#15 - JRL 7216
Russian Arms Industry Under Siege
June 9, 2003
By VLADIMIR ISACHENKOV

MOSCOW (AP) - The murder of two defense industry executives on the same day appears to be part of a long-running battle among criminal networks for control of Russia's lucrative state-owned arms trade, observers said Monday.

In murders that appeared to be the work of professionals, gunmen shot and killed a Kremlin-appointed chief of a defense consortium and the commercial director of an affiliated company. Police said the slayings Friday in Moscow could be connected, but refused to comment on the investigation and announced no arrests.

The murder of Igor Klimov, the 41-year-old chief of the Almaz-Antei air defense consortium, generated intense media attention.

``This is the most shocking crime of the year,'' the daily Moskovsky Komsomolets said.

Later Friday, a gunman shot and killed Sergei Shchitko, commercial director of the RATEP company, a part of the Almaz-Antei consortium.

The consortium, which includes 46 Russian companies involved in the production of air-defense missiles, has been the subject of an internal power struggle.

Although state-owned, many Russian weapons manufacturers have effectively become private ventures run by their managers - some of whom have developed contacts with organized crime - defense analysts and Russian media say.

``The military industrial complex has been plunged into a deep shadow because of its catastrophic condition,'' The Novaya Gazeta newspaper said.

Pavel Felgenhauer, an independent military analyst, said arms industry executives had long been skimming illegal profits from the trade, which in turn attracted major organized crime groups.

``The weapons industries have become increasingly criminalized,'' Felgenhauer said. ``Enormous illegal revenues have attracted the mob.''

Last year, Russia exported $4.8 billion worth of weapons, ranking second in global weapons sales behind the United States.

Felgenhauer said insufficient controls over the industry have allowed some weapons plants to illegally pocket billions of dollars by selling weapons that were presented as newly built to foreign buyers, but, in fact, were taken from Soviet-era arsenals. False intermediaries have also been used to earn illegal cash, he said.

``Despite being the nominal owner, the state has never seen this money,'' Felgenhauer said in a telephone interview.

Putin has sought to tighten control over the defense industry by ordering the creation of large government holdings such as Almaz-Antei, under close supervision of his administration. But the reform has proceeded with difficulty amid heated battles involving officials and company management.

The Kremlin brought in Klimov - an outsider in the business who had served as an aide to Viktor Ivanov, a powerful deputy chief of staff to President Vladimir Putin - in February as part of the effort to enforce tighter state control and increase revenues. He initiated criminal probes against managers of several companies included in the consortium, including RATEP.

``He broke many corruption schemes and pushed hundreds of people away from their feeding trough - bankers, ministers, bandits,'' Moskovsky Komsomolets said.