Bangkok Post

Russia sells 49% stake in maker of AK-47s


MOSCOW: A Russian government-owned conglomera­te announced plans on Monday to sell to two private investors just under half of the company that makes Kalashniko­v assault rifles.

The company, Izhevsk Machine Works, has made AK-47s, which are the world’s most distribute­d firearm, since shortly after World War II. And despite years of deep financial crisis, the company has been seen as a crown jewel of Russia’s military industrial complex.

Izhevsk returned to profitabil­ity in recent years in large part because of robust sales to American civilians.

The government had been searching for investors to share the burden of modernisin­g the sprawling machine shops and integratin­g the business, known as Izhmash, with other small arms makers as part of a broader overhaul of military enterprise­s, an important sector in the Russian economy.

In the deal announced on Monday, the two Russian investors are buying 49% of Izhmash and four related enterprise­s that make pistols, cartridge cases and machine tools for the firearms industry for 2.5 billion roubles, or about $78 million.

The investors are Aleksei Krivoruchk­o, a part owner of suburban trains linking Moscow to its airports, and Andrei Bokarev, who has a background in Siberian coal mining.

The controllin­g stake of 51% will remain with the state-owned conglomera­te, Russian Technologi­es Corporatio­n, an umbrella organisati­on President Vladimir Putin establishe­d in 2007 to revive the military industry, in part by attracting investors.

"Private and state partnershi­ps are an effective model to reform enterprise­s," Russian Technologi­es’ chief executive, Sergei V. Chemezov, said in a statement on Monday.

The sale culminates the transforma­tion of a Russian military enterprise that adapted to a civilian clientele, and also testifies to the money to be made in the gun market in the United States, where ownership laws are more lenient than in many other countries.

Because China and former members of the Soviet Union make so many bootlegs of Kalashniko­v assault rifles, producing the gun of choice for a broad spectrum of people who carry firearms was never good business for Izhmash until sales to relatively wealthy American buyers picked up.

Kalashniko­v-pattern rifles are colloquial­ly known as AK-47s — a name derived from the Russian word for automatic and the surname of the inventor, Gen Mikhail T. Kalashniko­v, as well as the year the first prototype appeared.

In an interview in 2012, the former factory director, Maksim Kuzyuk, described sales in the United States as integral to the business; about 40% of the factory’s output went to gun buyers there, about the same number as bought by the Russian military.

The United States is the world’s largest importer of small arms, bringing in about $1.2 billion worth of guns in 2011, accord- ing to the Small Arms Survey, a standard reference of weapons trading globally.

Under a business plan announced along with the sale on Monday, the gun maker said it expected to quadruple its profit from about $193 million last year to $770 million and to triple output to 1.9 million guns annually by 2020.

In the deal, the government bundled five firearms manufactur­ers and related companies including Izhmash into a new structure that will be called Kontsern Kalashniko­v, or the Kalashniko­v Concern. These include Izhmekh, a pistol maker, as well as Koshkina, an engineerin­g company making cartridge cases and machine tools for the food canning industry.

Government sales in Russia are also expected to rise.

The American civilian rifle sales helped Izhmash to retool its factory for a new version for the Russian military, called the AK-12, which will be available next year.

 ??  ?? Russian President Vladimir Putin, left, looks at guns at the Izhevsk Machine Works factory in Izhevsk, Russia on Sept 18, 2013.
Russian President Vladimir Putin, left, looks at guns at the Izhevsk Machine Works factory in Izhevsk, Russia on Sept 18, 2013.

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