Interview with Sergey Chemezov, General Director of Rostec State Corporation

In today's issue of the newspaper "Kommersant"interview publishedIvan Safronovwith the general director of Rostec State CorporationBy SergeyChemezov. Our blog leads him in an abbreviated version.
What do you remember for 2017?
A lot of good news this year was related to the current activities of the corporation. First, the first flight of the medium-haul MS-21 took place. This is a great event for all Russian aviation and for Rostec, which is the integrator of many systems. Our United Engine Corporation (ODK) has made for the MS-21 a new turbojet dual-engine PD-14, it has passed flight tests. Another major event in aviation was the first flight of our A-100, a Russian radar patrol aircraft.In general, we have advanced seriously in the electronic cluster, increasing the share of civilian products. We are actively moving forward in the development of the ecosystem project "Smart City". Projects for the implementation of the technologies of the “Bright City” started in Ulan-Ude, Nizhny Tagil, in Moscow. This lighting and smart traffic lights, and transportation systems. Well, and conducted a number of transactions aimed at developing public-private partnerships. The Russian Direct Investment Fund and a foreign investor appeared in the capital of our holding company “Helicopters of Russia”, and we agreed to increase the share of a private investor in the Kalashnikov concern.
Interviews with Rostec Sergey Chemezov, general director of the state corporation, will only produce products, company, decision, ours, now, Siemens, including, seriously, concern, this, sanctions, gas turbines, situations, Now, sanctions, Kalashnikov

