The following information has been adapted for the NIS Nuclear and Missile Database from:   "Cooperative Threat Reduction: Status of Defense Conversion Efforts in the Former Soviet Union" United States General Accounting Office, April 1997, GAO/NSIAD-97-101. 
 

Appendix II

KIROVSKY-ZAVOD

  -- Investment amount and date:  $3 million in loans approved in
     April 1995.

  -- Former defense capability:  Manufacturer of propulsion systems
     for nuclear submarines.

  -- Former employment level:  50,000 in 1991.

  -- Purpose of joint venture:  To produce excavator frames for
     export to a plant in Belgium.

  -- Defense building conversion:  Converted 60,300 square feet of
     floor space in a building that was previously used to
     manufacture pumping turbines and was not related to WMD.

  -- Joint venture production:  Producer of excavator frames.

  -- Joint venture employment:  Initially employed about 80 workers,
     but the number has risen to 100 and could peak at 200 by the end
     of 1997.  It is likely these workers were in the defense
     industry, but it is uncertain whether they worked on WMD-related
     activities.

  -- Obstacles:  None.

  -- Status of project:  The plant is currently working at capacity,
     and the project is expected to break even in 1997.  The project
     is expected to pay off its DEF loan.  The U.S.  partner
     expressed interest in expanding the operation, but the Russian
     partner was not willing to do so.  As a result, the U.S.
     partner purchased the Russian partner's share of the joint
     venture.
 
 

NAUKA

  -- Investment amount and date:  $2.8 million equity investment
     approved in September 1995.  The project has not yet used DEF
     funding.

  -- Former defense capability:  Designer of environmental control
     systems for MIG aircraft.

  -- Former employment level:  5,000 employees.

  -- Purpose of joint venture:  To produce and market environmental
     control systems for private commercial aircraft manufacturers.

  -- Defense building conversion:  Converted 53,800 square feet of
     factory space.  We were not able to confirm if this space had
     been used for WMD-related activities.

  -- Joint venture production:  Has a limited 3-year contract to make
     heat exchangers (environmental control system components) for a
     British firm.

  -- Joint venture employment:  About 40 employees that were younger
     hires and did not work on previous WMD projects.

  -- Obstacles:  There is no market in Russia for domestic aircraft
     engines and no aircraft are being sold; thus, no market exists
     for aircraft environmental control systems.

  -- Status of project:  The American partner has not yet drawn on
     the DEF investment.
 
 

KHLOPIN RADIUM INSTITUTE

  -- Investment amount and date:  $1 million equity investment
     approved in September 1995.

  -- Former defense capability:  Research and development associated
     with nuclear weapons, and plutonium and isotope production,
     among others.

  -- Former employment level:  1,600 in 1995.

  -- Purpose of joint venture:  To convert Russian WMD expertise into
     a commercial venture that builds and operates log sterilization
     and debarking centers in Russia, which will export treated logs
     to the United States.

  -- Defense building conversion:  Unknown.

  -- Joint venture production:  To irradiate timber of bugs and fungi
     so they will be suitable for export and processing in U.S.
     sawmills.

  -- Joint venture employment:  Approximately 10 scientists are
     working on this project, and more Khlopin employees will be used
     as this project develops.

  -- Obstacles:  The project needs cash to get a log yard in Russia
     operational, and it needs to obtain a Western timber products
     firm as a partner.

  -- Status of project:  DEF has invested $500,000 of the $1 million
     approved.  Although the technology is not at issue, the project
     has not yet demonstrated it can deliver logs.  The DEF Chief
     Financial Officer has temporarily become Chief Executive Officer
     of the joint venture.
 
 

NPO MASHINOSTROYENIA

  -- Investment amount and date:  $2 million equity investment
     approved in February 1996.

  -- Former defense capability:  Manufacturer of intercontinental
     ballistic missiles, nuclear cruise missiles, and reconnaissance
     satellites.

  -- Former employment level:  9,000 in 1992.

  -- Purpose of joint venture:  To convert skilled Russian military
     programmers who were working in the areas of guidance and
     control systems for cruise missiles and rocket launchers to
     commercial programmers for software development.

  -- Defense building conversion:  The project will occupy space
     outside of Mashinostroyenia's security enclosure.

  -- Joint venture production:  Expected to develop commercial
     software programs for mainframe computers.

  -- Joint venture employment:  300 former WMD-related workers within
     3 to 5 years (projected).

  -- Obstacles:  The original Western partner withdrew from the
     investment.

  -- Status of project:  DEF is seeking another Western partner.
 
