Kalashnikov faces bankruptcy

Izhmash Arms, makers of the developing world’s favorite automatic weapon, the AK-47, is facing bankruptcy, thanks to competition from cheap knockoffs:

According to Izhmash Arms’ parent company, the Rosoboronexport State Corporation — which has a monopoly on supplying Russian arms to the international market — there are about eight countries in which dozens of business are making their own versions of the Kalashnikov. And they are doing this without passing on any licensing fees to the Russians.

And now it appears that the financial difficulties facing the weapons manufacturer have reached crisis point: its very existence is threatened. A businessman in Izhevsk has filed a motion to declare Izhmash Arms bankrupt because of outstanding debts of around 8 million rubles (around €180,000 or $265,000). The case has caused a sensation in Russia because for a long time the Russian armaments industry has been one of the only industries considered competitive on an international basis. And Izhmash, which was founded in 1807 by Russia’s royals, is one of the largest firearms manufacturers in Russia.

However, arms exports have fallen dramatically over the past year, falling from around $10.8 billion (€7.4 billion) worth of weaponry in 2007 to a mere $3.5 billion (€2.4 billion) in 2008.

According to the Der Spiegel article, Izmash’s problems are partly of its own making. Licenses to manufacture the AK were granted generously to like-minded regimes throughout the third world during the Cold War. After the Soviet Union fell, the companies that were already making the weapons saw no reason to stop. 

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