#8
Jamestown Foundation Monitor
January 23, 2002
NO BIG CHANGES PLANNED IN SIZE OF RUSSIAN ARMS BUDGET.

President Vladimir Putin's promises to "civilianize" and reform the armed forces notwithstanding, the process by which Russia's defense budget is formulated has remained highly secretive. But if the figures now being circulated in the press are a reliable indication of the government's intentions, then it appears that Russia's uniformed personnel will not be the only element of the country's sprawling defense establishment likely to be left disappointed by the government's defense spending plans for 2002. Indeed, reports have indicated a considerable amount of resentment among military officers regarding what they feel is the Kremlin's failure to deliver on promises of pay hikes for 2002 (see the Monitor, January 7). Now, as figures emerge regarding the government's intentions with respect to procurement spending, it may be the turn of Russian arms makers to start feeling pinched. Government procurement will rise in 2002, but the modesty of the increase will ensure that defense enterprises are compelled to scramble for yet another year to keep afloat. What this means for the Russian military is that service chiefs can expect little in the way of new weaponry or equipment in 2002. What it means for the nation's arms manufacturers, however, may be more significant. Survival for many of them is likely to depend ever more on their ability to peddle arms to foreign customers.

Hard figures on the details of Russian defense spending for 2002 are hard to come by, but a January 17 meeting of the Russian cabinet at which the defense order for this year was set has generated a number of Russian reports. And according to these reports, Russian spending on arms procurement will total 79 billion rubles in 2002, or about a forty percent increase over procurement figures for 2001. However impressive this might sound at first glance, however, initial Russian reports have been unanimous in asserting that the increase is not only modest, but that it will do little to help Russia's struggling defense industrial sector overcome the enormous budget shortfalls of the previous decade. In fact, the Kremlin appears to be sticking to an earlier military reform plan, under which significant increases in defense procurement are not to occur until at least 2005, and that apparently only under the condition that Russia's economic output more generally--and government revenues drawn from it--continues its steady rise.

Meanwhile, the secrecy of the Russian defense budgeting process ensures that details will remain fuzzy regarding exactly how the government intends to direct those funds which have been allocated for procurement. One fact has apparently been made public, and that is that research and development work will continue this year to get the same portion of total procurement funding--42 percent--as it did last year. Earlier, there had been general indications that suggested Russia's ground--or conventional--forces would be a big winner in this year's procurement debate. That is because an intense political battle over Russian defense priorities ended last year with an apparent victory for those who supported a shift in priority funding from the country's strategic rocket troops (which, according to some reports, were getting as much as 80 percent of the defense order) to the country's bedraggled conventional forces. This shifting of funding priorities, moreover, was accompanied by a restructuring of the top Russian military command itself. An independent ground forces command was recreated as one of three service branches (along with the air and naval forces), and newly named Ground Forces Commander-in-Chief Colonel General Nikolai Kormiltsev was given pride of place over the other two service chiefs when he was also named as a Russian deputy defense minister.

The extent to which the Ground Forces are benefiting from these reordered spending priorities is difficult to say, however. Kormiltsev has himself complained that his service is to get 28 percent of the Defense Ministry's budget this year, a figure well below the 40-50 percent that he claims it requires. And reports indicate that current plans continue to stipulate that the Ground Forces receive no new weaponry or military equipment until at least 2010. Comments by Russian officials, moreover, also suggest that procurement spending priorities will do little in the short run to benefit the ground forces. Deputy Prime Minister Ilya Klebanov was quoted last week as saying that most of the 2002 defense order will be devoted to spending on aviation, communications, space equipment, and weapons (presumably upgrades of current hardware) for the ground troops and navy. He also hinted that the government was prioritizing development of a fifth generation military fighter plane. A leading Russian defense analyst, meanwhile, said that the government was expected this year to focus its procurement expenditures on modernization of Su-27 and Su-30 fighters, on research and development of new, unmanned aircraft, and on naval vessels, both surface ships and submarines. The ground forces, he said, would get a minimum amount of modernization for existing hardware and some purchases of ammunition.

If the Ground Forces do not seem to be quite the big winner in the 2002 procurement sweepstakes that many had expected them to be, a big loser seems quite definitely to be Russia's strategic rocket forces. Most notably, the forces are scheduled to receive only six new Topol-M missile complexes this year, the same number that they received in 2001. That is below the ten missiles which had earlier been planned for deployment per annum, and but a fraction of the thirty to forty new Topol-Ms per year that the rocket forces had expected to receive only a few years ago to deploy. The strategic missile forces appeared to take another hit last week, moreover, when Russian Colonel General Yury Baluevsky (who led the Russian delegation at last week's Russian-U.S. strategic arms talks in Washington) said publicly that the government intends in the years to come to give priority to the naval leg of Russia's nuclear triad.

What all of this appears to mean, on the one hand, is that Russia's military service chiefs face at least several more years of low procurement budgets and a further deferral of rearmament plans. Russia's major arms makers, on the other, will have to continue to look beyond their own government and domestic defense spending to find the financial means for their survival. That means that they will have to increase their arms sales to foreign customers, and it can therefore be expected that already aggressive moves by Russian arms dealers to peddle arms abroad will likely intensify still more in 2002 (Nezavisimaya Gazeta, Vedomosti, January 17; Izvestia, Nezavisimoe Voennoe Obozrenie, January 18).

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