| AEROSPACE AND DEFENSE INDUSTRY NEWS DIGEST – UKRAINE, 8 MARCH 2012 |
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HIGHLIGHTS
DEFENSE INDUSTRY NEWS President Yanukovych has appointed Dmytro Salamatin to be Ukraine’s Defense Minister. Salamatin had been serving as General Director of the recently-created UkrOboronProm state-owned defense industry conglomerate. Salamatin was replaced at UkrOboronProm by Dmytro Peregudov, a long-time UkrSpecExport official. [The appointment of Salamatin, who was until recently a parliamentarian from the pro-government Party of Regions, takes place against the background of wider efforts to place presidential loyalists in control of key security institutions: the Interior Ministry, the Security Service, the Tax Inspectorate, and now the Defense Ministry. Known for not shrinking from physical confrontations, Salamatin’s appointment has been taken by some as a sign that the authorities are preparing for the possible use of force should economic or political factors spark public demonstrations. Others have pointed to Salamatin’s role in setting up UkrOboronProm to highlight the need for a strong manager to bring order to a defense establishment that has been increasingly adrift since the departure of Anatoly Grytsenko at the end of 2007. Given his background at UkrOboronProm, this effort will likely include renewed emphasis on development and procurement of weapons and equipment.] The Salamatin appointment has proven controversial in the press and, reportedly, within the security community and defense establishment. Chief concerns are reportedly Salamatin’s lack of defense expertise, questions regarding his citizenship and loyalty (based on reports that has been permanently resident in Ukraine only since 1999, previously working six years in Russia and, before that, living in Kazakhstan) and dissatisfaction with the possibility that the Armed Forces could be ordered to confront the people as a tool of regime security. The appointment of Peregudov is expected to not result in major changes at UkrOboronProm or UkrSpecExport, given that he has been at UkrSpecExport since his graduation from the Kyiv National University of Trade and Economics in 1997. – Ed.] Ukraine’s government is expected to approve a 16.8 bln UAH ($2.1 bln) budget plan for the State Program on Development of Weapons and Military Equipment. This program will provide financing for over 160 Ukrainian defense industry enterprises during 2012-2017. Newly-appointed general director Dmytro Peregudov predicted that in the next 3-5 years, UkrSpecExport’s portfolio of orders would exceed $5 bln – noting that the company had increased the volume of its export-import operations by 25% over the past three years, to exceed $1 bln in 2011. This past year, UkrSpecExport supplied military equipment and services to 62 countries, with the greatest quantity of sales in Asia (45%) and Africa (30%), with India, Thailand, Algeria, China and Iraq remaining at the top of the list. Top exports are aircraft (43.1%), land forces’ equipment (36.4%), and air-defense systems (10%). Ukraine’s Parliament rejected a bill intended to cancel nearly 2 bln UAH ($250 mln) of debt for state-owned military-industrial enterprises. The Parliament’s National Security and Defense Committee joined with the Ministry of Finance to successfully oppose the bill, arguing that it would reward irresponsible plants managers and would not contribute to the development of the defense industrial sector. NATIONAL SECURITY & DEFENSE POLICY On February 14th, President Yanukovych relieved Andriy Kliuyev of his position as First Deputy Prime Minister and appointed him to serve as the Secretary of National Security and Defense Council (NSDC). [Experts differ over the significance of this change. Many point to it as a political sidelining of Mr. Kliuyev, as a part of the consolidation of the executive by presidential loyalists. Others have noted that Mr. Kliuyev’s energy may result in a re-invigoration of the NSDC and its staff – which for many years has been steadily losing institutional capacity and has been almost completely sidelined by the current administration. A few have suggested that this position provides Mr. Klieyev a platform to focus his attention on ensuring the ruling party’s success in the October 2012 parliamentary election. - Ed.] On 20 February, the new Defense Minister presented the Ministry’s new Deputy Ministers, two of which had been his deputies at UkrOboronProm: - Olexandr Oliynyk was appointed as First Deputy Defense Minister. [From 2002-2003, Oliynyk served as State Secretary of the Defense Ministry; in 2003-2004 he served as a First Deputy Minister. Most recently he was a Deputy General Director of UkrOboronProm. - Ed.] - Dmytro Plyatsuk was appointed as a Deputy Defense Minister [In 2009, Plyatsuk was Deputy Director at stated-owned Zirka enterprise (Shostka, Sumy region); in 2010 he was a Deputy Director at the State Foreign Trade Company Tasko-Export (Kyiv); in 2011, he served as a Director of the State Company Ukroboronservice. Since January 2012, Plyatsuk served as a Deputy General Director of UkrOboronProm. - Ed.] - Volodymyr Mozharovsky was appointed as a Deputy Minister and the Chief of Office of the Ministry of Defense . [Mozharovsky, a Colonel-General in the reserves, has served as First Deputy Defense Minister since 2010. This appointment can be seen as both a demotion and an effort to retain the use of Mozharovsky’s institutional knowledge. - Ed.] The appointment of Salamatin also precipitated the resignation on 16 February of the Chief of the General Staff, Colonel-General Hryhoriy Pedchenko. Lieutenant General Volodymyr Zamana was appointed in his place. [General Zamana’s previous position was 1st Deputy Commander/Chief of Staff of the Land Forces. He has a reputation as a complement professional, with a history of operational command, and appears to be politically neutral. His appointment has been generally well-received. - Ed.] In presenting newly-appointed Defense Minister Salamatin to the Ministry on 10 February, President Yanukovych called on the Ministry and General Staff to work together in preparing a radical reform of Armed Forces that would correspond to the country’s foreign policy objective of “non-bloc status” and the realistic assessment of availible resources while taking into account recent developments in the regional military-political environment. The President also called for an increase in the intensity of combat training and for stronger efforts to counter corruption. Subsequently, the new Defense Minister declared the following top priorities: - Completion of a package of strategic documents, including Ukraine’s new Military Doctrine, Strategic Defense Bulletin and State Program for the Development of the Armed Forces of Ukraine for 2012-2017; - An outline of the Armed Forces’ personnel potential aimed at improving the social status of military service, including an additional allocation of 500 mln UAH ($62.5 mln) for purchasing accommodation for military personnel; - A modernization program for weapons and military equipment financed by 2.3 bln UAH ($288 mln) from the state budget, under the auspices of the Defense Ministry and UkrOboronProm. On 23 February the Defense Ministry presented the seventh edition of the annual White Book, which provides an extensive overview about the current state Ukraine’s Armed Forces, including armaments and military equipment. The book supports the following presidentially-approved agenda for defense reforms: - Optimization in the number of command and control bodies, combat units and military bases; - Reductions in surplus Armed Forces’ property, inventory, and infrastructure; - Increase funding for Armed Forces’ technical modernization with the aim of achieving 30% of overall the Defense Ministry budget; - Increase the expenditures on military personnel per capita to EU-compatible levels; - Formation of a President’s Personnel Reserve to ensure the effective use of young officers. INTERNATIONAL CONSULTATIONS AND AGREEMENTS On February 2nd, 2012, a Ukrainian delegation participated in meeting of the NATO North Atlantic Council with countries that participate in Kosovo and Afghanistan operations. In addition, the delegation held meetings with U.S. Defense Secretary Leon Panetta, Armenian Defense Minister Seyran Ohanian, Georgian Defense Minister Bacho Ahalaya, and Turkish Defense Minister Ismet Yilmaz. Ukraine plans to improve its relations with NATO in the defense industry sphere, according to the Head of Ukraine’s Mission to NATO, Ihor Dolhov. This will include facilitating better conditions for Ukrainian companies to participate in defense contracts within the Alliance. Representatives from Kazakhstan Engineering, a Kazakh national company, held negotiations with representatives from Ukraine’s Defense Ministry, UkrOboronProm, and a number of defense enterprises on maintenance and modernization of armored vehicles and aircraft for the Kazakh Armed Forces, as well as on the development of naval infrastructure on the Caspian Sea. Participating enterprises included the Kharkiv Morozov Design Bureau, the Lugansk Aircraft Repair Plant, the Mykolayiv Research and Design Shipbuilding Center, and the Kherson Pallada Shipbuilding Yard. A Ukrainian Navy delegation visited China on 14-17 February, where they had the opportunity to visit the Chinese Northern Fleet HQ and naval base on Qingdao. Russia’s Prime Minister Vladimir Putin declared on 22 February that Russia does not intend to withdraw its Black Sea Fleet from Crimea, emphasizing that the presence of the Russian fleet on Ukraine’s territory is consistent with the April 2010 agreement extending basing arrangements until 2042 and that Russia currently pays a high cost for leasing the base in Sevastopol. He indicated that Russia will also develop fleet infrastructure in Novorossiysk, Russia. Local government authorities in Sevastopol have requested that the Russian Black Sea Fleet free 38 piers that local officials claim are being used illegally. City officials also plan to pursue possibilities for releasing land currently occupied by the Russian Black Sea Fleet but not in use back to the city. City authorities claim that the land in question, which includes the locations of two former Black Sea Fleet factories, the Kherson airfield, and 133 hectares in the area of Cossack Bay, poses obstacles to local community development projects. OPERATIONS, EXERCISES, TRAINING, FORCE DEVELOPMENT Under the auspices of the UN Stabilization Mission, Ukraine deployed the 18th independent helicopter detachment to the Democratic Republic of Congo. The detachment includes 157 personnel, 4 Mi-24 attack helicopters, and 43 vehicles with special equipment. President Yanukovych has approved sending twelve additional Ukrainian personnel to the UN forces in Cyprus. Ukraine will join the NATO’s Ocean Shield anti-piracy operation in 2013, according to the head of Ukraine’s Mission to NATO. Sixteen countries have confirmed their participation in the upcoming U.S.