 

 
                                           PORTFOLIO SUMMARY
 

Company	Defense Conversion	Western Partner(s)	DEF    Commitment    (millions)	DEF Equity
NURSAT	Satellite tracking >    Telecommunications	AT&T/ Lucent Technologies	$3.0	8.5%
ROSNET Labs	Strategic command and control >    Telecommunications	NYROS Telecom Services	$5.0	29.0%
KK    Interconnect	Nuclear weapons testing >    Printed circuit board manufacturing	KRAS	$2.5	31.0%
RAMEC	Military electronics > Personal    computer assembly and marketing	Kent International	$3.0	40.0%
OrbitSoft	Weapons programming >    Software engineering services	OrbitSoft 2000	$2.0	43.2%
RAIES    International	Nuclear R&D >    Timber sterilization and export	Russia Partners	$1.0	12.0%
Nevamash	Nuclear submarines >    Earthmoving excavator bases	Caterpillar	$3.0        (up to)	N/A        (loan)
Hamilton-    Standard/Nauka	Military aircraft systems >    Civilian aircraft systems	Hamilton-Standard	$2.8	25.0%
MPS-Telecom	Military communications >    Public telecommunications	AT&T and Communications    Development Corp.	$5.0	20.0%
RTN	Military communications >    Public telecommunications	NYROS Telecom Services	$5.0	20.0%

 

Source: "Cooperative Threat Reduction: Status of Defense Conversion Efforts in the Former Soviet Union" United States General Accounting Office, April 1997, GAO/NSIAD-97-101 Appendix IV p. 49.  {Entered, 1/18/98 PBI}
 
 

RUSSIA DEFENSE CONVERSION PROJECTS

--------------------------------------------------------- Appendix I:3

DSWA notified Congress of its intent to spend $38 million on five
defense conversion projects in Russia.  Four of these projects are
between U.S.  firms and Russian defense-related entities--GOSNIIAS,
Istok, Leninets, and NPO Mashinostroyenia.  One project is to provide
housing to demobilized Strategic Rocket Force personnel and establish
joint ventures with three defense-related entities--Kompozit,
NPO Mashinostroyenia, and Soyuz.
 
 

GOSNIIAS

  -- Contract amount and date:  $4.1 million in July 1994.

  -- Former defense capability:  GOSNIIAS is a state-controlled
     enterprise that designs and tests military avionics and carries
     out avionics and weapons integration.

  -- Former employment level:  8,000 employees in 1992.

  -- Purpose of joint venture:  While no joint venture was
     established, the project was intended to build prototypes for
     air traffic control hardware and software based on the Global
     Positioning System and GLONASS, the Russian counterpart.

  -- Defense building conversion:  Occupied a 8,600-square foot
     military design facility that had previously been used for
     conducting mathematical analyses concerning weapons.

  -- Joint venture production:  Developed a business plan and built
     prototypes for air traffic control hardware and software.

  -- Joint venture employment:  This project began with a staff of 10
     defense workers and employed as many as 60 defense workers at
     one time.

  -- Obstacles:  While the partnership has developed a business plan
     and built prototype hardware and software, a market has yet to
     develop.  GOSNIIAS and the U.S.  contractor tell us that they
     plan to work together in competing for a future Russian
     government contract for an air traffic control system.  However,
     the contract has yet to be tendered.  This contract could result
     in 200 jobs for GOSNIIAS and be worth $80 million to $100
     million.

  -- Status of project:  Work on the DSWA contract is nearly
     complete, and closeout on the contract is pending.  Rockwell
     intends to create a long-term relationship with GOSNIIAS and is
     planning on awarding subcontracts to GOSNIIAS for a variety of
     efforts.
 
 

ISTOK

  -- Contract amount and date:  $5.7 million awarded in July 1994.

  -- Former defense capability:  Producer of magnetrons, klystrons,
     high-powered vacuum tubes, carbon dioxide lasers,
     electro-optical devices, batteries, microwave devices, and
     solid-state electronic components.

  -- Former employment level:  8,000 in 1994.

  -- Purpose of joint venture:  To manufacture and distribute hearing
     aids.

  -- Defense building conversion:  The project converted a
     15,100-square foot facility that produced highly integrated
     circuits.  According to joint venture officials, this defense
     facility was associated with WMD.

  -- Joint venture production:  By early summer 1995, production had
     begun on a hearing aid (see fig I.5) that was useful for the
     moderately hearing impaired--about 50 to 60 percent of the
     hearing impaired population in Russia.  The joint venture is
     capable of producing 250,000 hearing aids annually and initially
     produced about 25,000 hearing aids.  The venture purchased parts
     for 40,000 hearing aids, but some of the components were in poor
     condition.

  -- Joint venture employment:  160 former defense workers.
     According to Istok officials, 80 percent of the staff are
     engineers, but we did not determine if they had worked on
     WMD-related projects.

  -- Obstacles:  The joint venture suffered a major setback in
     distributing its hearing aids.  It had planned to sell the
     hearing aids via the Russian government's medical technology
     supply agency, which would have distributed them to more than
     200 hearing clinics around Russia.  However, the lack of
     government funds prompted the supply agency to only purchase
     hearing aids for the severely hearing impaired--a small
     population for which Istok's hearing aid was not well suited.
     At that time, the venture had no other products.  The joint
     venture needs additional financing to establish new production
     lines.

  -- Status of project:  Istok is now planning to produce another
     hearing aid and focus attention on selling it on the export
     market (mostly in third world countries) as well as on the
     Russian market.  Istok also hopes to begin production on a
     hearing aid aimed at severely hearing impaired individuals.  The
     joint venture has asked DSWA to provide additional funding to
     help move the venture forward.

