/ world today news/ Still nothing is heard about a bill that prohibits the bankruptcies of strategic enterprises
In this article, I want to touch on a very specific issue – the bankruptcies of companies and enterprises. Bankruptcy and the free market are two sides of the same coin. Let intellectuals debate whether the elements of market relations can be preserved in wartime, but discussions about the permissibility of bankruptcies in such conditions are no longer permissible.
To the credit of our authorities, I will say that they also understand this. In March, due to the difficult situation caused by the sanctions war of the collective West, the Russian government announced a six-month moratorium on bankruptcies and foreclosures. The moratorium went into effect on April 1.
By the way, this was already the second moratorium on bankruptcies. The first was introduced in 2020 due to the difficult situation caused by covid and various sanitary-epidemiological restrictions. The first moratorium was also set for six months, but was then extended for another three months. True, the then moratorium applied to companies and organizations only in the most vulnerable sectors and industries (catering, transport, etc.). And this year, the moratorium became universal, covering all sectors and industries.
The current moratorium, which expires on October 1, was expected to be extended. However, there was no extension. From October 2, creditors started bankruptcy procedures for debtors. Only in the first five days after the lifting of the moratorium, creditors announced their intention to bankrupt nearly 2.5 thousand of their debtors.
I’ll just give some expert opinions on the implications of lifting the moratorium. “We expect claims to grow by at least 15-20% in the coming months,” says MEF Legal Practice Partner in Dispute Resolution Rimma Malinska.
Alexey Khorokhordin, First Deputy Chairman of the Management Board of Zenit Bank, also predicts an increase in bankruptcy filings in November-December 2022. Advisor at Orchards Law Firm Azat Akhmetov expects “explosive growth” of bankruptcy cases in the fourth quarter and in 2023, estimating the increase in the number of applications in the most optimistic scenario for legal entities by 30-50%, for citizens – by 20-30%.
Akhmetov admits the possibility of bankruptcy of large enterprises and even entire industrial groups, “taking into account the total accumulated negative effect of the coronavirus and sanctions from 2022.”
BGP Litigation partner Sergey Lisin expects that business and government can “put each other on one shoulder’to reduce the number of bankruptcies in 2023, “if not, the wave will become a tsunami by 2024.”
Until early October of this year, there was an atmosphere of strange complacency and complacency among narrow-minded bureaucrats and liberal pundits. So to speak, all these packages of economic sanctions of the collective West are like small balls for an elephant. In part, this atmosphere was created by the moratorium on bankruptcies.
During these six months, it was possible and necessary to carry out a radical reform (or at least to start a reform) of the entire system of economic management and reorganization of economic subjects (companies and organizations). Instead of reform – complacency, tranquility without reflection and imitation of activity.
One of the vital conditions for such a reform is the establishment of a clear status of a strategically significant enterprise (firm, organization). The term has been around for almost two decades. On August 4, 2004, the President signed a decree “To approve the list of strategic enterprises and strategic joint-stock companies” (No. 1009). The list was compiled and periodically revised. Initially, there were less than 300 enterprises in it, then their number increased to almost 600.
There were no clear criteria for classifying an enterprise as strategically important, and there still aren’t. For the simple reason that Russia still does not have a document defining the economic strategy. Hence such unpleasant paradoxes, when McDonald’s-type companies were on the list, and enterprises related to the production of weapons and military equipment fell “overboard”.
It is urgently necessary to develop a regulation for a strategically significant enterprise (company) and to define its status in law. Important elements of this status should be: state ownership of the enterprise, its unconditional obligation to fulfill state orders, full immunity against bankruptcy. According to available data (as of 2019), the military-industrial complex (MIP) of Russia includes 1,353 enterprises, and the number of people employed in the MIP is about 2 million people. (Glazkova V.V. Status and main trends in the development of the military-industrial complex of the Russian Federation // Electronic management. Vol. 4, No. 4, 2021).
From my point of view, the list of strategically important enterprises should include all enterprises of the defense industry. In addition, it should include suppliers of components, parts and assemblies for the production of military end products. As a result, the list must include many thousands of businesses. Defense subcontractors may be left off the list in cases where the number of subcontractors supplying the same type of product is more than five different unrelated firms.