-Ukrainian Sea Breeze 2012 multinational naval exercise scheduled for July 2012. The exercise will focus on planning for maritime security operations. Ukraine’s National Defense University held its 12th annual International NATO Week on 6-12 February, together with the NATO Defense College in Rome and the NATO School in Oberammergau. The program of lectures and seminars addresses new security challenges, the transformation of the Alliance, its organization and structure, operations, and the role of the NATO Response Force. Ukraine’s Interior Forces have begun a one-year, EU-sponsored “twinning” project with France and Romania to share experience on improving the system of maintaining public order – an issue of particular importance in the context of the upcoming Euro-2012 soccer championship [And potentially the upcoming parliamentary elections in October 2012. – Ed.] The EU will provide EUR 1.5 mln for the project, which will involve 115 specialists from both EU countries. Representatives from Ukraine, Belarus and Russia met in Mykolayiv for a planning conference for the Slavic Unity – 2012 international military exercise. The exercise will be held in late July 2012 and will include tactical-level maneuver. AIRCRAFT & UAVs Ukraine’s Defense Ministry plans to provide the Land Forces with modernized Mi-24 attack helicopters starting in March 2012. The helicopter will be equipped with avionics and thermal imagers produced by France’s Sagem as well as with a new TV3-117VMA-CBM1V helicopter engine produced by Ukraine’s JSC Motor Sich. The helicopter will also carry Barrier guided missiles produced by Ukraine’s State Design Bureau Luch. Antonov will complete construction of the first An-70 military transport aircraft in 2013, to be delivered to the Ukrainian Armed Forces. A second delivery is scheduled for 2014. Funding for the An-70 development program in 2012 will be 454 mln UAH ($56.8 mln). The Chief of the Russian Armed Forces’ General Staff, Nikolay Makarov, has stated that Russia will seek to obtain sixty An-70 aircrafts for its Armed Forces by 2020. Antonov also plans to develop the new An-178 military transport aircraft in 2012. Antonov’s net profit in 2011 increased to 193 mln UAH ($24.1 mln) on revenue of 3.2 bln UAH ($400 mln), an increase of 57.4% over 2010 figures. JSC Motor Sich increased its net profit by 9% in 2011 to 1.3 mln UAH ($168 thousand). In 2011 Motor Sich`s equity also increased to 5.1 bln UAH ($638 mln), an increase of 35% compared to 2010. The company’s assets rose to 8.18 bln UAH ($1.02 bln), a 33% increase, and it fixed assets rose 52% to 1.8 bln UAH ($225 mln). The company’s long-term liabilities decreased by 69% from 183 mln UAH ($22.9 mln) to 83.2 mln UAH ($10.4 mln). Ukraine will continue testing Mi-8MSB helicopters and Mi-24P modernized attack helicopters. Thirty Mi-24P test flights were recently completed in the Armed Forces’ Research and Testing Center in Crimea. Currently, night test flights are being conducted. More than seventy Mi-8MSB flights are planned, aimed at testing its improved high-altitude capabilities. Ukraine’s Defense Ministry has approved the Concept of Equipping the Armed Forces with Unmanned Aerial Vehicles (UAVs) through 2025. The first phase, currently being implemented, involves the development of tactical & technical requirements for various UAVs, research, and comparative flight testing. AIR DEFENSE Ukraine considers its cooperation with NATO on air situation data exchange as one of the main steps towards improving interoperability with neighboring countries in the area of airspace control. According to the statement by General Viktor Gamora, commander of Ukraine’s Air Forces, the main goal of Ukraine’s participation in this program is the creation of an alternative early warning radar system within the Armed Forces that can contribute to the protection of Ukraine’s national territory. Preparations for security during the Euro-2012 Championship are proceeding, including elements of international cooperation. Ukrainian airspace will be constantly patrolled by four fighter jets and two helicopters from the Ukrainian Air Forces. In March and April Ukraine and Poland will conduct a series of joint air defense exercises to prepare for Euro-2012. Several exercises with the special units of the Armed Forces, including counter-terrorism units, are scheduled for May. In April two bilateral Ukrainian-Belarusian and Ukrainian-Russian command and staff exercises are scheduled with the command HQ and on-call air defense forces. SATELLITES & LAUNCH VEHICLES Ukraine’s government approved a plan for implementing the Concept of State Policy in the Space Sector though 2032. The concept establishes a program aimed at transfer of advanced