The Russian military-industrial Complex is having difficulty adapting to President's Vladimir Putin's 2016 call for "civilianization," according to AESMA Group strategic research consultant Mathieu Boulegue.
The complex is administered by the Russian Military Commission (VPK), which streamlines decision making between Russian industry and the Russian government. But because of its structure—Putin on top, with the armed forces and industrial companies only able to access him through intense lobbying—the VPK proliferates a corrupt system unable to work in a competitive market, Boulegue said during a presentation at the Center for Strategic and International Studies.
"These state-owned corporations vie for attention and money from Putin. The ones with the best lobbies push forward their interests and not necessarily the ones with the best designs," he said.
Right now the VPK's goal is to increase the volume of civilian and dual use systems by thirty percent in 2025 and by fifty percent in 2030. Boulegue predicted that companies in the oil and gas industries will find it easier to adapt to civilian markets than companies with more expressly military products, like those in the missile industry. He warned, however, that even companies that learn to adapt to civilian needs will not invest in research and development because of financial restraints.
Boulegue also said that the VPK is limited by internal competition, ministerial corruption, and a lack of responsibility because of its entangling structure.
"Most of these corporations weren't designed to succeed in open markets," he said.
In addition, since the breakdown of relations between Russia and Ukraine, Russia has been forced to develop its own ICBM components, helicopters, and aircraft engines in lieu of outside help. According to Boulegue, Russia has attempted to solve this problem by extending the life of its already existing systems, but the secrecy of the Russian government prevents certainty.
"Does modernization mean the introduction of new systems or does it mean the extension of out-of-date systems? We don’t know because seventy percent of the Russian military budget is classified," he said.
Boulegue concluded by saying that the VPK’s ineffectiveness exists as a triangular relationship between industries, the military, and the market.
"The cornerstone of the military-industrial complex today is the interaction between what the industries can actually produce, what the army really needs, and for which markets the industry wants to produce," he said. "As long as the Russian military industrial complex cannot solve this equation, it will be really hard for them to afford to make upscale technology in an increasingly competitive market."