I return to such an event as the end of the moratorium on bankruptcy from the beginning of October. Here are the official statistics on the number of company bankruptcies in recent years:
2015 – 13044
2016 – 12549
2017 – 13541
2018 – 13117
2019 – 12401
2020 – 9930
2021 – 10319
Of course, the majority of bankrupt companies belong to small businesses and from sectors such as trade, communications, transport, business services and agribusiness. But at least 10 percent are industrial enterprises. And among them (I give a conditional figure) 10 percent are somehow related to the defense industry (suppliers of components, parts and assemblies for the production of final military products).
It’s no secret that by the end of the last decade, hundreds of defense industry enterprises were on the verge of bankruptcy. By the end of 2019, their total debt on bank loans reached 750 billion rubles. In the summer of 2019, the then Deputy Prime Minister Yuri Borisov, who led the defense industry, made a sharp statement: credit organizations are suffocating the Russian defense industry. According to him, the defense industry “lives day by day serving financial institutions that do not produce anything, but are only called upon to ensure the process of organizing the production and placement of products”.
Then we managed to save the defense industry. By closed decree of the President of the Russian Federation in March 2020, half of the resulting debts of the defense industry were written off, and the second was restructured (for 15 years at 3% per annum). However, more than two and a half years have passed since then. New duties piled up, probably more serious. However, the current curator of the defense industry, Deputy Prime Minister D. Manturov, does not reveal the figure of the debts.
So far, there are no signs that the new defense industry debt will be written off or restructured. Many defense industry enterprises (those not listed as systemically important) do not have a special legal status that guarantees protection against bankruptcy. With this in mind, the atmosphere in the Russian defense industry is tense and nervous. The heads of many defense enterprises are grasping at straws.
The leader of the pariah “Just Russia – Patriots – for the truth”, the deputy of the State Duma Sergey Mironov, at the request of the defense industry, sent a petition to the head of the Russian government Mikhail Mishustin and the chief military prosecutor Valery Petrov. It contains a request to suspend the bankruptcy of 15 enterprises from the military-industrial complex, “taking into account the currently created situation of conducting a special military operation, as well as the existing shortage of military equipment”.
Mironov also proposed to conduct an audit of the state of the organizations and assess the possibility of continuing their work. Mironov’s list includes, in particular, PJSC “Motovilikhinsky Zavodi”. This is an enterprise created in Russia almost three centuries ago. It has passed through the storms of wars and revolutions and is now on the brink of destruction. It is as if a strike is being prepared against the Motovilikh plants with the help of the American HIMARS salvo missiles.
But the combat vehicles for the Tornado-G and Tornado-C salvo launch missile systems are produced at the PAO facilities. In October 2022, it was reported that the company had implemented a three-shift work schedule to increase production volumes, which became the highest in the last ten years.
In the same list, such enterprises from the defense profile as JSC “50th Automobile Repair Plant”, JSC “261st Repair Plant” (full name – “261st Repair Plant for Fuel Refueling and Transportation”), JSC “172- th Central Car Repair Plant”, “81st Central Engineering Base”, “1st Design and Reinforcement Bureau”, “Zhigulevsky Radio Plant” and others.
Sergey Mironov’s assumption about the reasons for the wretched state of the enterprises he protects is striking: “The main reasons for the bankruptcy of the military-industrial complex enterprises are presumably the lack of state defense contracts. I believe that the liquidation of such factories can significantly weaken the defense capability of our country during a special military operation.”
And it really is. In the years before the start of the SVO, the state reduced state procurement and pushed defense enterprises into the deadly embrace of loan sharks. The reduction in government procurement is explained by the fact that, according to them, the federal budget may fall into deficit. And the Treasury has made it artificially scarce, hoarding a significant portion of oil and gas revenues in a currency capsule called the National Welfare Fund.
Some other members of the Duma are also trying to somehow save the defense industry. Thus, in September, the Chairman of the Committee on Property, Land and Property Relations of the State Duma Sergey Gavrilov said that strategic enterprises should be protected from bankruptcy and that in the current conditions this issue is a priority for legislators. It’s been a month since this message. So far, nothing has been heard about a bill prohibiting the bankruptcy of strategic enterprises.
Translation: ES
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