space technologies to real sectors of the national economy. Elements of the program include the Sich remote sensing system, the Lybid national system for space communication, the Navigation Support System, and systems for monitoring and analysis of outer space are planned to be developed. The estimated cost is 38.5 bln UAH ($4.8 bln). As part of the Dnipro Program, Ukraine and Russia will launch two rockets from the Russian launch site Yasnoye in 2012. The first launch, scheduled for April or May, will lift the Korean Komsat-5 satellite to near-Earth orbit; the second launch, scheduled for September or October, will lift several satellites from near-eastern countries into orbit. Ukraine’s Lybid communications satellite is scheduled for launch from Baikonur spaceport (Kazakhstan) via the Ukrainian-Russian Zenit-3SL launch vehicle in the fourth quarter of 2013. The satellite is expected to fully cover Ukrainian territory, surrounding countries, North Africa, and parts of Asia. India has requested MacDonald, Dettwiler and Associates Ltd (Canada) – the largest sub-contractor for the Ukrainian Lybid communications satellite – to discuss the possibility to set up a communication satellite system in remote areas of Himalayas. The Ukrainian side has supported this proposal. Ukraine’s government has approved a draft National Concept of the Scientific and Technical Space Program for 2013-2017. The program includes development of remote Earth sensing capability, development of telecommunication and navigation space systems, space programs for national security and defense, space scientific research, and initiatives for international cooperation. The estimated funding for the program is 2.58 bln UAH ($323 mln) which includes 1.12 bln UAH ($140 mln) from the state budget. On 13 February the first launch of a new Vega European light class launch vehicle took place from Guiana Space Center located in Kourou, French Guiana. During the launch, nine satellites went into orbit, including the Italian LARES and ALMASat-1, as well as seven CubeSat microsatellites from the U.S. The State Enterprise Pivdenne Design Bureau (Dnipropetrovsk) and the State Enterprise Pivdenmash (Dnipropetrovsk) developed and built the cruise engine for Vega launch vehicle. SHIPBUIDLING By October 2012, Ukraine intends to complete preparations for contracting with foreign suppliers under the program to build corvette-class ships for the Ukrainian Navy. Foreign suppliers are likely to receive 28% of contacts for equipment, including diesel generators and equipment parts from the U.S. and weapons from France, Germany, Italy, Switzerland and South Africa. The “Corvette” program will receive 433.6 mln UAH ($54.2 mln) from the state budget in 2012. On 17 January AAF Ltd (United Kingdom) signed an agreement to supply 1.8 mln Euro’s worth of complex self-cleaning air-filter devices for gas turbines to Zorya-Mashproekt (Mykolayiv, Ukraine) in 2012-2013. Ukrainian-built gas turbines equipped with British air filters will then be supplied to Middle Eastern customers. Zorya-Mashproekt has borrowed a revolving line of credit of $27 mln from JSC UkrEximBank. The credit line is for the period of one year starting 20 January. Executives from JSC Sevastopol Marine Plant are currently negotiating an agreement with the Ukrainian Navy for repair and upgrade of naval ships. The company has also made a proposal for a comprehensive agreement on repairs for Ukrainian Navy vessels. ARMOR The state-owned Kharkiv Armor Repair Plant has developed a new heavy infantry fighting vehicle (IFV) with common technical characteristics to the T-64 main battle tank. The new system aims to reduce the repair costs and to simplify the crew training, as well as to minimize the deliveries of spare parts and consumables. The IFV weights 34.5 tons and is equipped with the 5TDF diesel tank engine, which has a capacity of 700 horsepower. The main armament is a 30 mm automatic machine gun and Barrier missile launchers. The IFV’s armor is comparable to that of a tank, including the Nozh cumulative protection system or Duplet anti-tandem cumulative dynamic protection. The IFV is designed for a three-person crew and can transport up to twelve persons inside the vehicle. AMMUNITION A National Production Center for Ammunition and Explosives will be created on the basis of the “Zirka” and “Impulse” state-owned factories and the State Chemical Products Research Institute located in Shostka, Sumy region. UkrOboronProm will be responsible for developing a program by 15 March for the restructuring of the enterprises and establishment of the national center. During 2012-2016, Ukraine plans to eliminate 120,000 tons of obsolete ammunition that is currently stored in 36 facilities belonging to the Armed Forces, Security Services, Interior Ministry, and State Border Guard Service. Ukraine’s government plans to allocate 972 mln UAH ($121.5 mln) from the state budget for this work. © 2012 Effective Engagement Strategies, LLC ======================================= If there are any specific issues or questions regarding topics of this digest, please feel free to contact: Lada Pastushak, Director of Operations & Development, -------------------------------------------------------------------------------- |
