to the aims dictated by the development of offshore fields,” Sechin told RIA-Novosti, adding that Rosneft and Gazprombank would both participate in the consortium.

There was also a proposal to transfer control of civil shipbuilding to Rosneft, Rogozin said, confirming reports from Kommersant last week.

The common denominator here?  United Shipbuilding.  One of the national champeens Putin created to supposedly rationalize Russian industry, exploit economies of scale, yadda yadda.  But, in what should have been a predictable result, a state created monopoly negotiating with other state entities (defense, energy companies) tries to extract high prices and delivers poor performance, because there’s no competition.  (NB: shipbuilding for the military in the US is a mess these days too. )

A great illustration of the fundamental flaws in Putin’s state directed capitalism, and an indication of why Russia’s economy is stagnating.

It’s not only shipbuilding.  The space program is facing serious delays in building a new cosmodrome to replace facilities in Kazakhstan.  And Rogozin is losing it, blaming the delays on sabotage:

Deputy Prime Minister Dmitry Rogozin slammed the slow progress of construction at Russia’s Vostochny cosmodrome during a visit to the facility Wednesday, saying the delays amounted to “sabotage.”

Rogozin, who oversees the defense and aerospace sectors, said two key instructions regarding construction of the cosmodrome had been issued, but even though one had a July 30 deadline, neither have so far been fulfilled.

Both instructions he mentioned related to setting project construction costs and performance indicators for the site, which covers over 1,000 square kilometers (386 square miles).

“I will view any deviation from the plan as sabotage,” Rogozin said at a meeting with representatives of agencies involved in building the cosmodrome. “I have no intention of being one of those public servants who accept failure to deliver on instructions.”

“I will view any deviation from the plan as sabotage.”  I would have written: “I will view any deviation from The Plan as sabotage.”

Create a simulacrum of the Soviet economy, get Soviet results. It’s that simple.\One potentially related tragic story.  A Russian-built Kilo class sub, recently refitted in a Russian yard, caught fire and sank last week, killing its entire crew.  The cause of the incident is not known, but the Russians denied any responsibility with unseemly haste.

And weirdly, the same guy who is blasting Russian firms (including United Shipbuilding) for their incompetence, delays, and quality problems-yes, Rogozin the Ridiculous-immediately absolved United Shipbuilding from any responsibility, all while the sub and its doomed crew are resting on the bottom of the bay where the incident occurred:

The Russian specialists do not see technical failure as the likely cause of the incident, Rogozin said.

“The initial information … is that the explosion occurred in the compartment where the batteries were charging,’” he said. “This is the most dangerous work, which is not so much to do with the makers of these batteries, but with technical safety measures, which must be at the highest level. So the first suspicions of our experts are about questions of technical safety standards. We aren’t blaming the equipment yet,” he added.

Russian experts have not yet been to the scene of the accident, where Indian Navy divers are still working to try to recover the bodies of those who died. The divers recovered three bodies Friday from among the 18 crew believed to have been on board, The Times of India reported.

So they haven’t been to the scene, but they know what isn’t the cause.  Got it.

Given the huge problems the Indians have had with Russian hardware-and with United Shipbuilding in particular-I doubt they’re taking Rogozin’s word on this.

Putin has grand plans to rejuvenate the Russian military.  The Navy is centerpiece of these plans.  It is evident that Putin’s own creation will scupper these plans.  Which will lead to anger and a search for scapegoats.

Can the wrecking trials be long in coming?

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    The Chinese have successfully created their own MIC and are increasingly less reliant on Russia’s. How much longer until India will do the same? And then who will Russia have to sell to beyond truly underdeveloped countries?

    Comment by hmm — August 21, 2013 @ 9:54 pm

  2. @hmm. Re India: its military procurement system is as corrupt as Russia’s, as is its defense industry. Massive cost overruns, huge delays, etc., are the norm. It will take a long time to develop an effective indigenous defense production capability. Meaning that the only thing that permits Russia’s corrupt and woefully inefficient industry to survive is that the industry in its major customer is as bad or worse.

    The ProfessorComment by The Professor — August 21, 2013 @ 10:38 pm

  3. @Professor Nothing is sate-onwed in Russia 🙂

    Comment by MJ — August 21, 2013 @ 11:19 pm

  4. Owned – schmowned. Everything is state controlled when they bother to notice it. The lesson from this is that corrupt toadies might not be the best way to pick management. Rogozin’s response is typical of what I call the modified George Washington: ” I cannot tell a lie – he did it.”

    Comment by Sotos — August 22, 2013 @ 9:11 am

  5. @MJ I did notice the smiley face.

    Comment by Sotos — August 22, 2013 @ 9:12 am

  6. @Sotos That’s ok. 🙂 Russia is a complicated country…

    Comment by MJ — August 22, 2013 @ 12:01 pm

  7. Russia and India. What does that remind me of? Nearly seventy years after Independence, India’s GDP is still only 75% the size of the UK’s. If you had asked someone in 1948 how the GDPs of 60m people would compare to that of a billion people in 2013, would they have expected the 60m people to still be ahead? Would they have expected that Independence would have left half the country in very deep poverty 65 years later?

