Dual-Use Technologies and Export Control in the Post-Cold War Era (1994) / Chapter Skim
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Economic Incentives Conversion and Dual-Use Technologies: The Case of Russia
Economic Incentives Conversion and Dual-Use Technologies: The Case of Russia
Pages 189-198
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From page 189... ...
Gaddy Research Associate The Brookings Institution The purpose of this paper is to present a framework for analyzing how policy regarding dual-use technologies in Russia may be affected by the present and future economic status of defense enterprises. What ~ am talking about includes what is loosely referred to as "conversion." In the case of today's Russia it goes beyond that to embrace concepts such as "commercialization," "marketization," and "privatization." But for present purposes let me use the word conversion for all of this.
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From page 190... ...
Does it -- can it -- apply to a Russian defense enterprise? There are certainly many differences between the situation of an American automaker, say, which is suffering a sales slump, no matter how severe, and a Russian tank manufacturer which sees its orders virtually disappear overnight.
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From page 191... ...
Even without the more advanced systems "based on new physical principles" called for by defense minister Grachev, merely maintaining these forces will provide orders for many Russian firms for years to come. 01d Product -- New Customer Military procurement inside Russia is being slashed, but some of that lost market might be replaced by the foreign market.
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From page 192... ...
New Product -- 01d Customer Could a defense plant convert to producing civilian goods, but still count on the Russian state as its buyer? As a matter of fact, this is the case right now for virtually all the civilian goods produced by defense plants in Russia, since very few wholesale and large retail firms have been formally privatized.
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From page 193... ...
A third, related, practice is that of spinning off small private enterprises from a large state enterprise. Assets, sometimes including valuable intellectual property, are transferred to the spin-off company, where all proceeds are considered the private property of those who founded the company.
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From page 194... ...
RESEARCH TASKS The conclusion we must draw is that there are potentially many ways for defense enterprises to react to the drastic cut in defense orders. in particular, there are many ways to avoid a "productive" conversion to market-oriented civil production.
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From page 195... ...
In the Russian case, this means delineating the spheres of continued active military production and resolving the issue of "mobilization capacity," as well as deciding on public versus private ownership. The final step would be provisions relating to conversion of those plants eligible for conversion.
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From page 196... ...
Maley projects revenues of $5 billion a year from arms sales. This then is to be used for "military conversion," although many observers have pointed out that it is highly unlikely that firms which have been successful in earning dollars in a particular activity will be eager to abandon it.
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From page 197... ...
Maley has invited Arab nations and others to invest in Udmurtiya to help implement his policy. Much could -- and should -- be said about the consequences of Russian defense industry staking its hopes on the international arms trade.
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