Staunton, February 11 – Dmitry Rogozin, the deputy prime minister responsible for overseeing Russia’s defense industry, says that rising inflation will make it more difficult to achieve Moscow’s rearmament plans and that, to ensure these are met, the government needs to introduce controls on prices of goods in that sector.
But Rogozin’s argument – that inflation is hitting defense firms less directly than because of the rising prices their suppliers are charging – suggests that any price control program would be extremely difficult to limit to that sector and would either fail or be extended to an ever larger part of the economy, something that would undermine what markets there are.
Given Rogozin’s own nationalist and authoritarian views, it is entirely possible that he sees the dilemma that Russia’s defense industry finds itself in as the basis for an even larger re-orientation of the Russian economy, a shift that would restore other aspects of the Soviet command system as well.
Specifically, Rogozin said, according to RBK.ru, “price increases can lead to a sharp reduction of the profitability of the enterprises of the defense industry complex” and that “in turn can threaten the realization of the [Kremlin’s] plan for re-equipping the army” (top.rbc.ru/economics/09/02/2015/54d8bcbb9a7947638018e9db).
Given what he described as “the existing political and economic situation,” Rogozin called for an expansion in state regulation of prices “for all production” in the defense area and “the extension of quotas on raw materials” and dual use products used “for the production of military technology.”
Rogozin’s statement extends arguments made by Deputy Defense Minister Yury Borisov at the end of last year who said that inflation was going to force a downward correction in defense plans for the next three years – despite assurance by Defense Minister Sergey Shoygu two weeks ago that Russian defense industry will meet the current targets.