    India has been independent for nearly as long as the USSR existed, and it’s still wallowing, and come to think of it, Russia’s GDP is still only 80% of the UK’s 96 years after the revolution.

    Comment by jon livesey — August 22, 2013 @ 2:24 pm

  8. @jon livesy. And India is currently in the grips of a looming economic crisis, and threatens to slip back even further.

    The ProfessorComment by The Professor — August 22, 2013 @ 3:24 pm

  9. Why, it’s almost as if countries which adopt Soviet-style central planning underperform economically!

    Comment by Tim Newman — August 22, 2013 @ 4:03 pm


    Comment by t c phillips — August 22, 2013 @ 4:16 pm

  11. @t c phillips. Those wacky Russians! What were those beach goers doing there? It is quite a puzzle.

    A hovercraft plowing into an obviously occupied beach. Clearly routine. Routine, I tells ya!

    And remember. It is August.

    The ProfessorComment by The Professor — August 22, 2013 @ 10:38 pm

  12. @Professor It is just a testimony of the Russian army being an inseparable part of the people 🙂

    Comment by MJ — August 22, 2013 @ 11:30 pm

  13. Please comment on Syria- and Obama’s red line with poison gas. I wonder if Putin and Assad are just toying with him, and pushing his buttons.

    Comment by scott — August 23, 2013 @ 8:07 am

  14. @scott-Quickly: Given that the alleged attack took place on the exact anniversary of when Obama made the redline speech, there is a very good chance that that they are effing with Obama. They are quite likely calling his bluff, and making him look like a total fool.

    Here’s what I wrote on the day he made the red line comment. He left himself an out: the “whole bunch” proviso. (I defy you to find another instance where the POTUS used the phrase “whole bunch” in a public statement, about grapes or bananas even, not CW.) They are already caviling. And in a weird way, he has a common interest with Putin. Obama wants nothing whatsoever to do with Syria, and any doubts on the reports of CW use by Assad permit him to do that. Putin doesn’t want anything done in Syria either, except if Assad is doing the doing, so he has an incentive to attack the reports . Thus, Obama and Putin are pretty much aligned on this, even though Obama can’t admit that publicly.

    I am highly ambivalent about getting involved in Syria. The time was in 2011. Now I think it is too late. But by trying to have it all ways, Obama has made a bad situation worse. He staked the his credibility, and that of the US, on the red line remark, and now he will twist and turn every way to avoid the consequences. And Putin and Assad will gleefully jab him all the while.

    The ProfessorComment by The Professor — August 23, 2013 @ 9:20 am

  15. A bunch of bananas… I can’t wait to see Obama squirm explaining what a “whole bunch” of chemical weapons is. I feel like Alice in wonderland. I don’t remember falling through the hole though? when did it happen? And does Assad really have the leisure time to eff with Obama (is he partying with Putin in Sochi?), or is Assad truly facing an existential situation. Perhaps I should view my bank account and health care under Obama the way Assad is viewing his future. I can’t find my way back.

    Comment by scott — August 23, 2013 @ 12:11 pm

  16. Putin could easily blame past failures on the old Yeltsin regime and not let current problems reflect badly on him. However, it will increasingly look bad for him of failures of this nature because he’s been in power too long to not be involved in the failure at some level.

    If Putin gives an order (no more delays in delivering warships), and it doesn’t happen, there are only so many reasons why. Either 1) Putin does not command enough clout for people to obey him, 2) his previous decision to consolidate the shipbuilding was a mistake, 3) the person he placed in charge of the project is incompetent, or 4) the entire governance system of Russia he constructed is corrupt and inefficient. None of the potential answers look good.

    As more of these issues crop up, Putin’s credibility as a leader will erode, and he will need to resort to more blatant displays of force. This is already happening.

    Comment by Chris — August 23, 2013 @ 4:20 pm

  17. @Chris-That would be even more lame than Obama continuing to blame Bush for everything. Especially since he claimed Russia is Back! in around 2006.

    I think that the answer is overdetermined. That is, 1-4 are all true. Re 1, the inability of Tsars to get their commands obeyed, especially in distant provinces, has been a problem since there were Tsars.

    I agree that Putin’s credibility is eroding. It is an inevitable feature of the system. He benefitted from luck: under Yeltsin (at the end) oil was under $10/bbl; under Putin, oil neared $150/bbl. He also benefitted from the comparison with the awful Yeltsin years. Both factors are increasingly irrelevant. So yes, he will necessarily be forced to resort to harder means to enforce his power-namely, force. Just like you say.

    The ProfessorComment by The Professor — August 23, 2013 @ 4:52 pm

  18. And force would need to be enforced only in Moscow. There is no need for it anywhere eлсe. And that much resource is available till the end of Putin tenure. The question is what is awaiting Russia within a 30-50 years timeframe…

    Comment by MJ — August 24, 2013 @ 12:11 am

  19. off-topic but must-read –

    Comment by hmm — August 24, 2013 @ 4:34 am

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