TV INTERVIEW WITH VICE PREMIER AND DEFENSE MINISTER SERGEI IVANOV VESTI NEDELI TV RUSSIA SUNDAY PROGRAM WITH SERGEI BRILYOV, 20:00, MARCH 26, 2006

(Federal News Service (Russia) Via Thomson Dialog NewsEdge)

Anchor: Sergei Borisovich, how many months have passed since
you were appointed vice premier -- three, four?

Ivanov: Four months.

Anchor: Four months. And all these four months there has been
talk about how Ivanov would increase his bureaucratic clout, and
what methods he would use. But now a decision has been made to
create the Military-Industrial Commission. Why was this particular
scenario of building a new mechanism chosen?

Ivanov: Let us begin with the "apparatus" clout. I did not seek
to acquire any "apparatus" clout, and the creation of a Military-
Industrial Commission under the Russian government indicates that
there will be no new ministries with a huge staff. And the decree
leaves no doubt about it.

Now about the substance. Of course as Defense Minister I have
frequently visited defense enterprises, but I paid those visits as a
customer. I was interested in when an order would be fulfilled and I
did not go deep into the production processes. But now the situation
has changed and in the last four months, since my appointment, I
have visited defense enterprises in many regions: Krasnoyarsk,
Kaluga, Novosibirsk, Moscow, and St. Petersburg.

Anchor: And you are about to go on a swing through Siberia.

Ivanov: Yes, and previously it was Tambov, I have visited a lot
of enterprises and I was confirmed in what was previously just a
guess. As of today, if one takes the average temperature, like in a
hospital, the average load of the capacity of the enterprises in the
defense industry is between 20 and 40 percent. In principle, this is
normal. It's the same everywhere in the world.

Anchor: That is, if there is a war, then it is 100 percent, but
in peacetime --

Ivanov: Yes, yes. But on condition that the remaining part of
production capacity is loaded with the production of high-tech
civilian products. I am not calling on the defense industries to
produce cooking pots, irons and so on -- that of course would be
foolish. But there are some instances, including in this country, of
defense enterprises which produce some serious stuff like rockets,
simultaneously producing high-tech civilian products. And that is
how it should be.

Unfortunately, this is not the case yet here. So, idle capacity
is formed, and so an enterprise has to think not so much about its
development as about survival. A real bankruptcy situation arises.
And we know of instances of genuine bankruptcy, and sometimes bogus
bankruptcy. One should draw that distinction. The existence of idle
capacity pushes prices up, because the director of an enterprise in
this case has to include the upkeep of unloaded capacity in the
price of the military products.

I don't want to sound alarmist, but our defense industry is
still capable of producing the whole range of modern weapons: to
build ships, planes, rockets and spacecraft.

Anchor: To use modern language, Russia remains a self-
sufficient and sovereign country militarily.

Ivanov: Yes, of course. I spoke about problems. The problem of
idle capacity is one of the main problems.

Anchor: And who will tackle this problem of organizing civilian
production? Will it be awarded to these factories in the shape of
state orders or are you calling on these factories to go to the
market?

Ivanov: Our whole economy is already a market economy. All the
enterprises should at least pay their way. Just continued subsidies
won't ensure their survival. We realize that there are special
cases, for example, the production of ammunition: huge areas are
involved, and clearly, such enterprises should be helped, this is
what the whole world does and not only we. And we have chosen to
create state-financed and state-run enterprises for this sector of
the military economy.

Anchor: How do you see the future of the mechanism, of the
operation of this triangle: government -- defense industry -- the
armed forces?

Ivanov: Initially, when the President offered me to become vice
premier in charge of the military-industrial complex, it was assumed
that a very close tie-in was necessary. Over the past five years the
armed forces started developing, and most importantly the range of
weapons that will be required in the short and in the longer term
has been determined.

Now it is important that the defense industry should be able to
supply such quality products to the forces at a price not as high as
it would sometimes like to.

Anchor: Who are members of your commission? How frequently will
it meet? And a subquestion is, what will be the role of General
Putilin? Will you mainly run the commission, or do you see Putilin
as a kind of sergeant who will mind the commission?

Ivanov: To start with, the commission has existed before, it
has in fact existed all along. What is a new departure is the
creation of a permanent body of the commission. Because decisions
need to be taken promptly. Prompt decision-making and monitoring of
execution. Vladislav Nikolayevich Putilin is thoroughly conversant
with the military system, with the forces, armaments and at the same
time in recent years he acquired extensive practical experience of
economic issues. I think the combination of these two qualities is
exactly what is needed.

And besides, the commission will only have a permanent staff of
five. One will have the rank of deputy chief of the government staff
and he will be in charge of all the paper work because the
commission has the right to prepare government decrees that we will
submit to Mikhail Yefimovich Fradkov, or, if necessary, to prepare
presidential decrees on the entire range of issues connected with
the Military-Industrial Commission.

Anchor: But under the new regulations, it will be your
function, in other words, you have the right to prepare presidential
decrees.

Ivanov: I have such a right as Defense Minister.

Anchor: And as head of Military-Industrial Commission?

Ivanov: As head of Military-Industrial Commission I will, of
course, initial these draft government decrees and submit them to
Mikhail Yefimovich Fradkov, the government chairman. The principle
of one-man responsibility remains in the army and in the government.
You can rest assured on that score. But let me go on about the other
positions. The third position will be the person at the head of the
Scientific-Technical Commission, that is, he will do science on a
permanent basis, all the scientific aspects of the Military-
Industrial Commission, and the three remaining officials will deal
with down-to-Earth matters, for example, land, sea and air.

Anchor: Sergei Borisovich, you have uttered a verbal formula
which is instantly understood by the political class, but we still
live in what is partially a Byzantine atmosphere. If you were to
describe in a single word the atmosphere in the government in
connection with these reshuffles, the creation of new structures and
the appearance recently of new key ministers and vice presidents,
are they rivals, allies, partners?

Ivanov: Co-thinkers.

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