The Russian Federation inherited the largest and most productive share of the former Soviet defense industry, employing as many as 9 million workers in 1,125 to 1,500 research, design, and production facilities. Those installations are concentrated in particular regions, whose economies tend to be heavily dependent on the industry; in the Republic of Udmurtia, for example, more than two-thirds of workers and industrial capacity were attached to defense in some way in the early 1990s. Moscow has large plants for air force and missile components, and St. Petersburg specializes in naval design and production as well as infantry weapons.
The Russian Committee on the Defense Industry [Roskomoboronprom] was established in October 1992 by an edict from President Boris Yeltsin. Responsible for all defense industries and their commercial and military activities, Roskomoboronprom was the successor to the Soviet-era Military Industrial Commission (VPK). The new Committee on the Defense Industry was was divided into eight departments: Aviation Industry. Ammunition and Special Chemical Products, Armaments Industry, Communications Industry, Radio Industry, Missile and Space Technology, Shipbuilding Industry and Electronics Industry.
The State Committee on the Defence Industry (Gosudarstvennyy komitet po oboronnoy promyshlennosti - Goskomoboronprom) replaced Roskomoboronprom in September 1993. Some 2,000 defense related industries, 920 research institutes and design bureaus were under Goskomoboronprom, with a directly employed work force of about 5 million. However, a 1996 estimate identified about 35 million Russians as receiving their income from enterprises linked in some way to Goskomoboronprom. Information about the funding of Russia's defense R&D programs remains hard to obtain because many such programs are secret. The official budget allocation of US$1.4 billion, even with the addition of the Security Council's supplemental funding in February 1996, seemed extremely modest in an era of rapid technological advances. Most of the acquisition programs of the mid-1990s do not have known R&D follow-on programs; instead, they are products of R&D programs started in the early 1980s.
In May 1996 Goskomoboronprom was upgraded to create the Ministry of the Defense Industry (Minoboronprom). In 1995 defense industrial production fell by 21 percent compared with 1994, when production in turn was 25 percent lower than 1993. In January 1996, orders were 25 percent below the level for January 1995, and in the first half of 1996 the Ministry of Defense had not completed payment for its 1994 and 1995 deliveries from defense plants. Hardest hit were the shipbuilding, radio, electronics, and ammunition industries. Between 1991 and 1994, annual production of main battle tanks dropped from 900 to forty, of infantry fighting vehicles from 3,000 to 400, of fighter aircraft from 225 to fifty, and of helicopters from 350 to 100. Those statistics partly reflect the intentional reduction of forces that began in the late Gorbachev era before the dissolution of the Warsaw Pact in 1991, but they also indicate the overall deterioration of the industry.
In March 1997, Minoboronprom was dissolved and most of its functions were transferred to the Ministry of Economy (MoE). Some defense industries have mounted successful conversion and restructuring programs. Although conversion received much publicity and billions of dollars in Western aid after 1992, government funding for that program decreased steadily in the mid-1990s, and only a small percentage of allotted funds actually were spent for conversion. No funds were authorized for conversion in the 1995 budget.
In early June 1999 Russia reorganized its arms manufacturers into four major industrial sectors, each overseen by a new government agency. The four agencies are the Russian Munitions Agency, the Russian Conventional Weapons Agency, the Russian Control Systems Agency and the Russian Shipbuilding Agency, and will report to a new government commission on military-industrial issues headed by the prime minister. These new agencies joined the Russian Air Space Agency formed earlier in the year.
Vice-premier of Russian Government Ilya Klebanov supervised not only Defence Industry Complex but also work of the Ministry on Atomic Energy, the State Committee of Communication and the Ministry of Science and Technologies. This assignment was given to him during a meeting with the Prime-Minister Sergey Stepashin on 01 June 1999.
The governmental Commission on Defence-Industrial Questions was created in accordance with Government's decision #665 of 22 June 1999. It was head by then-Prime Minister Sergey Stepashin. Vice-premier Ilya Klebanov, the Security Council chairman's assistant Alexey Ogarev, and General Alexander Piskunov, Deputy Chief of Staff to Prime Minister Stepashin, were nominated to the position of the comission head's assistants.In order to recover the normal administration of government as a defense industry, it was decided to create five defense agencies instead of reviving the Ministry of Defense Industry. Under an alternative scheme that was debated but rejected, the Ministry of Defense would develop a prospective arms program which would serve as the basis for the Ministry of Economy working out a defense production order for the coming year, while the responsibility for creating priority kinds of final production was assigned to the chief designers. The goals of the agencies will be clarified once the arms program through the year 2005 was specified. In general each agency will offer its own projects and defend them before the Government, receive financing from it, be responsible for the entrusted direction and conduct order placing tenders among the enterprises. The agencies will also become the state contractor for research and development projects in their respective spheres, directing process of creation of new technologies. Another task is that of destroying the inter-departmental barrier, and there is a great danger of recreating this departmental disjunction with the formation of these new separate agencies. That is why the Control Systems Agency is discussing with the General Armaments Agency and the Aerospace Agency the creation of so-called borderline concerns which could help solve the problem of creating one and the same products in various quasi ministries and various agencies. Yakov Urinson, who prior to his retirement was the vice-premier supervising the defense industry complex and the Minister of Economy, took a negative view of the creation of these separate agencies. The defense industry in the pure state does not exist any more, since there are only a few enterprises predominantly engaged with governmental military production orders. Most are primarily working on manufacturing large volumes of consumer and export oriented goods. According to Urinson such enterprises do not need arms agencies, since their economic well being lies elsewhere. The agencies, according to Urinson, could be the main designers' institution, while being placed above the enterprises they become only feeding joints for the bureaucrats. On 06 August 1999 the Russian government ratified the structure of three Russian agencies on DIC enterprises management - on shipbuilding, conventional arms and control systems. However, the Regulation on the agencies, which elaborates their functions, remained in the stage of ratification. These three agencies acquired some of the Ministry of Economics functions, including enterprises licensing and some federal target programs.
On 15 September 1999 Deputy Prime Minister Ilya Klebanov said that five sectoral defense agencies had been established according to the decree of the President of the Russian Federation on the reforming of the government, dated 25 May 1999. The aerospace agency was headed by the Yuri Nikolayevich Koptev, the Munitions and Special Chemicals Agency headed by Zinoviy Petrovich Pak; the Shipbuilding Agency headed by Vladimir Yakovlevich Pospelov; the General Armaments Agency headed by Alexander Vasilyevich Nozdrachyov and the Control Systems Agency headed by Vladimir Valentinovich Simonov. About six weeks were spent on the issuance of executive orders dealing with each agency, but the agencies were already active because they already had their directors. Although the process of the establishment of these agencies had been completed, they had not yet moved to their permanent premises. Klebanov noted that in the near future they all would be housed in a single building, which was the former Ministry of the Defense Industry on Shchepkina street. The Space agency is already accommodated there.
On 16 September 1999 Deputy Prime Minister Ilya Klebanov said that no more than ten major integrated corporations would be left for each of the five sectoral agencies of the military-industrial complex, which consists of some 1,600 enterprises.