   Figure I.5:  Hearing Aid
   Production at a Former
   Integrated Circuit Production
   Building

   (See figure in printed
   edition.)
 
 

LENINETS

  -- Contract amount and date:  $2 million in June 1994.

  -- Former defense capability:  Manufacturer of airborne radars and
     other radio electronic equipment.  Leninets officials claimed
     that they also made specialized equipment, such as chips for
     high-frequency radars used in MIG and Sukoi aircraft.  Leninets
     consists of 16 factories, 10 research organizations, and 50
     small enterprises.

  -- Former employment level:  Unknown.

  -- Purpose of joint venture:  To remanufacture dental chairs,
     distribute new dental equipment, and bottle solutions for oral
     infection control.

  -- Defense building conversion:  The project is occupying a
     4,600-square foot building that formerly operated, in part, as a
     toy factory, but Leninets officials stated that 55 percent of
     the building was devoted to manufacturing portable naval
     radiation decontaminators, which were intended for use on naval
     vessels after a nuclear attack.  Production stopped in 1993.

  -- Joint venture production:  As of October 1996, the project had
     sold 187 remanufactured dental chairs, earning the venture about
     $35,000 a month (see fig.  I.6).  The distribution of new dental
     equipment earns the project about $80,000 a month.

  -- Joint venture employment:  About 22 people, some of which have
     manufacturing skills associated with computers and other
     equipment and others are being used in accounting and marketing
     roles.

  -- Obstacles:  The project has had considerable difficulty in
     setting up its bottling operation, which it sees as more
     lucrative than the other ventures.  The bottling operation has
     been delayed for over 1 year due to setbacks at the U.S.
     manufacturer of the bottling equipment and problems with Russian
     customs.  Project officials also underestimated the cost of
     purchasing the equipment and refurbishing the space that they
     are to occupy.  As a result, the project had run out of funds at
     the end of 1996.

  -- Status of project:  The project is seeking at least $250,000 to
     $500,000 in new capital to start up the bottling line.

   Figure I.6:  Dental Chair
   Production Line at a Former
   Manufacturer of Portable Naval
   Radiation Decontaminators

   (See figure in printed
   edition.)
 
 

NPO MASHINOSTROYENIA

  -- Contract amount and date:  $5.1 million awarded in June 1994.

  -- Former defense capability:  Producer of cruise missiles,
     intercontinental ballistic missiles, and maneuverable
     satellites.

  -- Former employment level:  9,000 in 1992.

  -- Purpose of joint venture:  To establish a cola bottling
     facility.

  -- Defense building conversion:  Plans called for the conversion of
     Mashinostroyenia's nitrogen building, which was needed to
     produce missiles.

  -- Joint venture production:  The joint venture was never
     established, so it never reached production.

  -- Joint venture employment:  None.

  -- Obstacles:  According to Mashinostroyenia officials, DOD
     selected the project without their input, and they were not
     happy to have a low-skilled project at their high-technology
     firm.

  -- Status of project:  The American partner and Mashinostroyenia
     were not able to work out differences, and the U.S.  partner
     asked to be released from the contract.  DSWA agreed in April
     1996 to cancel the contract and disbursed $195,000 of the $5.1
     million contract.
 
 

HOUSING

  -- Contract amount and date:  $20 million awarded in June 1995.

  -- Former defense capability:  The Russian partners for this
     project include Soyuz, a firm that built turbofans for cruise
     missiles; Kompozit, a producer of heat shields for missiles and
     space systems; and Mashinostroyenia.

  -- Former employment level:  Kompozit employed 10,000 in 1992,
     NPO Mashinostroyenia employed 9,000 in 1992, and Soyuz employment
     was unknown.

  -- Purpose of joint venture:  To construct a housing industry in
     Russia and build homes for Strategic Rocket Force personnel.

  -- Defense building conversion:  No buildings have been selected
     for this project.

  -- Joint venture production:  Unknown at this time because the
     joint venture has not been established.

  -- Joint venture employment:  Unknown at this time because the
     joint venture has not been established.

  -- Obstacles:  Until January 1997, DOD and the Russian government
     were not able to reach agreement on the scope of this project.

  -- Status of project:  In January 1997, the Russian government and
     DOD officials agreed that Russian WMD enterprises would work
     with an American partner to establish five production lines.
     These production lines are a modular housing assembly facility,
     a window and door manufacturing facility, a low-pressure brass
     casting production line, an asphalt shingle production line, and
     a lumber mill capable of supplying the lumber suitable for
     housing construction.  Remaining funds will be used to provide
     housing to demobilized Strategic Rocket Force personnel.
 
 

Click here for a more in depth story about the Mashinostroyenia defense conversion project as found on the world-wide web.

Page last updated 22 March 1999
Comments or questions? Contact Contact Cristina Chuen at MIIS CNS: Cristina.ChuenATmiis.edu
 

This material is produced independently for NTI by the Center for Nonproliferation Studies at the Monterey Institute of International Studies and does not necessarily reflect the opinions of and has not been independently verified by NTI or its directors, officers, employees, agents. Copyright © 2003 by MIIS.

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