THE USSR MINISTRY OF DEFENSE INDUSTRY: SOLDIER IN THE CONVERSION CAMPAIGN (SUMM

Created: 6/1/1991

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The USSR Ministry of Defense Industry: Soldier in the Conversion Campaign

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The USSR Ministry of Defense Industry: Soldier in the Conversion Campaign

A Research Paper

This paper was prepared by.

Office of Soviei Analysis, with comributiona from

Comments and queries are wdcome and may be

directed to SOVA.

The USSR Ministry of Defense loduslry: Soldier In Ibe OwtersioB Campaign

hen President Gorbachev first arinouriced plans lofrom weapons produaion to sopport tbe civil economy,have been claiming progress in converting defense industry toTo date, however,ittle evicJertee that Soviotare being fundamentally reoriented to produce civil inachincrygoods.orts arc better characterized as diversion,becauseevidence shryars that moat involve the

transfer of expertise or labor to Increase productioa of existing civil products rather than the repUcerneni of military prodisrtioa lines with lines devoted to civil production.

Tbe Ministry of Defease Industryof eight dacs^todtrtrial ministriesajor producer of land arms aod several types ofa good lest Tor tbe Sonet conversion program. On the one hand, its traditionally large ouiput of civil goods and iu extetisive excessin recent years by weaponsthefor sizable contributions to the civil rxorsomy. On tbe oilier band, unlike the products of Ihe Ministries of the Aviation Industry and of the Saipbuildingother defense-industrialof MOP'a military product* have no close chil counterpart. To meet their newigaiioos, MOP's miliury enterprises must retool production lines, retrain workers, gad construct new facilities. Sotnc MOP plants are sharing ii^cmatrial lec^iiscJogy wiih civil facers, and ethers .reooipot of existing cmJ productin tbe case of pianu currently ntxnufaauring agricultural inachinery and consumer goods. However, new dvfl production capacity must also be brought on line if MOP cmterpnscs are toubstantia! impact. MOP's success in impietrsentinf, tad executing ctjnversion willauge for how the rest of defense industry might perform

As part of their conversion resportiibililiei, MOP enterprise* have been taskedumber of priority areas. They are to:

the meal-rxotraaing. canning equipment, and ice cream prod act tort sector*.

Modernize the textile industry.

Substantially increase production ofod*.

output of diverse goods wiib which tbey already havesuch as plumbing equipment, medical equipment, railwaynd locomotive engines.

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MOPalso undc< pressure to raise the quality of its current civil products as well as to design and produce newer versions of these itemsfeature*.

MOFa performance to date suggests that^ contributions are likely to be lo the form ofincreaaed outpulof ctvditerra that it already produces or io sharing imnufactuong technologies with civil Ldustry. MoVVgrea.es. challenge will bethoae ^fcods with which it has little or no production experience. Production of these uo-familiar goods-such as machinery for Ught Industry andccss.ng, and certain types of medical equipment-willonger transition time because MOP will have to retrain workers and engineers, retool facilities, and establish new supply networks.

Despite the attention tbe program has recerved, ctfflvcrsioo of deft industrial facilities will notanacea for the problems of the cml economy. Although the leadership traditionally has consKlcred defense industry to be the strongest sector of the Soviet economy, the advantages that It hasas access to better quality raw materials and higher pay and social benefits to attract more highly skilled personnel-by definition limited and therefore not readily transferable to civil industry. Moreover, defense industrys ability toifference is limilcd by Its attitude that civil production it beneath its digm.y.

Ironically, tbe economic reforms that, along with conversion are currently making defense plan, managers' lives tmserable may be the best hope for conversion in the long run. Reforms such as self-financing,equiring plants to cover most of their costs through profits and wholesale trade in place of guaranteed supply networks, have been painful for theindustrialists but. at tbe same time, are leading tbem to.consider the needs of their customers. In the short term, defense plants wdl try to meet their new civil obligations through increasing production of thetrdvij product lines and possibly transferring some unused capacity to production of civil goods. Over time, however, if the leadership continues reducing military expenditures and, correspondingly, wrapon* procure-rnent. defense-industrial plants at the local level may be forced toheir role in civil production in order to maintain financial solvency.

Original document.

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