Russia to consider cutting imports of Ukraine military equipment

Обзоры по компаниям и отраслям 10.04.2014 Russian President Vladimir Putin proposed on April 9 convening a meeting today to discuss with industry representatives the possibility of substituting the import of Ukrainian parts for Russian military hardware, reported the Russian Presidential Administration website. Putin also suggested that Russian military orders could be adjusted based on the meeting’s results. At the same time, he asked Industry Minister Dmitry Manturov to “responsibly fulfill all contractual obligations with Ukrainian companies.” Alexander Paraschiy: Among the Ukrainian publicly traded companies, Motor Sich (MSICH UK) is most exposed to the Russian military sector as a near-monopoly supplier of engines to Russian military helicopters. A month ago, company president Vyacheslav Boguslayev reported Motor Sich will increase the supply of engines by 7%-20% yoy in 2014. Putin’s initiative may cut Motor Sich’s 2014 plan, and what’s worse, it may negatively affect the sustainability of Motor Sich’s long-term cooperation with Russian copter plants. On the positive side, the Russians have been trying to replicate the production of Motor Sich engines for more than a decade, with little success visible. Therefore, the future of Motor Sich’s cooperation with Russia will depend mostly on the Ukrainian company’s willingness to continue it, or the Ukrainian government’s regulations on the supply of military and dual-purpose goods to Russia. The new government is interested in the stable work of Motor Sich, a big taxpayer, according to Boguslayev.