Russia's vast defense industry, a source of foreign exchange revenue even from areas of current conflict such as Libya and Syria, is on what appears to be a collision course with the Ministry of Defense.

Russian Defense Minister Anatoly Serdyukov faced a very public upbraiding from Russian President Dmitry Medvedev after it emerged the submarine manufacturer Sevmash had missed the target on the delivery of a submarine for the Russian navy.

Further angry exchanges followed complaints about the inflated prices demanded by military manufacturers, alleged corruption and malpractices at different levels of the defense manufacturing infrastructure.

Sevmash is the acronym favored by the giant shipyard Severnoye Mashinostroitelnoye Predpriyatie Northern Machine-Building Enterprise based in the White Sea port of Severodvinsk. The company employs about 27,000 people and specializes in building ships, submarines and other military equipment for the Russian navy.

Reports of the delays came to light only after a former key figure in the defense establishment said the submarine order was in trouble and might never be met by the shipyard, Itar-Tass reported.

"The state order for 2011 is disrupted already, it will never be fulfilled," Yuri Solomonov, the former general designer of the Moscow Institute of Thermal Engineering told the Kommersant business newspaper in an interview.

Solomonov is one of Russia's pre-eminent military designers, credited with designing the RS-24 and Bulava ballistic missiles. However, he was fired in July 2009 after a series of unsuccessful Bulava tests.

"The reason as of today is that there is not a single contract drawn, as far as the strategic nuclear force is concerned," Solomonov said in the interview.

The comments raised an uproar during which the president "blew up" at Serdyukov for disruption of the state defense order, Itar-Tass reported.

In later comments, the Novye Izvestia quoted Medvedev denouncing Solomonov.

"You well know how scaremongers were treated in war times -- they were shot," Medvedev said, adding he was authorizing the defense minister to "fire everyone."

Serdyukov earlier acknowledged the ministry was having difficulty concluding contracts with manufacturers because of inflated prices. He complained of a "wild growth" in defense contract prices, one of the reasons why the ministry had trouble signing contracts.

More than $3.57 billion in contracts for defense spending in 2011 remain unsigned, he said.

Itar-Tass cited corruption was aggravating the situation.

The Komsomolskaya Pravda said it was the fourth time in six months that Medvedev had lashed out and demanded punishment for those putting Russian defense manufacturing in jeopardy.

The fallout from the presidential reprimand to the defense minister has been, as widely expected, a retaliatory salvo from Serdyukov to the alleged whistle-blower, Solomonov.

He accused the designer of holding a grudge against the defense ministry and of lobbying -- Western-style -- for the Russian defense industry.

"I suspect that he holds a grudge because of his dismissal from the post of the general director of the Moscow Institute of Thermal Technology," Serdyukov told reporters, RIA Novosti reported.

"It could be also viewed as a form of lobbyism, an attempt to interfere with our work," the minister said.

Solomonov was replaced by Sergei Nikulin, the former head of the Vympel military manufacturer.

Serdyukov said the ministry will recommend the Russian leadership to reprimand Solomonov for ungrounded accusations.

In May Prime Minister Vladimir Putin warned defense manufacturers not to overcharge.

The Russian arms industry is on an aggressive global marketing spree, selling arms and equipment even to countries embroiled in conflict, including Libya and Syria. In Latin America, Russia sold military equipment worth more than $2 billion to Venezuela as it mounted its feud with Colombia in a deal that was backed with soft-term credit and negotiated and signed by Putin.

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