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Sunday, September 28, 2014

Much Ado About Izhmekh

There is quite the hubbub surrounding a press release from Rostec concerning the transfer of ownership for Izhevsky Mekhanichesky Zavod "Izhmekh" from state hands to a private individual Andrey Bokarev. The release clearly states that, 
"Andrey Bokarev will acquire 74.9% of IMZ (Izhevsky Mekhanichesky Zavod) shares owned by Rostec Corporation. The purchase price will be allocated for production modernization and reequipment of manufacturing funds. Rostec will retain controlling interest."

Some in the gun blogosphere as well as Reuters are taking this as a crafty means for the Ruskies to get around sanctions by taking Izhmekh out from underneath the Concern Kalashnikov umbrella and in the hands of someone that is not currently sanctioned by western powers. It is important to know that Izhevskiy Mashinostroitel Zavod (Izhevsk Machine-Building Plant) is not the same entity, which is best known for the Izhmash brand that was also later converted to the Concern Kalashnikov Group in hopes of building a more recognizable brands for export of AK style firearms along with other Russian Small Arms. Izhevsky Mekhanichesky Zavod (Izhmekh) is known for its Baikal line of Shotguns as well as the famous Makarov pistol, and previous manufacturer of the Mosin Nagant Rifle. 

Those same crafty Russians that are now looking to divest certain entities put together Concern Kalashnikov as a means for modernization and marketing of their small arms. They lumped together many of the firearms manufacturing under one name brand, which is smart in itself given the apparent marketability of the Kalashnikov name. However, with the recent sanctions on exports from the westd, this move clearly backfired due to the fact that they tied in Molot, Izhmash, IMZ/Baikal, among other entities. Rostec notes,
"The share of exports in the plant’s revenues is over 25%. Key IMZ importers are Germany, Cyprus, the USA. Today, IMZ is on the verge of unprofitableness. Revenues for 2013 were RUR 3 bln, (with a loss of) – RUR 182 mln ($4.6 Million USD). The company needs to realize a large-scale investment program to drastically change the situation. New investors will help revive the plant." 
Reuters notes an "inside source" said the move was to skirt Europe and U.S. Sanctions against IMZ, and Rostec commented, "As a result of the sanctions, we were forced to review the strategy for a number of our holdings". I guess this could be good news if you are hankering for a newly imported Makarov or Baikal shotgun and the treasury department doesn't decide to just slap the same sanctions on them overnight after reading a certain Reuters' article. I haven't heard anyone whining about not being able to find a substitute for these products. Rostec noted that they will remain the controlling interest, so I don't see how they are getting around that aspect. 

If Concern Kalashnikov dispossess themselves of Molot with its popular VEPR and Saiga brands then this may prove more interesting, assuming the sanction fairy doesn't just show up at their doorstep the next morning. What is of more interest to us is certain entities remained separate in the Russian firearms industry and have yet to see that arbitrary magic wand keep them from passing into western Nations. You may have some of their products sitting in your gun safe as this is written.