UPDATE 1-Russia's Medvedev urges army to import weapons

Tue Jul 12, 2011 2:18pm EDT

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* Russia's defence industry has stagnated in recent years

* Moscow is world's second biggest arms exporter

(Adds analyst quote, recasts led)

By Alexei Anishchuk

GORKI, Russia, July 12 (Reuters) - President Dmitry Medvedev, leader of the world's second largest arms exporter, urged the Russian military on Tuesday to buy weapons from abroad in order to ensure its forces are properly armed.

The comments highlight increasing concern over Russia's decrepit arms industry and raise doubts that Moscow can complete an ambitious military modernisation programme.

"You shouldn't buy junk," Medvedev told Defence Minister Anatoly Serdyukov and Deputy Prime Minister Sergei Ivanov, who oversees the defence sector for the government, at his residence just outside of Moscow.

"If they (domestic arms makers) offer equipment which does not satisfy you, place your orders with other firms, or, ultimately, import them," Medvedev said.

Russia signed an agreement last month to buy two Mistral class helicopter carriers from France in a 1.2 billion euro ($1.72 billion) deal, the first major foreign arms purchase in the two decades since the fall of the Soviet Union.

Serdyukov was due to present the findings of a probe into arms contract failures after a top weapons designer said this year's contracts were doomed to fall short of targets .

Russia's once - proud defence industry that armed Soviet satellites and allies during the Cold War has stagnated due to lack of financing and corruption.

"I think Russia's defence industry doesn't have much of a future strategically. There are pockets of excellence or competance that will survive, but in general there is no energy there to sustain any steady growth or development," defence expert Pavel Podvig said .

Prime Minister Vladimir Putin has promised to spend nearly 20 trillion roubles to rearm Russia's army, suffering from years of lack of investment, low morale and outdated equipment.

Serdyukov said poor quality and overpricing of domestic arms were among the obstacles stopping the ministry from buying a remaining 230 billion roubles ($8.21 billion) worth of weapons out of a planned 750 billion in expenditures this year.

A top weapons designer said last week that procurement failures were due to a lack of cooperation with the Defence Ministry. Analysts say the row stems from unaccountable price rises for key armaments, which the ministry refuses to approve.

"You need to buy quality equipment at transparent prices, and not those put forward by certain companies," Medvedev said.

Medvedev has repeatedly warned Russia's notoriously corrupt defence sector to clean up its act and this year sacked several industry chiefs over what the Kremlin said were unfulfilled contracts. . (Writing by Thomas Grove; Editing by Diana Abdallah) ($1=28.02 Rouble) ($1=.6991 Euro) ($1=28.02 Rouble)

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