Sergey Chemezov (c) Dmitry Lebedev / Kommersant
What financial indicators does Rostec wait for the year?
According to preliminary benchmarks, revenue will be about 1.5 trillion rubles, in 2016 it was 1.26 trillion rubles. At the same time, it is already possible to state a serious growth of the “citizen” - by about 20% compared with the previous year. We expect that we will reach the figure of 460–470 billion rubles. This year, Rostec is ten years old, and we have calculated that the total value of assets, compared with 2007, has tripled, reaching 3 trillion rubles. Although in fact the growth is even higher.The figure of 1 trillion rubles, with which we started, is the book value, which was only on paper. When we conducted the first audit and were faced with real numbers and facts, I was very surprised: a lot was not worth what was written. For ten years we have done a great job. Today, the quality of our assets is completely different. More than 1 trillion rubles was invested in the development of our enterprises during the time of the corporation.
Ready to reduce military orders?
We must increase the share of civilian products to 50% by 2025 - then we have a chance to survive, because we can no longer rely only on the production of military products. But the sad experience of the 1990s says that it is unlikely that we will be able to exist normally with zero state defense order.
From January 1, 2018, a new state armaments program will take effect. What can Rostec expect?
According to our calculations, there will not be any strong reductions in volumes: in ten years our enterprises will account for about one third of all funds of the state program.
Import substitution of gas turbines for ships of the Navy goes smoothly?
Now on the test bench of the UEC "Saturn" tests of these engines are being conducted. Next year we will start the mass production of ship gas turbine installations.We will be able to meet any needs of the Navy in gas turbine engines and units based on them, completely leveling the dependence on Ukrainian suppliers.
And how is import substitution in other industries going? Is it painless?
We have difficulties with power equipment, this is not a secret: now all large turbines are made by Western players like General Electric or Siemens. The need for stations in our country is enormous: it is necessary to build new ones, modernize old ones ... And basically, Western generating equipment. And we need to move away from this dependence so that we are no longer intimidated by sanctions and courts. This work at Rostec is based on the JDC. In the next two years, we will present samples of Russian generating equipment, including turbines.
Why, then, was it necessary to contact Siemens turbines and enter into a contract after the Crimea was incorporated into Russia in 2014?
They tried to put us in a hopeless situation: they said: we will work in your country, but by our own rules. And thus left no choice, because the right equipment is made by Americans, Germans and Italians. Wherever you throw - everywhere wedge.In turn, we primarily thought of our citizens. If we speak from the position of universal values, then what difference does it make where people live? Though in the Crimea, beyond the Urals, in the Far East, in Taman. And if these people do not have the opportunity to either wash themselves or warm themselves, there is no electricity, water is not supplied, then how can they survive? From this point of view, which region the turbines are in is not important at all. And in the West, all this is forgotten - human rights no longer play any role here. The main thing is sanctions. By the way, when the US and the EU imposed restrictions, we offered Siemens to take the turbines, buy them from us, but they refused.
What motivated?
They said that they would not pay for the storage and transportation of the supplied equipment and are ready to buy it back only at the contract price, no more. And who will reimburse us our costs? Are we at our expense? Not. Therefore, they announced a contest and sold this equipment.
And how can this whole story end?
Siemens is a serious company, it is also not out of hand to quarrel with everyone, and the Russian market is rather big. Honestly, we don’t want a conflict, although they also made retaliatory complaints, because they caused us some damage by our actions. But we will not abandon the idea of ​​signing a settlement.
Terms of launch stations in the Crimea are not shifted?
The first start-up operations - the so-called ignition - are envisaged in February 2018, further commissioning works will be carried out.
And how do state corporations live under sanctions?
I’m not going to be cunning here: they affect us negatively. We lost a number of markets, including the US, if we talk about the products of "Kalashnikov." But in return, we found other points of sale of products in the Latin American region, in the Arab world ... I understand that all these sanctions are a concrete example of unfair competition. They try to exert pressure, understanding that our weapons are very competitive, cheaper in price, and in terms of quality they are not inferior to counterparts from America or Europe, and often surpass them. Naturally they do not like it, because they are losing the market.
In late January — early February of next year, the United States plans to introduce a new package of restrictive measures.
There will be painful points for us. The blow will be inflicted not only on the logistics of our shipments, but will also affect, apparently, our partners.
And how to be in this situation?
We will work to look for ways out of the situation.
All these sanctions for a long time?
I think that they will be canceled no longer during our lifetime. With yours, maybe with mine, definitely not.
The fact that the private shareholders of the Kalashnikov concern, Andrei Bokarev and Iskander Makhmudov, left this business, somehow connected with the sanctions?
Bokarev and Makhmudov are co-owners of a large diversified holding and decided to concentrate on other industries, in particular, metallurgy and mechanical engineering. And Alexey Krivoruchko will focus on the development of the Kalashnikov concern. There is no connection with the sanctions; they made this decision long before that. There is already a government decision that we will sell an additional 26% minus one share of the concern, and we will have 25% plus one share. Total Alexey Krivoruchko will be 75% minus one share. He proved himself as a competent and progressive leader who could turn a heavy asset into a strong business.
Is the Uralvagonzavod transferred to you still in serious condition?
The transfer process is quite long, in fact, UVZ shares will be transferred to us only in early 2018. But, of course, we are already seriously working with this asset. The main debts were related to the fact that the production of UVZ was unprofitable.The process was built in such a way that the company produced wagons and bought them at home. At that time, the cars were practically not sold, as there was no statutory limitation of their service life. Railway carriers themselves made a decision about the end of life, and could use them until the cars collapsed and the wheels would fly off. Now the terms of their service are limited. We plan to sell the company "UVZ-Logistic", it currently owns 27 thousand cars. There, the main debt of about 28 billion rubles. plus about 90 billion rubles. bails. As a result, the sale will significantly reduce the credit load.
Armored holding will not create?
If Uralvagonzavod were in a normal financial condition, then it would be possible to combine them. But since “Kurganmashzavod” is all in debt, and “Uralvagonzavod”, now this is not so true. If they unite, they may even drown - and it will be very difficult to pull them out of the pit.
How long does it take to bring them to life?
I guess at least three or four years. And only after that it will be possible to think about the holding.
Are you still interested in the United Aircraft Building Corporation?
If we talk about all structures that are not part of the corporation, the KLA is the closest company to us. About 70% of all components are made with us: engines, avionics, composites, units ... We cannot live without each other.
What will the entry of KLA in "Rostec"?
We are now talking hypothetically, there is no decision on the entry of the KLA. But if a decision is made, a single company will emerge, such as Boeing or Airbus. Full production cycle in one hand and in one place. In this case, probably, such a combined company will be more interesting for the investor than a fragmented one.
Think aviation assets make sense to privatize?
Of course. Such a configuration will definitely be of interest to investors, including foreign ones.
In terms of understanding there?
While all at the discussion stage. I, frankly, am afraid to do anything and speed up the process. We must understand that this is another very heavy clamp. Now we need to deal with “Uralvagonzavod” and “Tractor plants”, in particular, with “Kurganmashzavod”.
Agree, "Helicopters of Russia" is now too heavy in terms of product sales. This is due to the reduction of the order from the Russian Defense Ministry?
Not even in this case.The market for medium and heavy helicopters is filled, it takes time for customers, including foreign ones, to once again have the need to purchase this equipment.
What tasks do you set for the Rosoboronexport special arms exporter of Russian armaments given the difficult foreign policy situation?
I see the point of focusing on service - we began to work in this direction, but so far this area has not been seriously covered. Our volumes have already grown, and this direction was far from being a priority. Today it is necessary to focus specifically on this, because the supply of spare parts and the provision of services in terms of volumes are quite comparable with the sale of finished products. We strive to enter into full life cycle contracts. Rosoboronexport already at the stage of selling the product indicates in its contractual obligations that our holdings undertake to provide maintenance services and repairs throughout the entire period of operation of the product. One of the most effective schemes is the creation of a joint venture, which includes Rosoboronexport, the local client company and our holding.
A geopolitical question: what is the benefit of Russia in supplying Turkey with the S-400 Triumph anti-aircraft missile system?
This is the first NATO country to acquire our newest air defense system, the C-400.
Have they acquired four divisions?
Yes, at $ 2.5 billion
A loan from the Russian Federation?
The Russian and Turkish Ministry of Finance have already completed negotiations, it remains only to approve the final documents. I can say that they pay 45% of the total contract amount as an advance, 55% - Russian credit funds. We are planning to start the first deliveries in March 2020.

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