Rostec Will Acquire Dozens of Russian Defense Firms

Russian defense industry holding Rostec has announced plans to acquire UralVagonZavod, a subsidiary of Tractor Plants Concern, according to Defense News. The defense conglomerate already accounts for around two-thirds of Russia’s defense industry.

Rostec provided a statement to Defense News announcing the decision.

The statement as reported by Defense News quoted Rostec’s Weapons Cluster Director, Sergey Abamov, as saying, “Our task after we obtain control over the plant is to set up coordination between the UVZ military segment and other holdings and entities…to improve the effectiveness of the production process and to increase the competitiveness of the products.”

Rostec will work with Vnesheconombank to address UralVagonZavod’s debt issues. This will take place over a period of 18 months and will come prior to Rostec taking full control of the tank manufacturer.

UralVagonZavod produces a number of tanks and armored vehicles for the Russian military. The firm notably is the producer of the T-14, a main battle tank built on the modular ‘Armata’ chassis. W4T previously noted the Russian government expects to place an order for the T-14 in September; serial production may begin in 2018.

In addition to UralVagonZavod, Rostec plans to acquire up to 70 other defense enterprises, 20 of which are gunpowder manufacturers.

“These enterprises are key in the ammunition industry. Many of the assets are bad; therefore, a comprehensive development and financial health program will be necessary,” the statement said, according to Defense News.

Rostec is also said to be considering an acquisition of aircraft producer United Aircraft Corporation (UAC), which owns firms like MiG Corporation and Sukhoi.

Defense News did not indicate if the Rostec statement referred to the reported UAC interest, but last month, Industry and Trade Minister Denis Manturov noted, “We have not ruled such a decision out, insofar as there is a trend in this direction.”

Industry and Trade Minister Manturov added, “There is a great deal of synergy between Russian Helicopters and UAC. This will only increase each year due to the optimization of production processes.”

Russian Helicopters is a subsidiary of Rostec. Much of the components used for UAC’s products are supplied by Rostec. These components include engines, electronics, and landing gear.

In January 2015, The Moscow Times highlighted that the replacement of UAC’s then-President, Mikhail Pogosyan, with then-Deputy Industry and Trade Minister Yuri Slyusar was a boost for Rostec’s CEO, Sergei Chemezov. The report, citing analysts, stated,

“Both Slyusar and Manturov are said to have close ties with Chemezov, who has been working to expand Rostec’s holdings in the defense industry — which already amount to nearly two-thirds of the sector, not including firms working in the space or nuclear industries.”

Rostec CEO Chemezov asserted last month a merger between Rostec and UAC “could probably be appropriate, but not today.”

About Derek Bisaccio

Military markets analyst, covering Eurasia, Middle East, and Africa.

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