Thursday, December 24, 2009

Russia: Climbing the Export Tree?

Galrahn at Information Dissemination analyzes more news on the Russian Mistral LHD purchase and talk about the Russian shipbuilding industry and why it is importing French shipbuilding technology. He also talks about the US Senate reaction to this pending purchase.

I have earlier talked about the Mistral purchase as reviving the historic Franco-Russian relationship. Galrahn's discussions reminds me that France may be actively pursuing this geo-political realignment as well. France is betting on Russia becoming the next China.

For all the abuses of the Soviet era, it has left Russia with a relatively well-educated work force familiar with modern manufacturing technology. Although Russian quality control was deplorable, its heavy industries sustained the mighty Red Army for decades. Even today Russian metallurgy is still state of the art. Compared to India and Brazil, Russia is probably best prepared to take on China in mass manufacturing. Moreover, China itself is trying to climb the export tree and leaving the export manufacturing business behind. If France injects capital and technology into Russia, it stands to profit from Russia's re-industrialization and China's de-exportation.

At the same time, France is trying to balance a multipolar world. From France's perspective, an economically ascendant Russia is a nice counter against China. Russia is a potential ally who shares France's distrust of both the US and China. With the communist party still popular in both countries, they share a social affinity as well.

Therefore France hopes to re-industrialize Russia, starting with its ship-building sector. They may be working on a Korean model, where the heavy industries spin off into the light manufacturing industries. There are certainly many challenges, not the least of which is Russia's demographic collapse. But the time is right for a geo-economic/political partnership between France and Russia.


Anonymous said...

I get the impression that most of the high quality workforce has rejected the defense industry for greener pastures outside of Russia or for western tech companies (particularly Intel) with operations in Russia.

I seem to recall some recent Russian Defense Industry documents that used the term "crises" to describe the condition of the workforce. Cursory viewing of most Russian documentaries on Russian weapons tend to show a very old industrial workforce. Not sure about the state of Russian manufacturing.

Jimmy said...


Yes, Russia is in a race against time. At this moment, its workforce is still relatively well-educated/trained. In the near future, as the older generation starts to retire from work, the work force quality will start trending down.

If Russia can re-industrialize quickly enough, they can bring in enough new blood, and train up fast enough, to sustain the quality. Hence the window right now for reindustrialization. If Russia misses the window, it will sink back down, and never catch up with the other 3 BRICs.