The defense firms will be cut to 600 or 700 from the current 1,700 by the year 2005, Russian daily Russkiy Telegraph quoted Prime Minister Kirienko as saying. Kirienko added that the remaining enterprises will produce civilian products and compete for state military contracts. The measure is a part of governmental program to restructure the defense industry, which calls for spending 2,1 billion roubles ($339 million) from the 1998 federal budget. Of that amount, 632 million roubles are to be used as credit for conversion projects, 508 million roubles for financing private projects, and 1,019 billion as subsidies for converting enterprises. The mutual debts between the government and the defense sector amounting to 6 billion roubles ($967 million) would be written off as was announced earlier. The debts to defense enterprises will be cleared within one to one-and-half months, said government officials.

The Ministry for Atomic Energy (Minatom) responded to the governmental plan by saying it would start reducing the number of its science centers and enterprises which were engaged in defense production and research. By 2003-2005, all the military orders would be concentrated in enterprises located in Arzamas-16 and Chelyabinsk-70. But Minatom officials denied that lay-offs are imminent, saying that 4,500 people presently working on military programs would be retained to work on civilian projects.

In 1997, Minatom received only 30% of the appropriated state funding for military contracts. Earlier this year, Minatom’s boss Yevgeny Adamov said that only 10% of the ministry’s budget comes out of federal coffers. The rest of the funds comes from various commercial activities, such as sales of energy produced at nuclear power plants, and the export of nuclear technologies and products abroad.