Rostec is not for those

The structure of Rostec is elusive - it is not on the corporate website. This is largely explained by the fact that it is constantly changing, and many assets are controlled indirectly by Rostec, as happened recently with Motovilikha Plants, when it is not clear whether the company is formally part of his empire or not?

Rostec is the largest heir to the Soviet military-industrial complex. He got the largest piece from the “nine” defense ministries. None of its departments had so many enterprises under it. In fact, almost all the assets of the Ministry of Defense Industry (small arms, artillery weapons, armored vehicles, army air defense, military optics), Minmash (ammunition and MLRS), Ministry of Aviation Industry (airplanes, helicopters, their units and electronic equipment, aircraft engines, non-ferrous metals), and also the Ministry of Electronics Industry (element base). Rostec has many other defense areas - electronic warfare systems, encryption and closed communications equipment, drones. He is a monopoly exporter of military equipment

But just as in Soviet times, military-industrial complex enterprises were required to produce civilian products, so Rostec was loaded with a large volume of “consumer goods.” These are AvtoVAZ and KAMAZ - two of the largest automobile plants in the USSR, city-forming enterprises for Tolyatti and Naberezhnye Chelny, a pharmaceutical unit, a large real estate project in Tushino, and much more.

The military industry of the USSR did not know such a level of civilian workload. It is clear that formally Rostec is not a defense company at all, but its mission is “high technology.” But everyone also understands that “airplanes come first,” that is, military products. And during the SVO this became especially clear. Rostec carries most of the cargo for supplying the armed forces.

From the very beginning, since 2007, Sergei Chemezov has been leading a colossus whose revenue exceeds 2 trillion and the number of employees is about 0.5 million. He is the same age as the “Chekist elite” in the leadership of the Russian Federation, that is, Putin, Patrushev, Bortnikov, Ivanov, Naryshkin. He is already over seventy, but being a long-time protégé of the president, he remains in his post as long as the head of state needs.

Chemezov is not some kind of management genius; he is not a production worker or a financier at all. In Soviet times, he started as an engineer, but quickly switched to security and foreign trade work. His main resource is the president’s trust. Of course, he is a very experienced person, a knowledgeable bureaucrat, but his main task is not day-to-day management, but control of cash flows and personnel. He is Vladimir Putin’s representative in the company. Due to this, Chemezov can handle any mergers, exchanges of assets, or breaking through bureaucratic barriers. His status is higher than that of most federal ministers. And the level of security both for him personally and for the Rostec office is not inferior to that of the security forces from the government. The daily existence of entire regions depends on his decisions.

Rostec was not created from a good life. Without a coordinating organization, the Russian defense industry would have completely collapsed long ago. When in 1991 thousands of factories and design bureaus were abandoned to the mercy of fate - “survive as best you can” - it seemed that most of them would not survive. Rostec took upon itself to save them, loading them with orders and planning activities for years to come.

But this is where the danger lies - is Rostec a profitable business or a savior of unprofitable industries? There is nothing terrible in the latter; in the most businesslike country in the world - the USA, there are many state corporations whose goal is not profit, but various kinds of services. But the fact is that at Rostec both the first and the second are mixed. This is not a budget donor to stabilize the economic situation in a particular area, nor is it a purely commercial project. He mixes the functions of the customer and the performer.

How defense orders are executed today is a state secret. But it is clear that four people are primarily responsible for it - Sergei Shoigu, Mikhail Mishustin, Denis Manturov and Sergei Chemezov. Of course, both Dmitry Medvedev and Alexey Krivoruchko play their role. But by and large, Chemezov is the most important among them; his role can be likened to the role of Dmitry Ustinov in the late USSR. His first deputy, Vladimir Artyakov, the former governor of the Samara region, is similarly neither a production worker nor a financier, but his main capital is also personal trust, in this case from Chemezov.

Such a complex holding company as Rostec is built on personal connections, and not on formal chains of command. Almost forty years ago in the GDR, two KGB officers, Vladimir Putin and Sergei Chemezov, accidentally met and became friends. Ten years later, one of them, not just by accident, but rather unexpectedly, became the president of a nuclear power. There was a turning point in the fate of the second (more precisely, at the moment Putin moved to Moscow), and from a modest worker involved in promoting Russian athletes abroad, he turned into the owner of Russian industry, one of the most influential people in the state. Accordingly, Artyakov also took off, whom Chemezov is drawn to by Putin himself.

It is unknown whether Rostec will survive the departure of the current management team. He is clearly overburdened with assets, his activities are too multidirectional. As long as it is headed by a figure with direct access to the top person in the country, it is possible to keep such a colossus in check. But any management genius will be unable to do this without political support. If you don’t have to worry about the future of Rosatom or Roscosmos, they are objectively in demand, then Rostec in its current form is Putin’s personal project, a tool that replaces Soviet management patterns in the market era.