General Director of Rosoboronexport nearly destroys Russian helicopter industry
Aleksander Mikheev, the new General Director of Russian Defense Export (Rosoboronexport) Joint Stock Company, has an amazing service record, including failed governmental projects, misused billions of rubles, and even suspicions operations with state assets.
Russian Helicopters Joint Stock Company suffers the fate of other companies affiliated with the Ministry of Defense. They all have a number of common features, including immense governmental funding, corruption, and unsinkable managers. However, the recent ‘Oboronservis case’ has taught the officials some useful lessons: upon squeezing everything out of a military company, they now part with it quietly and without scandals. First, it was decided to confidentially reform riddled with corruption Spetsstroy; then time has come to deal with Russian Helicopters.
Immediately after the New Year holidays, Andrey Boginsky, former Deputy Minister of Industry and Trade, has been appointed the new Chief Executive Officer of Russian Helicopters. Aleksander Mikheev, the previous CEO, has been promoted to the General Director of Russian Defense Export (Rosoboronexport) Joint Stock Company. Based on the Russian Helicopters web site, its business had flourished during the rule of Mikheev – profits were growing faster than revenues.
Aleksander Mikheev was in charge of Russian Helicopters for the last three years. During this period, the company has lost a sizeable portion of international contracts and switched to the servicing of foreign-made machines. Despite the optimistic reports published by Russian Helicopters, the debt obligations of the company in the amount of 229 billion rubles –considerably exceeding its revenues of less than 220 billion – look alarming. The situation with helicopter plants is even more worrisome. In April 2016, workers of the Ulan-Ude Aviation Plant, in the hope to speak with the President on live TV, had mentioned catastrophic underutilization of production facilities and plans of the plant management to switch to shorter work hours and weeks. The aviation workers did not get a chance to express their concerns on live TV; neither were they able to disrupt the plans of the management. A month later, the Kazan Helicopters Plant has switched to a four-day working week as well.
The elimination of the intermediary between the government and governmental helicopter plants – Russian Helicopters Joint Stock Company – seems the most logical way to cut the costs. But managers of state corporations are not looking for simple solutions. A governmental order with the total cost of 9.3 billion rubles (contract № 1; contract № 2) has been awarded to the declining industry, and a few days later Aleksander Mikheev, then-Chief Executive Officer of the company, provided his vision of the future of the Russian helicopter engineering. On December 29, 2016, he has stated that the company is going to start repairs and maintenance of Italian AgustaWestland AW189 helicopters. The Russian–Italian cooperation has been praised in media as a groundbreaking achievement of Russian Helicopters. It is necessary to note, however, that this cooperation hasn’t affected in any way the idling plants in Kazan and Ulan-Ude.
Flights in dreams and in reality
But even the idleness of major helicopter plants fades in comparison with the perspective high-speed helicopter project. For the sake of fairness it must be said that this ‘show’ had started back in 2009 – but during the rule of Aleksander Mikheev, the fuss surrounding the high-speed helicopter has reached its peak. The top management of Russian Helicopters had been making fantastic announcements in relation to the flying characteristics of the future machine – which was supposed to accelerate to an unbelievable speed of 500 km/h. In anticipation of an inflow of international contracts, the project had received truly generous funding.
Rachel (Russian Advanced Commercial Helicopter)
In 2011−2012, 1.1 billion rubles had been allocated for the high-speed helicopter development from the state budget; in 2013, the funding has increased to 2.5 billion rubles; while in 2014−2015, the perspective helicopter project received additional 4 billion rubles. Furthermore, in 2014, Yuri Slyusar, the Deputy Minister of Industry and Trade, was ready and willing to spend extra 7.5 billion rubles on this amazing project. The future technological wonder has even got a commercial name: Rachel (Russian Advanced Commercial Helicopter). As the project budget was growing, the confidence of designers has been fading. The maximum speed had been gradually reduced in the official press releases issued by Russian Helicopters; the completion date had been repeatedly extended – but Aleksander Mikheev, then-Chief Executive Officer of the company, was unwilling to abandon a project that could potentially bring him over 7 billion rubles.
But the economic crisis has taken its toll. The number of international orders has drastically decreased; the plants, as said above, were idle, while the Ministry of Industry and Trade started questioning the feasibility of the helicopter that could not be sold abroad anymore. The Board of Directors of Russian Helicopters – involving the notorious ex-Minister of Defense Anatoly Serdyukov – has attempted to perform an additional issue of shares. But the company building castles in the air instead of helicopters could not attract new investors. The state treasury had to pay for the failed initiative – Russian state companies have bought out the shares through direct placement.
Let Mikheev go
Amid the dive-bombing of Russian Helicopters, Aleksander Mikheev decided to look for a more quiet job. He had started preparations for the transfer to Rosoboronexport back in fall 2016. Andrey Boginsky, the new Chief Executive Officer of Russian Helicopters, closed the hopeless Rachel project without fanfare. He has quietly announced this decision – delicately named " project reformatting” – in one of his first interviews after taking over the office.
The ‘swan song’ of Mikheev was a not-so-original scheme to siphon off state assets of Russian Helicopters to private companies. He only had to issue one Order to implement it. The Order № 0045-UK of April 20, 2016 has established the Integrated Service Center for Enterprises of Russian Helicopters Holding and transferred to it for management the asset complex of Mil Moscow Helicopter Plant located in Tomilino settlement near Moscow. In addition, Russian Helicopters sold vehicles, furniture, and office equipment present there to the management company on deferred terms.
The management company had been chosen through some mysterious procedures and directly named in the CEO’s Order. The assets of Mil Moscow Helicopter Plant have been transferred to humble VR-Resurs Limited Liability Company (formerly LIK Service Company Limited Liability Company). By a pure coincidence, Viktor Zelentsov, son of the Senior Accountant of Mil Moscow Helicopter Plant, is the General Director of VR-Resurs. The scheme has been successfully tested eight months before the appointment of Mikheev the General Director of Rosoboronexport – so now it can be used again on the new grounds. As said earlier, fates all the companies involved into the military industry are surprisingly similar.
Saburova believes that the Russian authorities violated articles 2 and 5 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, guaranteeing the right to life, as well as the right to freedom and personal inviolability.