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Russia Creates State-Owned Technology Corporation

Government hopes Russian Technologies, a vast state holding comprising of military and industrial assets, will play a crucial role in developing the country's technology sector.

MOSCOW (AP) -- Russian President Dmitry Medvedev has signed off on the creation of Russian Technologies, a vast state holding comprising military and industrial assets, which the government hopes will play a crucial role in developing the country's technology sector and diversifying the economy.

Medvedev approved the transfer of assets in 426 companies to the holding, including a 51 percent stake in AirUnion, an alliance of Russian regional airlines. The holding, established on the basis of arms exporter Rosoboronexport, also owns stakes in titanium maker VSMPO-Avisma and car maker AvtoVAZ.

Russian Technologies head Sergei Chemezov, who has clashed with Finance Minister Alexei Kudrin over the number of companies to be diverted to the holding, said there were plans to sell some of the assets, Russian media reported.

Signs of a government rift surfaced in June, when details emerged of a letter written by liberal-leaning Kudrin to another minister, in which he addressed his concerns over Russian Technologies' growing sway and what he saw as a covert attempt to privatize assets.

"(It) also assumes nontransparent sales mechanisms for the assets as well as the absence of control over the use of such revenues by the state corporation itself," Kudrin said in the letter, whose contents were reported by the newspaper Kommersant.

Russian Technologies is one of several state-owned corporations set up in the latter part of Vladimir Putin's presidency. The corporations, which focus on specific sectors, are designed to target investment at non-resource areas of the economy. Putin, who turned over the presidency to Medvedev in May, is now prime minister.

But critics fear the state holdings will merely extend the state's domination of the economy, despite pledges by Medvedev to scale back state involvement.

"This is a potential area for conflict. This big state company has put itself firmly at the top of the queue" for investment in this sector, said Chris Weafer, chief strategist at UralSib. "But the reformers want this to take place with private investment."

"When battles take place, nothing happens," he said.

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